Poundland

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Poundland

Type	Private limited company
Founded	April 1990
Founder(s)	Dave Dodd and Stephen Smith
Headquarters	Willenhall, England, UK
Number of locations	212 (June 2009)[1]
Key people	David Dodd (Co-Founder) Colin Smith (Chairman) James "Jim" McCarthy (Chief Executive)
Industry	Retail
Products	Groceries, Consumer goods, DIY, electrical
Revenue	▲£396 million (2009)[1]
Operating income	▲£16 million (2008)[2]
Profit	▲£11.8 million (2009)[3]
Owner(s)	Advent International
Employees	6500 (2009)
Website	www.poundland.co.uk

Poundland is a British-based variety store chain which sells every item in its stores for £1.^[4] Established in April 1990 by Dave Dodd and Stephen Smith, Poundland stock a variety of around 3000^[5] different products, such as home and kitchen-ware, gifts and healthcare products, many of which are brand name and clearance products. Like many of its rivals, Poundland operates a constantly rotating product line of cheaply-bought bulk products, some of which have been recalled by the retailer due to failing health and safety regulations.^[6] Although price-point retailing was invented in the United States during the 1870s, the chain claims to have introduced this concept to Europe^[7] and is the largest single-price retailer in Europe.^[8] The retailer claims that their Croydon store is the busiest single-priced outlet in the world, generating more than £9m in revenue per year with 30,000 customers a week, which is more than any of its yen and dollar counterparts in Japan and the USA respectively.^[5]

Poundland have enjoyed strong sales growth and have maintained steady profit growth against increasing inflation, aided by a strong customer base of predominantly female shoppers every week in the C1, C2, D and E categories.^[9] The chain employs 4,600 staff and their company union is the Union of Shop, Distributive and Allied Workers (USDAW). Their closest rival in the market is 99p Stores, who undercut Poundland's prices by a penny.

It was announced in September 2008 that Poundland's owners, Advent International, are said to be cashing in on the resurgence in value retailers by putting the chain up for sale. The report comes as figures show that value retailers are seeing business boom in the current economic climate.^[10]

Contents 1 History 1.1 Formation 1.2 Early 2000s 1.3 Economic crisis of 2008–2009 1.4 Management 2 Business practice 2.1 Sales strategy 2.1.1 Products offered 2.2 Store expansion 3 Customer base 4 Financial performance 5 Criticism 5.1 Accusations of Spying on Former Employees 5.2 Environmental concerns 5.3 Health and safety 5.4 Customer perception 6 See also 7 References 8 External links

[edit] History

[edit] Formation

The retail chain was founded in April 1990 by Dave Dodd and Stephen Smith^[4] with a starting capital of just £50,000,^[11] claiming to have introduced the concept of single-price retailing.

The first pilot store opened in December 1990 in the Octagon Centre, Burton upon Trent, after countless turndowns by big landlords who had reservations about allowing such a store to operate,^[11] given they could easily undercut every retailer in sight. It was soon followed by other stores, most notably on The High Street, Meadowhall. Growth continued throughout the early 1990s, with 6 stores by December 1991 and a further 7 a year later. A difficult year was during 1995, when Smith failed to plan for additional warehouse capacity, and it soon became apparent their retail growth was pushing the capacity of their warehouse past its limits, with stock theft reaching unacceptably high levels. In response, a new 130,000 square feet (12,000 m²) warehouse was constructed, although at a cost of heavy profit losses, from £850,000 in 1994, to £400,000 in 1995.^[11] The retailer managed to resolve their operational difficulties throughout 1996 when their new warehouse site became fully operational.

[edit] Early 2000s

Although enduring a troubled first few years, Poundland has since become a multi-million pound business, with its 150th store opening in Northampton in mid-2006 and a gross turnover of £311 million in 2007, up from £281m the previous year.^[9] Following a management buy-out in 2002, the company has continued to grow with annual profit growth of 23.44% (2007)^[7] and aims to continue its store expansion by 30 a year into 2009, overseen by James McCarthy. Chairman Colin Smith, speaking in April 2005 as Poundland revealed it had invested £20-25 million in building a 300,000 square feet (28,000 m²) distribution centre, said there was great scope for further growth, saying "We can clearly conceive this chain having 400-plus stores in future".^[12]

Poundland operate a recycling initiative where they will give money for old mobile phones, whilst at the same time making charitable contributions and helping the environment.^[13]

[edit] Economic crisis of 2008–2009

Reports emerged in September 2008 that Poundland's owners, Advent International, have put the retail chain up for sale. The report comes as figures show that value retailers are seeing business boom in the current economic climate.^[10] Poundland, unlike many of its rivals, have been one of the few to report strong sales in a time of economic crisis, with 2008-2009 revenue expected to reach £400m, up from £330m for 2007-2008.^[5]

When the rate of VAT was reduced in November 2008 to 15%, Poundland's prices remained fixed at £1, by reason that they have kept the same single price point of £1 for 18 years and during that time have always absorbed duty and increased supplier costs without raising its price point. Chief executive Jim McCarthy said the chain will pass the savings on to customers in other ways.^[14]

With difficult economic conditions continuing into 2009, the supermarket retailer Asda announced in January 2009 that they would cut the price of many of their branded products such as Colgate toothpaste to just £1, in competition with Poundland who are offering the same branded products at the £1 price point. In response, Poundland introduced multi-buy offers to provide a larger quantity of the products for the same price of £1.^[15] The announcement comes after reports show that value retailers are seeing their sales and profits boom during the credit crunch, with value-conscious customers making the switch from traditional larger supermarket retailers for their everyday necessities.^[5]

[edit] Management

In 2002, Dave Dodd, co-founder of the chain, led a management buy-out by Advent International worth £47.5m for 78% of the company,^[7] where he received £304,000, making him worth some £25 million at that time.^[4] The sale allowed for the company's accelerated growth, expanding the store portfolio to well over 150 throughout the UK and creating an additional 500 jobs.^[16] He became chief executive with a 12% share in the business, and brought in Colin Smith as chairman, former chief executive of Safeway.

James McCarthy took over from Dave Dodd as chief executive of the value retailer in September 2006. He joined Poundland having been lured away as managing director at Sainsbury's,^[17] with the offer of an "attractive equity incentive" that he will be able to cash in when the group's US owner, Advent International, sells out.^[18]

[edit] Business practice

DHL Exel Supply Chain announced in March 2008 that it won a new three year contract worth £9 million with Poundland for transporting and supplying stock.^[19] DHL will be importing consumer products from overseas countries such as China, to transport them to Poundland stores throughout the UK. DHL will transport a variety of products for Poundland from UK outbases in Billingham, Hatfield and Belshill.^[19]

[edit] Sales strategy

Poundland's biggest sales advantage is their price consistency across all products. Whilst other retailers must decide upon the price of each individual product and have this clearly displayed to their customers, Poundland may simply move stock onto its shelves from their warehouses, so customers always know how much a product costs.^[11] Poundland promote this strategy through their slogan, "Yes, Everything's £1!". Running a store in which prices cannot change at all presents interesting challenges, particularly with inflation, as it is difficult to change all the signs to read "everything is £1.05", although inflation has also meant that there are products which could not previously sell that suddenly are on their radar due to RRP prices exceeding £1.^[20]

Plans to launch a transactional web site before the end of next year are also under consideration, in an effort to attract consumers not served by any of its stores. The site will offer a limited range of products with best-sellers and seasonal items featuring strongly, such as Halloween and Christmas products. Poundland also ran a similar trial scheme several years ago, with an average transaction value of £25.^[21]

Since November 2003, all of Poundland's stores have been using an advanced point of sale solution ­developed in-house ­running on Epson's touchscreen Intelligent Registers (IRs).^[22] The primary purpose is to track and understand which products customers are buying, allowing for up-to-date tracking of the most popular products, helping to ensure constant stock via automated ordering.^[22]

[edit] Products offered

Until recently, all unbranded products stocked by Poundland, which account for roughly 70% of total stock,^[9] would carry the Poundland branding and logo. However, the retailer has been able to increase sales by removing the Poundland branding and creating around 50 sub-brands, such as Beauty Nation, Kitchen Corner and Toolbox, for its value line of DIY products.^[5] In total, the retailer stocks more than 800 branded products,^[5] the majority being food and drink,^[23] and more recently have introduced eggs to eight of its stores as part of a trial, which the retailer believes is likely to be a "top 20 volume seller".^[21] Food products now account for 14 per cent of store space and 28 per cent of revenue.^[21] Poundland often sell large quantities of their stock to other retailers off-the-shelf, where it is cheaper for these retailers to pay £1 each for a bulk purchase than it would be to pay a discounted bulk-purchase rate elsewhere.^[11]

As well as their own brand line of products, the retailer also sells hundreds of products from other top brands such as Colgate, Walkers and Cadburys to name a few.^[24] Some of the products offered by Poundland which carry their branding are in fact supplied by manufacturers who are fussier about the retail positioning of their products and would rather allow their products to sell without their own branding attached.^[11]

[edit] Store expansion

Poundland have a keen interest to expand their store portfolio by 30 new stores every year,^[25] whilst also increasing its optimum store size by 25% to around 7,000 square feet (650 m²), comprising around 5,000 square feet (460 m²) of sales space.^[26] Poundland's property director Craig Bales is responsible for store expansion, saying that "although the economy was suffering, this had not resulted in a ready supply of suitable stores for expansion."^[26] In 2007, Chief Executive Jim McCarthy said that the retailer would consider expanding operations into Europe and the far east once it has extended its UK portfolio to 650 stores.^[23] On 27 November 2008, Coronation Street actor Anthony Cotton opened Poundland's 200th store at the Frenchgate Centre in Doncaster,^[27] with plans to open at least another 35 stores throughout 2009.^[28]

[edit] Customer base

Poundland boast a loyal customer base, with roughly 2 million predominantly female shoppers every week in the C1, C2, D and E categories.^[9] However, it claims 10% of its customers are in the A/B group, with the retailer seeing a 22% rise in the number of shoppers in this group over the 2007/2008 period.^[29] Poundland also attract students and the elderly who typically watch their budgets and look for bargains.^[9]

The retailer has been keen in recent years to move away from their reputation of only appealing to low-income households, as they continue to expand into mainstream shopping centres and districts, with an increasing number of higher earning consumers in the market for a bargain.^[9] Poundland's ability to fight inflation by guaranteeing their prices will remain consistent is just one factor in their appeal to a larger customer base.^[30]

An increasing number of households are seeing Poundland as a means to purchase their regular household necessities at a time of financial struggle. Whilst some high street shops have reported a downturn in profits, Poundland, a member of the bargain shop retail sector, have seen strong growth attributed to rapid price inflation of many of the household necessities,^[31] with an increasing number of hard-pressed customers visiting its stores for bargains, bulk buying items such as toothpaste and tinned food.^[32]

[edit] Financial performance

Poundland have seen strong increases in turnover year on year,^[33] helped by an increase of store openings and turbulant economic conditions.

Week ending	Turnover (£m)	Gross profit (£m)	Trading profit (£m)	Pre-Tax profit (£m)	Retained profit (£m)
31 March 2009	396[1]			8.6[1]	11.8[3]
30 March 2008	330		16	4.2[1]	8
1 April 2007	310.7	112.9	11.7	5.6	3.5
2 April 2006	281.2	100.4	5.4	4.2	0.15
3 April 2005	239.9	89.4	14.8	10.7	-0.68
28 March 2004	195.5	71.6	13.9	10.9	7.1
30 March 2003	192.9	67.2	9.5	4.9	8.8

[edit] Criticism

[edit] Accusations of Spying on Former Employees

During the month of May, 2009, Poundland was caught repeatedly spying on a former employee. The scandal was announced on the City of Recovery Press website, and has subsequently been echoed around the internet, on blogs, MySpace, and Twitter.^[34]

[edit] Environmental concerns

In 2008, Poundland infuriated green campaigners by flying Polo peppermints 7,300 miles (11,700 km) into the UK from Indonesia, rather than sourcing them locally. Despite Poundland being close to the Nestle Rowntree factory in York, which has made the mint since 1948, Poundland insists it is cheaper for them to source the product from overseas, even taking in to account transport costs, to ensure it can continue to provide its customers with value for money.^[35]

[edit] Health and safety

Although Poundland claim that they strive to provide its customers with good quality products whilst keeping the cost low, there are occasionally some products which fail to meet health and safety standards, and in some cases pose a health threat to the consumer. One such example occurred in February 2006, when dangerous car jump leads were withdrawn from sale across all stores. Although the cable gave the appearance of being heavy duty, it was found to only have a 3 amp wire in the centre following tests by council officers which, if used, could quickly overheat, melt and possibly catch fire.^[6] More recently, the retailer has been forced to recall Halloween witch hats, as checks on the item revealed a small number of chemicals classified as unsafe for young children.^[36]

Aside from potentially unsafe products, Poundland has also been found guilty of blocking fire exits at a cost to the company of £3000,^[37] as well as also being fined £13,000 in 2005 for unsafe racking in its warehouse.^[38]

[edit] Customer perception

Reviewers tend to speak positively about the store on many online review sites, however, some tend to criticize poor store layout, design and overcrowding, as well as inadequate customer service and staff knowledge.^[39] Despite this, in a survey the retailer conducted in July 2007, 99% of respondents said they would recommend the chain.^[9]

[edit] See also

• Variety store
• Advent International
• 99p Stores

[edit] References

[edit] External links

• Poundland's official website
• Poundland Recycles Initiative
• Company history and formation
• Reviews at DooYoo

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