Poundland – the owner of Dealz – has floated on the London Stock Exchange this week, thanks to rapid growth ... and to the sort of Irish yummy mummy customers who didn’t darken its doors in the boom years
Published 23/03/2014 | 02:30
Forget the cheap 'n' trashy stereotype or any notions of middle-class snobbery. The main street discount stores generically known as "pound shops" have now gone mainstream. And changed the way we shop.
The cut-price chains are also offering a serious challenge to traditional supermarket multiples, even if, analysts say, their products are not always cheaper.
The UK's Poundland – owners of the Dealz chain of stores in Ireland – this week became the first cut-price retail group of its kind to float on the London stock exchange, with an initial valuation of just under €900m.
Poundland is now a major, multinational business, with big institutional investors and plans to roll out hundreds of stores next in Spain (using the very successful Irish store model).
Here in Ireland, Dealz already has over 30 stores (with 10 in the Dublin region alone) and plans to open a further 11 over the next 12 months, creating up to 300 jobs and investing €1.75m.
Without any great fanfare or much publicity, Dealz has become one of our major retail chains, from a standing start of just two stores in Blanchardstown and Portlaoise opening in September 2011.
The cut-price retailer has also, together with the likes of Lidl and Aldi, changed attitudes and habits in recession-hit Ireland and the UK.
Poundland now claims that up to one quarter of its regular customers are from the higher-income AB demographic.
The retailer has used some very clever marketing to combat any stigma that more affluent customers might still associate with pound shops.
In the UK, Poundland has teamed up with celebrity baker, cook-book author and actress Jane Asher, something of a middle-class icon, to launch an exclusive bakeware range.
In Ireland, there are now Dealz stores in relatively upmarket locations such as Nutgrove Shopping Centre, Stillorgan and Dundrum.
Well-to-do consumers have learnt to look past the old stereotype of "pound shops" and to include the likes of Dealz and its competitors in their weekly shop.
Retail analysts such as Damien O'Reilly, lecturer at the Dublin Institute of Technology, call the new trend "repertoire shopping" and point out that while it is benefiting discount chains, it is also good for smaller, niche operators such as butchers and fishmongers, while putting the squeeze on some mid-sized, traditional chains that try to do everything.
"You'll find that people are buying, say, their best cuts of meat in the local butchers, shampoo or detergents in stores such as Dealz and staples like cereal and bread in Aldi, Lidl or Tescos," says Damien.
"We are no longer doing one big weekly or fortnightly shop, we tend to shop more often, visit more stores, and be very careful on comparing prices and deals.
"With discount stores, we may only go in to buy three or four specific items. But the price-point is the big attraction. We know that we have four items to buy, and each of those items will cost us €1.49, so you can budget very carefully".
Damien believes that shoppers have now learnt to trust the discount chains on quality.
"Aldi and Lidl have made a big play on sourcing their meats and similar products from Irish suppliers.
"And in Ireland, we think our meat and farm produce is the best in the world.
"Lidl have introduced in-store bakeries in their Irish stores, again, emphasising the fresh and local, quality message.
"The discount stores have definitely raised the quality. They have worked very closely with suppliers to establish very strong supply chains at very competitive prices.
"And in a recession, if people feel they can trust the discount stores on quality and they know they are getting a deal on price, they will use them."
Shoppers are certainly getting smarter. A survey released last month suggested that up to 20pc of supermarket customers now "mobile shop", cruising the aisles with their smartphones or tablets in hand to do live comparison shopping or bargain-hunting.
Buying from home over the internet is now posing a challenge to traditional bricks-and- mortar operations such as Poundland, who are aiming to beef up their online retailing.
On the main street, discount stores can also concentrate on a relatively small number of products. While the traditional large supermarket might carry up to 20,000 items, stores like Dealz can concentrate on around 1,500 or even less.
Some analysts say shoppers in cut-price retailers may not necessarily be getting bargain-basement deals, pointing out that if you compare products such as shampoos or detergents on the basis of weight, the supermarket often offers a better deal.
However, the one-price-fits-all model, very clever packaging and smart, aggressive marketing have combined to convince (or perhaps manipulate) consumers.
The price-point factor in particular, knowing that your staple will cost a pound or (in Ireland) €1.49 – 97pc of all Dealz products are priced at this point – has proved to be a winner.
With Poundland now very much a major player in the UK market – as well as in Ireland and soon, in Spain – it seems the era of the "respectable" pound shop is very much upon us.
However, the market continues to evolve rapidly and Poundland is coming under pressure from a raft of aggressive imitators in the UK.
The chain recently had to cut prices on a range of products to just 93 pence, in a bid to stave off competition from 99p stores.