Written by: Cally Worden
Pound shops have been a feature of our High Street for many years now, but in the wake of the financial crisis it seemed as if they were cropping up everywhere. Most towns and cities now have several value stores of one form or another, and they appear to be doing a roaring trade. We all know that some of the stuff they sell is very cheap and cheerful, but does that matter? They are clearly filling a gap in the market. But some High Street purists say they lower the tone and devalue some of the better quality stocks on sale in the pricier stores. So who’s right, and where do you sit in the Great Pound Shop debate?
Yes! To Pound Shops
There is not a shred of doubt that the pound shops deliver a lot for very little money. The stores may not boast delicate lighting, lush carpets or designer displays, but who cares about the surroundings when you’re able to bag so many bargains in one place? Pound stores are adorned with row upon row of cheap essentials. Choice of brands ranges from zero to limited, so you can save time when you’re shopping too by not having to agonise in selecting one product over another. They are all the same (or a similar) price.
As far as the pound shop retailer goes this business model is ideal. They shift a lot of stock, which enables them to buy in bulk and keep prices as low as possible. Their profit margins are simple to calculate and the mark-up on most items will be similar – this negates the need for a raft of expensive overheads in the form of Head Office staff to manage the finances. Money is also saved by not having the standard Customer Services team, and the idea of discounted stock is a nonsense, which also saves management time and keeps costs to a minimum. These savings can be passed onto the consumer in the form of ever-cheaper goods, which keeps stock flying off the shelves. It’s your ideal Win:Win scenario, especially for consumers who are still feeling the financial squeeze.
Poundland is just one example of the runaway success of the pound store business model. Between 2013 and 2014 they increased their number of High Street stores from 389 to 500. The market share that this delivers gives them immense buying power and the ability to drive prices down to a minimum, even with the likes of big brands such as Coca Cola and Heinz. Rapid expansion such as this helps the local economies too, as the stores provide jobs, and help to draw people onto the High Street where their spending inevitably spreads to other retailers too.
No! To Pound Shops
Those who oppose the pound store business model believe that the very existence of cut-price stores threatens consumer choice, and presents a real threat to their personal health and well-being. They argue that the pound shops take their pick of the ‘easy target’ products from the vast range offered by the supermarkets. This effectively blanks out the fresh fruit and veg market, Fair Trade and organic products, and speciality foods designed for those with specific dietary requirements.
By drawing shoppers into stores where sugary drinks, sweets and snacks are offered at a premium, and simultaneously offering zero in the way of healthy food choices, pound stores may be contributing to the rise in obesity in the UK. It’s also a fact that mass-produced cheaper foods tend to be more processed, and contain fewer fresh, healthy ingredients.
Consumer psychology experts also question the way in which pound stores affect consumer behaviour. Far from discouraging shoppers from over-spending, they argue, the marketing techniques used, and the novelty value of everything being priced at, or close to, ¬£1, actually creates an illusion of ‘value’ that can drive shoppers to buy items they don’t need, or more than they would normally purchase.
In addition, business experts can see that pound stores are harming the local economy by drawing consumers away from other businesses who offer similar products, but simply cannot compete with their buying capacity and resultant low pricing.
What do you think?