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Ok, a bit obscure: a Pony is slang for £25. What
No consumer is that loyal. And that is what is
with 35 stores (Poundstretcher, established in
will Pound shops be called in 20 years’ time?
fuelling the rapid market share shift in favour of
1981, is a discounter not a Pound shop). By 2012,
‘Grand’ shops perhaps (a snip at just £1,000
Pound shops and discounting generally. We all
Poundland had 401 branches. Two more large
per item) or ‘Monkey’ shops (bargain-basement
want to ‘save the High Street’ but not if it costs
Pound shop chains had meanwhile emerged:
at just £500 per item)? Whatever the longevity of
us anything.
99p Stores (176 branches if the Family Bargains
the current ‘Pound’ shop concept, the fixed price
The faster Pound shop networks expand (and
fascia is included) and Pound World with 175
model itself is definitely on a roll. It is not just
they are expanding very fast indeed), the greater
branches. Overall, the number of Pound shop
Pound shops of course. Discounters of all types –
the consumer awareness of price differentials
branches grew from 35 to 752 over the 1998-
non-food and grocery – have been expanding like
becomes. And the more clued-up consumers
2012 period (growth of more than 2,000%),
Topsy during the downturn, feeding on the new-
become about price, the more obvious – and
dwarfing chain network growth rates generally.
found thriftiness of UK consumers. That thriftiness
the more unsustainable – big price differentials
Literally hundreds of new Pound shop stores are
looks set to continue as long as the downturn
become too. Range is short and uncertain in
meanwhile in the pipeline. The rate of branch
lasts. And, if Japanese experience is anything to
Pound shops true, but the offers are still ground-
growth of the big-three Pound shops is notable
go by, thriftiness could become an abiding new
breaking, something that – even now – baffles
for another reason. All of them seek large units.
feature of UK consumer behavior if the downturn
many retailers and landlords alike. Get the retail
In their race for space they are continuing to
lasts much longer. Once established, thrift is an
magic right, and Pound shops are a stonking
hoover up a significant chunk of available large
extremely difficult consumer trait to budge.
business formula and not just in recessions.
unit space: in-town and out-of-town.
The
discount
demographic
has
The Pound shops are not alone of course. Other
certainly
broadened over the last three to four years, so
much so that it now appears to take in pretty
well all socio-economic groups. But it is the
Pound shop model that is attracting the most
attention because, like the grey-market panics of
yesteryear, the formula poses a direct threat to
traditional High Street stalwarts, including – most
notably – the big-four grocers. Pound shops are
“I suspect, once the dust
settles, that Pound shop/
discounter growth will
emerge as one of the
most important structural
changes to occur during
the recession”.
There used to be a restaurant in Leicester Square in the 1960s called The Guinea and
the Piggy. It offered ‘all-you-can-eat’ for just one Guinea (21 shillings for younger readers).
It was the favourite destination of a generation of hungry Leicester Square cinemagoers.
If it was still there today, due to inflation, it would doubtless be called The Pony and
the Piggy. Tony Devlin and Melitta Berrino look at the inexorable rise of Pound shops
and inflation.
IN_retail_Winter_2012
B&M, Home Bargains, Range, QD, Quality Save
et al (and grocery discounters like Aldi and Lidl)
have also been hoovering up space. The number
of branches held by the discounters mentioned
(excluding Aldi/Lidl) has more than trebled since
1998 from 406 to 1,411 now: 348% growth over
the period, a lot less than for Pound shops but
a rapid rate of growth all the same. The Pound
a competitive threat to many other chain traders
IN FOR A PENNY,
IN FOR A POUND
discount players like Poundstretcher, Wilkinson,
too because they are apt to target a quite narrow
The retail market is continuing to polarise. The
brand model continues to hold sway in discount
but very focused price-bracket that, in retailing
Internet price comparison activities of consumers
markets – perhaps simply because the Pound
terms, is a core part of the non-food/dry grocery
are hitting margins in branded commodities
discount offer itself is more concisely defined.
market: the reason that Pound shops are causing
generally,
electrical/technology
Expansion plan figures suggest that the rate of
many retailers such unease, landlords too.
items. Price competition from discounters –
Pound shop branch growth in discounts markets
including Pound shops – is a double-whammy
will continue to outpace the discounter average
for many High Street traders. The growing price
for a long while.
“We all want to ‘save the
High Street’ but not if it
costs us anything”
particularly
focus of consumers is chipping away at the very
foundations of traditional mid-to-lower market
niche High Street offers, driving change that will
ultimately reshape the High Street mix itself (and
However sniffy some landlords continue to be
leave a trail of yet more vacancies). As we have
about accepting Pound stores as tenants, if one
seen, many older brands simply cannot survive
thing is known about retailing it is that attempts to
the current price-driven upheaval. The old cosy
stifle new competition to support uncompetitive
chain retailing certainties – monopolistic almost
pricing by existing occupiers is a recipe for
– are breaking down. If you want to see the future
stagnation. In the end: everybody – consumer,
of domestic High Street retailing, it is writ large
retailer and landlord loses. It is a mistake in this
in discount offers at one end, luxury shopping
respect to see Pound shops as somehow diluting
at the other and a pared-down domestic middle
quality any more than ‘grey markets’ dilute quality.
bolstered by a large infusion of catering.
“All of a sudden the Pound
shop no longer looks like
just another hybrid discount
model. The formula appears
to presage quite major
structural change in the way
low price-point mass-market
branded commodities (dry
grocery and non-food)
are marketed”
What both do is dilute price in some branded
To illustrate just how fast things are evolving,
“Discount shopping has always been there,
product lines, not quality, putting margins under
we asked Retail Locations, the largest database
it is nothing new. And single-price shops are not
pressure: the reason retailers hate discounters.
of multiple retail and service outlets in the UK,
new either,” comments Melitta Berrino of Retail
After all, why pay double the price for branded
to look at the growth of Pound stores (and other
Locations. “It is often forgotten that Woolworths
goods next door just because the store has been
key discount players). In 1998 there was just one
started as “five and dime” (5¢ and 10¢) stores.
on the High Street since the beginning of time?
significant Pound store operating: Poundland,
And there were lots of penny stores around at
11
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THE GREAT
PRODUCTIVITY
GAP
13
On a like-for-like basis,
retail park space remains
a lot cheaper for retailers
than town centre space.
Dominic Walton explores the
town-centre/out-of-town
productivity gap.
The productivity gulf between town centre and
out-of-town, in favour of out-of-town, remains a
major enticement to occupiers, developers and
investors alike.
On a like-for-like basis, retail park space remains a lot
cheaper for retailers than town centre space. Dominic Walton
explores the town-centre/out-of-town productivity gap.
The advantages of out-of-town shopping are
well known: accessibility (and crucially parking)
out-of-town is markedly superior to that of town
centres; average unit sizes out-of-town are much
larger too, allowing for both flagship units and
the time too. The ‘everything-at-a-single-price’
broadly-based expansion activity set in, begin
the more extensive merchandising sought by
concept is as old as retailing itself.
to price discounters out of certain parts of the
today’s mass-market retailers.
“Among the new breed, Poundland was
property market. It is relatively low property prices
In most town centres, it is just not possible
established in 1990 – born out of recession. And
that have given the Pound formula such a boost.
to create units of the size, and accessibility, of
the new wave of Pound shops did not really start
Household incomes look set to remain under
those available out-of-town. Finally, and most
to flourish until the onset of the current downturn:
pressure long term so atypically rapid discounter
importantly, the accessible larger unit out-of-
recession has given them a huge boost”.
growth looks set to run and run. Currently, Pound
town shopping stock allows retailers to offer
“But it goes deeper than that. All of a sudden,
consumers both greater value for money and
shops and discounters (along with grocers) have
the Pound shop no longer looks like just another
an open-road in front of them for acquiring
In a little over a decade, Pound
hybrid discount model. The formula appears
space. And the longer the discounter expansion
shops have achieved national
to presage quite major structural change in
activity goes on, the greater the market share
representation. Rapid Pound shop
might personally want to ‘save the High Street’,
the way low price-point mass-market branded
shifts.
expansion continues.
modern out-of-town shopping wins hands-down
commodities (dry grocery and non-food) are
marketed. It is almost as though grey-market
trading is finally morphing into the mainstream,
just in a different guise”.
“Pound shops also appear to have finally broken
the effective monopoly in certain low-price
point goods areas traditionally held by grocers
TONY DEVLIN
Head of Retail Agency
Tony is Head of our UK retail agency business, having specialised
in retail property for 19 years, advising both major property owners and
leading UK and international retailers.
greater shopping convenience.
To put it brutally, and however much we
in the productivity stakes: hence its attraction to
retailers and consumers.
Critically from the property perspective, on
a like-for-like basis, out-of-town space is by
and large cheaper to occupy (and staff) than
equivalent town centre space: and cheaper
and much quicker to build too. Planning and
and certain High Street mixed goods retailers
compulsory purchase quagmires in town centres
(including Woolworths). I suspect, once the dust
can hold-up large schemes for 10-15 years or
settles, that Pound shop/discounter growth will
more (schemes that have actual construction
emerge as one of the most important structural
changes to occur during the recession.”
Geographically, the march of the Pound
shops has proved inexorable. All major markets
are now covered (in-town or out-of-town) but
thousands of infill opportunities still remain. The
rate of future Pound shop/discounter expansion
depends upon the duration of the downturn. Any
marked upturn in consumer spending would, as
Melitta Berrino
Senior Partner, Retail Locations
Melitta joined Retail Locations in 1988 and conducted a successful
MBO in 1993. The Retail Locations database is the oldest and by far the
most extensive dedicated multiple database in the industry, providing a
comprehensive record of chain operators in retail, service, catering and
leisure markets. Retail Locations supply the data and market intelligence
for CBRE’s Shop Expansion Plans publication series as well as providing
trading location-level branch data for CBRE’s NSLSP programme.
periods of only three to four years at most).
The economic cost of such development delay
is inevitably eye-watering.
Development out-of-town, if you can get
permission, is much quicker. Planning obstructions
have still resulted in chronic shortages of A1
space out-of-town though. Competition for the
best out-of-town sites/properties remains intense
as a result.
Whatever the demand pressures, free of the
IN_retail_Winter_2012
vagaries of Zone A rental valuation, occupational