Is this the death of poundshops?
Although the inflation rate fell last month from its lofty heights over 5% down to 4.5%, the thing with inflation is that it makes the price of things go up. Add in the increase in VAT to 20% last year and you could well expect 2012 prices to be considerably heftier than those a couple of years ago. But what if the retailer’s unique selling point is its fixed price? Will Poundland and 99p Stores soon become the £1.38 Shop?
It may sound silly, but that is exactly what Welsh businessman Colin Sharp was forced to do when he changed the name of his Famous £1 Shop to the Famous £1.20 Shop some time ago and he reckons that his somewhat larger competitors will soon be following suit.
But they disagree. The advantage that the bigger boys have, with 173 UK 99p stores and 381 Poundland outlets, is that they can have products made for them, of a particular quantity or size, to ensure the £1/99p selling price makes a turn. A simple way to address rising prices is therefore to offer customers less for their money.
99p stores founder Hussein Lalani recently admitted that his Toblerone bars, for example, are now 30g lighter than they were. "I may be selling a smaller Toblerone than I did 10 years ago, but I am still the cheapest on the High Street for that particular Toblerone," he said. Of course, no one else sells that particular Toblerone either, so strictly speaking, he is also the most expensive retailer.
However, the fixed price stores are also finding other ways to relieve the inflationary pressure. 99p Stores have recently opened its first stores in the Irish Republic called Euro 50 (£1.25) Stores as well as expanding into retail parks with Family Bargains, which are not tied down to a single price. Mr Lalani explained his motivation by saying, "We had a lot of customers coming in and saying: 'It's great that you've got all this 99p stuff, but I need to buy a new vacuum cleaner'." Yes. I always go into my local 99p store looking for domestic appliances. What is this country coming to that you can't buy a suction-based cleaning machine for less than a pound?
Poundland has opened Deals-branded stores in the Irish Republic and the Isle of Man, which do not stick to a single price. Retail director Tim McDonnell is convinced that the pound shop format can survive, although the products offered may change.
"If you go into any other supermarket you'll see a whole range of products ranging from 10 pence up to 60 or 70 pence. There are thousands of those lines, and over time, with inflation, they will eventually fall into our price bracket," he says.
Great to see quality and quantity being compromised at the expense of price, eh? Still, this may all be a load of complete nonsense. The newest shop that has opened in my posh suburb of North Birmingham* is the amazing 98p Store. I kid you not.
*no, this is not an oxymoron.