SWOT Analysis of Poundland
Strength
Poundland offer a range of over 3000 products,[7] with 10,000 new products featured in any year. David Coxon, Buying & Merchandising Director, defines stock as falling into one of three different categories: ongoing core lines (products bought direct from the manufacturer), seasonal ranges and clearance stock.[32]
Until recently, all unbranded products stocked by Poundland, which account for roughly 70% of total stock,[11] would carry the Poundland branding and logo. However, the retailer has found that they could 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.[7] In total, the retailer stocks 1000 branded products,[7] the majority being food and drink,[33] 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".[30] In 2003, The Grocer reported that approximately 400 of the chain's 2000 stock-keeping units (SKUs) are in impulse and grocery lines.[25] Food products now account for 14 per cent of store space and 28 per cent of revenue,[30] with 55% of its customers purchasing food or drink, particularly taking advantage of their multibuy offers such as four-for-£1 deals on branded crisps, confectionery and soft drinks.[34]
In October 2009, Poundland launched their own range of bagged sweets branded "Sweet Heaven", in a bid to help fill a gap left by the demise of Woolworths. The range will include a number of products that used to be found in Woolworths's Pick n Mix selection.[35] As well as their in-house brand line, the retailer also sells hundreds of products from other top brands such as Colgate, Walkers and Cadburys.[36] Poundland is Britain's largest seller of batteries, stocking reputable brands such as Sony, Panasonic and Kodak in quantities priced more competitively than their closest rivals,[32] with their Kodak AA batteries being one of their best selling items in 2009.[37] Some of the products sold under the in-house brand are supplied by manufacturers who are worried about their brand being sold in discount stores and would rather allow their products to sell without their own branding attached.[15] Poundland often sells 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.[15
Threat
Value and discount retailers have seen a boom in sales since the recession at the start of 2009, with several retailers operating with the same strategy as Poundland, such as independent businesses and smaller price-point retail chains such as Poundworld. Poundland's closest and largest rival in the sector is 99p Stores, whose buying director Faisal Lalani cited one of their main aims being to catch up with Poundland and their 223 stores as of August 2009.[52]
Other larger chains have also been hit by the success of discount retailers, with many budget-conscious customers making the switch from traditional larger supermarket retailers for their everyday necessities.[7] A strategy adopted by Poundland to lure customers away from the larger supermarket chains is to give them confidence with reputable household brands, then bring them in en-masse by selling those names at prices that defy and undercut almost any competition, at which point try to entice the 40% to impulse buy other products on offer, hopefully own-brand, that they may not necessarily have planned to purchase.[32] In response to this trend, 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 an effort to stifle the competition, Poundland introduced multi-buy offers to provide a larger quantity of the products for the same price of £1 to avoid deterring this lucrative band of customers back to Poundland's larger competitors.[20] However, research conducted by The Grocermagazine in August 2009 found that of the 1300-odd supposedly discounted products on sale in ASDA during July 2009, a third were the same price as in March 2008 and 173 products had been selling for less than £1 during Spring 2009,[32] while prices at Poundland have remained fixed since the chain was founded in 1990.
Whilst Poundland's competition will primarily be other value retailers, the retailer may sometimes find they are competing with other retailers' own brand produce. It was reported in May 2010 that Poundland were selling rebranded lotions for £1, exactly the same products that Boots were selling under their own brand for significantly more.[53] Boots responded to the findings by suggesting that the products available in Poundland stores were likely excess stock they had sold off below cost price which had been destined for overseas markets, with some inadvertently directed into UK distribution without their permission.[54]
Weakness
Although the £1 price prevails throughout the stores, some branded products are offered cheaper or with better value at larger supermarket chains, as the price consistency across all product ranges in Poundland creates customer perception of a bargain. For example, two reporters from the Daily Mirror newspaper in November 2009 compared prices for branded products offered at Poundland with the same products offered at larger supermarket stores and found in some cases the larger supermarket stores offered better value for money.[60]
Reviewers tend to speak positively about the store on many online review sites, but some tend to criticize poor store layout, design and overcrowding, as well as inadequate customer service and staff knowledge
Opportunities Poundland are planning to open one store a week in the next year on the back of a 4.4% growth in like-for-like sales. Students should consider whether it is only the recession which has allowed this growth or whether other factors are part of the change. The article suggests a number of other factors as well, including
- increased use of the internet for shopping around and the use of comparison websites;
- a new appetite for discount vouchers raising awareness of bargain-hunting;
- more vacant shop units meaning that premium space is becoming cheaper to rent;
- seizing opportunities as a result of the failure of other discount chains like Woolworths.
There are also some interesting comments about the strategy that any shop called Poundland, Pound Crazy or Mr Pound has to follow when VAT rises back to 17.5%. They can hardly raise their prices above £1 to reflect the higher rate, so they have to absorb it, and look for cheaper suppliers, smaller sizes, or focus on products for which other retailers all charge more than £1 in order to keep their margins. (http://www.tutor2u.net