Pound for Pound – Consumers Getting Savvy

News is out that Poundland plans to open 50 new stores this year after announcing strong increases in profits and sales. Profits rose by 81.5% to £21.5m in the year to 28 March, with turnover up 28.7% to £509.8m (source: The Grocer).

At a time of economic downturn with the threat of a double dip recession on the horizon, we wondered what might be the explanation for and impact of Poundland’s success?

It is accepted now that many people adopted thrift as part of a trendy lifestyle choice but now, with the threat of a double dip, is Poundland’s success a reflection of the fact that people genuinely feel they need to spend less?

Although the high street is a place where people can experiment without risking too much and only sacrificing a retail "experience”, there is some evidence that people are willing to put effort into finding bargains in some product categories and therefore will trade off price against the convenience of doing all their shopping in one place Poundland may be scoring on the brands or products that consumers don’t feel they need to buy from a Sainsburys, a Tescos or a Waitrose.

In the previous recession, research showed that continental consumers were shopping around more for their groceries - using chains such as Aldi or Lidl for commodities, such as flour and sugar, and a regular supermarket for more 'valued' items, such as coffee and meat.

It may even be that consumers are subconsciously segmenting their shop by category - with some products sacrosanct according to retailer or brand and some categories where it's all about value and then categories where it's purely about price.

The savvy consumer - more about information & choice than actual behaviour in the past – may be coming true in the face of a genuine financial squeeze.