Poundland CEO Extols the Virtue of Value
Poundland, the single-price mixed merchandise retailer has stepped up its Christmas preparations by announcing an expansion of its Christmas range. I spoke to Poundland CEO Jim McCarthy (left) about what this move says about consumer buying habits into the festive season and the longer-term implications into 2010.
BNET: How will Poundland's offer be changed by the expanded lines?
Jim McCarthy: We've retained the most popular lines from last Christmas. The most notable new lines are Christmas novelties, such as gift bags. We think the new lines reflect the changes in consumer fashions and focus on bringing additional value to the proposition. We know customers are all seeking value this Christmas.
BNET: Do you think the customer demographic for your stores has changed over the year?
Jim McCarthy: The customer demographic has changed. The A, B1s now make up 11 per cent of our customer base. That's a rise of 22 per cent from the previous year. It reflects the flight to value of these types of customer. People are more shopping savvy. There is a loss of confidence and a need to make money go further. We are well placed to take best advantage of that shift in behaviour.
BNET: Your Christmas offers will include Buy One Get One Free (BOGOF) offers. They've been criticised as being wasteful. How do you think this impact's Poundland's environmental record?
Jim McCarthy: We provide amazing value. It's not unknown for us to do a multibag, but what's working for us is extra fill in a pack. It's a compelling offer for customers to purchase. We don't do too many BOGOF offers because it means spending more in the supply chain for the same revenues. Basically we have to shift two pallets instead of one for a BOGOF. We're cognisant of waste and have worked to reduce the packaging in our lines. It's not just about the environment - there is a commercial logic to that, provided reducing the packaging doesn't hinder sales.
BNET: It seems you are expecting shoppers to be frugal in the run up to Christmas. Doesn't that run counter to economic commentators saying we've turned the corner this year?
Jim McCarthy: The macro-economic view is that there is an early indication of improvement, but this is contrasted with the reality of worsening unemployment figures. People are aware that they have to make money go further this Christmas. They are not entirely confident about job security next year and so are spending wisely.
The relevance of Poundland in this situation is prominent and it's a robust business in a recession. That's not to say it wouldn't do well in a vibrant market too. And we would like to see a quick recovery as much as everyone else.
BNET: Would you say Poundland is recession-proof? Why do you think that is?
Jim McCarthy: We've opened stores over the last year and we are taking the proposition to new areas of the country. We will be opening up 13 new stores in October alone. We expect to have 250 stores operating by the end of Christmas.
Alongside this, we've been working closely with suppliers, increasing our supplier base and increasing the amount of suppliers we deal with directly. The large supermarkets have been pushing their own-label brands, which means branded manufacturers have been looking at different routes to market.
BNET: What do you forecast for 2010 and beyond? Will shoppers continue to watch their pennies?
Jim McCarthy: Some behaviours that have been acquired during the downturn will stick around. Where customers see value, they will remain loyal. Retailers have adjusted their offers accordingly. The big grocers have all developed their value brands.
Consumers have a wider access to information now. They are more discerning. There's no point trumpeting value and then not delivering on it.
On top of that there is a degree of uncertainty about 2010. It's a general election year. There will be an emergency budget and new taxation is likely to be applied in April. Consumers will continue to feel the need to be careful. We are a long way off the conditions for consumers to be more relaxed on spending.
This downturn differs from the last two in terms of the access to value ranges. Retailers such as Aldi, Lidl, Primark and TK Max had far fewer stores than they do now. Retailers have to understand shoppers will be promiscuous if they don't provide a value proposition on an ongoing basis.
(Pic: didbygraham cc2.0)