News • 09.08.2018

“Differentiation remains the key to growth”

Poundworld’s failure to differentiate from other discounters led to demise

Graphic of market share of top UK discounters; copyright: GlobalData...
Source: © GlobalData

Poundworld, which is set to disappear from the UK high street by early August 2018, must look to its own failures – and in particular its failure to stand out from other discounters – to explain its demise, says GlobalData, a data and analytics company.

It is easy to assume that the higher supply costs stemming from Brexit, ferocious competition amongst discounters and rising wage costs were all responsible for Poundworld’s failure, but this is not the whole story.

Thomas Brereton, Retail Analyst at GlobalData, comments: “As with retailers across sectors, differentiation amongst the discounters remains the key to growth. One misstep by Poundworld was a failure to offer shoppers a reason to choose them over Poundland, B&M or Home Bargains. Poundland is thriving on the back of its recent expansion of value clothing brand Pep&Co, and B&M is expanding into food and offering larger items such as outdoor furniture. Poundworld failed to find a unique selling point, and without it consumers were quick to switch to a retailer that did.”

Other factors certainly played a part, with falling footfall exacerbated by a loss of Poundworld’s credibility amongst consumers. Following difficulties in credit insurance, the discounter struggled with stock availability over the all-important Christmas trading period in 2017, inevitably leading to a loss of custom to rivals Poundland and B&M.

Brereton continues: “Unfortunately for Poundworld, adverse currency changes arising from the 2016 referendum hit it harder than most. Its smaller market share than B&M, Home Bargains and Poundland meant that international buying power was weak in comparison. This proved to be fatal, with its high reliance on the now more expensive overseas imports crippling its operating profits.

“While Poundworld cannot be blamed for the fallout of the referendum result, it is responsible for its attempt to mitigate its impact through a poorly executed multi-pricing strategy. Its rapid repositioning backfired, leaving shoppers confused about what to expect when walking into a store.

“However, Poundworld is not alone as macroeconomic conditions have affected numerous retailers across the British high street this year, including household names such as New Look and Toys R Us. But for the seemingly impervious discounters, the loss of Poundworld will make it clear that the physical retail landscape is a treacherous one to all.”

Source: GlobalData

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