The online pound store wars have started again – with a truce.
Poundshop.com has merged with rival outfit Hereforapound.com as part of a relaunch.
Both sites launched at the beginning of 2014, and briefly found fame on primetime BBC One, with a mention on Pound Shop Wars. Indeed, the documentary was blamed for causing a spike in web traffic to Poundshop.com that caused it to crash in its first week.
Poundshop.com was originally a joint venture between Poundland founder Steve Smith and Poundworld (is that too many pounds to keep track of?). Poundworld backed out in August, citing concerns over its “operations, online trading, web platform and marketing”. Since then, little has been heard.
Exeter-based Hereforapound.com, meanwhile, launched in February, and targeted £4m-5m in first-year sales. Two other online pound stores – Onlinepoundstore.co.uk and Poundpanda.co.uk – shut down within weeks of launching the same month, seemingly proving the doubters right that the pound-store model simply can’t work online.
Now Poundshop.com is back for another go – and MD Donna Baker (formerly of Hereforapound.com) is convinced it can work.
“You can do it if you’re efficient,” Baker told The Grocer. “This is a new area of retail, so there is not a business model for us to copy. We’ve had to manage expectations and find ways to keep costs down. We have one distribution centre in Exeter, rather than multiple distribution centres. We don’t have shops to run. It helps us to compete.”
Before the original launch of Poundshop.com, Smith said he was “surprised” the rest of the single-price market had been so slow to embrace online trade. “I can see why people held back now,” Smith told The Grocer yesterday. “For me, moving online was the natural progression; it was the natural next stage. But pound shops have already got a lot on their plate, they’re already really busy.”
But how can the pound store model work on the web, and overcome low margins and high delivery costs? Smith and Baker’s plans for Poundshop.com suggest customers’ routines will be important for online trade.
“Soon, if a customer buys shampoo every two weeks, we will have a repeat service that’ll automatically add shampoo to their basket every two weeks. We’re developing tools to learn about our customers,” said Smith.
Smith added he “was not worried about competing with stores in town” because they had such a different customer base. “We cater to disabled or housebound customers and to night shift workers. We’re very important to small businesses and wholesalers. For any type of customer, we can get heavier goods delivered to their door.”
When questioned on what would make such customers use Poundshop.com as opposed to other websites, Baker said for many customers it would not be price but “convenience”. “Some of the other competitors provide range by hosting other sellers. I think we can compete through our range and by being simple and trusted.”
And Smith has even bigger aspirations – with plans to tackle youth unemployment. “So many children are leaving school and not knowing what to do. Poundshop.com is in talks to start a new scheme, open to everyone but mainly school leavers and university leavers. It’ll be like the Avon lady business model. Those that sign-up can get goods in bulk from Poundshop.com to sell and earn commission.
“I started on a market stall, so did my father, so did Ken Morrison,” Smith added. “There’s a lot to learn from the market-stall model. That’s what this scheme is all about.”
Poundshop.com may soon face a new rival, as Poundworld has indicated it would develop its own online venture.
“Our biggest challenge over the next year is to make sure our customer service is great. We’ve had issues in the past with web traffic crashing our site due to the high demand. We need to make sure we have the right software in place,” Smith said. “We also need to make sure we are offering a good delivery service and getting good customer feedback. Feedback on social media is going to be very important for us.”
The jury is still out on online trade for single-price retailers. But if Smith and Baker can crack it, the whole sector will sit up and take notice.