Mike Anthony @ engage consultants

Mike Anthony on Shopper Marketing

Discount channels and the value they can create for brands

with 2 comments

A confession. I am, what might be politely called “thrifty” (and what my wife, on occasion, has called “tight”). Thrifty works for me. I don’t see it as an insult. And for thrifty shoppers like me, trips back to the UK these days bring with them an extra thrill – pound shops.

Following a recent trip to the UK, my seven year-old daughter sports a matching glove, scarf and woolly hat combo (all a pound); I have a back support for use whilst sitting at my desk; we ate five (or was it four?) Mars Bars and a very large Toblerone. I switched deodorant brand. I bought three umbrellas (I leave them everywhere!). Some of this was impulse. Some of it a one-off thrill. And some of it has changed my consumption behavior long term.

I switched deodorant brand – and I like it – so I might just stay switched. How valuable is that to Unilever? How much of a loss is it to Beirsdorf? How much would they usually pay to persuade and gain new long term consumption? How much TV advertising, sampling, discounts and displays in supermarkets? All achieved with a little listing in Poundland.

Pound shops are popping up on every high street in the UK. Poundland has just opened its 400th store : adding these to the stores of Poundworld, B&M, 99p Stores  and Home Bargains brings the number of stores to well over a thousand. In the US there are, according to Time , over 20,000 dollar outlets.

So what should shopper marketers make of the rise of the pound/dollar channel? Is this just a recession-led blip, or a significant new channel that requires attention? Perhaps most importantly, will they last? All of the these discount store groups are projecting significant store openings, but once the country tips out of recession, what will become of pound/dollar shops?

Pound shops have evolved their relationship with manufacturers

From their humble origins selling cheap trinkets and clearance stocks from major brands, pound shops have come a long way. Where once pound shops picked up products through clearance brokers, today they have built enough scale to cut out the middle man with some manufacturers and now deal direct.

Manufacturers must welcome an alternative to the dominant  modern trade forces of Tesco, Sainsbury, and Asda. Whilst pound stores will undoubtedly use their increasing scale to demand larger margins in the future, the threat of private label doesn’t exist, and they create a welcome “brand only” zone for brand owners to ply their trade.

Pound shops have found a long term home

Pound shops may be the direct spawn of recession, but it is the empty high streets caused by the exodus of the likes of Tesco and Sainsbury that (together with the collapse of Woolworths) created the breeding ground – in many ways, big retailers are again victims of the unforeseen consequences of their actions. Pop-up stores only go so far: High street landlords needed something, anything, and will have offered long term, low rent leases to anyone who would take them.

People have changed the way they shop

Even without pound shops, shoppers have fundamentally changed the way they shop. The days of “one-stop shopping” appear to be long gone, and shoppers have got used to a multi-channel shopping experience. Shopping for deals is fun: for some (me included) a bargain from a pound store is a badge of honor to share with my friends (many of whom roll their eyes and sigh!) Further, it isn’t just less affluent shoppers that you find there –  according to Tim McDonnell of Poundland around 13%  of their shoppers are from loftier A and B demographics.

Pound shops are here to stay – so what should we do?

It appears that bargain hunters like me will still be being thrilled by bargains on the high street for years to come. Pound shops offer no nonsense convenience and great prices. They attract a broad range of shoppers, and have built a long term low cost base from which to operate. They have reached a scale now which gives them power to negotiate decent deals with manufacturers, and increasingly to demand the tailored pack sizes that they will require to maintain their price points over time.

Manufacturers need to understand the role that this channel plays for their target shoppers. Understanding who shops in pound shops at a deeper level than mere demographics; understanding what influences those shoppers in this channel, and the impact that this has on shopping elsewhere will be  paramount. Armed with this, savvy marketers will be able to understand how pound shops can support their brand strategies as part of a structured multi-channel strategy, and drive future consumption growth. In this way pound/dollar shops and their counterparts around the world could and should be seen as a welcome addition to the retail lexicon of the future.

Advertisements

Written by Mike Anthony

May 17, 2012 at 8:07 pm

2 Responses

Subscribe to comments with RSS.

  1. A levelling out of the playing field between the retailers and manufacturers can only be a good thing. And it’s important to remember that while these people are looking for the best deal in some categories, they will continue to spend on the occasional luxury item. I’m not sure that pound shops will enhance their instore environment so it does put a certain level of responsibility back onto to brand marketeers to do their jobs well.

    Kenan Nashat

    May 17, 2012 at 8:50 pm

    • Hi Kenan,

      Very true.
      Pound stores won’t improve the environment in-stores unless they feel they will get a return on it – as you say the responsibility (and opportunity) lies with brand owners to take the opportunity that these stores offer. Too often chains like this are seen as unimportant to marketers – they may pay attention to the likes of Tesco or Walmart, but not to PoundLand. But whatever the shop, if it contains your target shopper, then it is worth of interest, attention, and may create huge opportunities. Considering this channel as merely a discount “drive the volume” channel that sales teams can manage without a marketing input could be a huge opportunity missed.

      All the best,

      Mike

      Mike Anthony

      May 18, 2012 at 9:49 am


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: