Poundland nation: Britain's middle classes flock to discount chain

Firm says it wants more shops than Sainsbury’s as it plans stock market flotation

The dominance of discount chains on Britain’s high streets has moved a step closer as Poundland said it wants to have more UK stores than Sainsbury’s and Starbucks, revealing plans to join the stock market with as value of around £700m.

The firm’s management said it wants 1,000 stores across the UK, doubling the current 500 sites, and added that the middle-class stigma previously attached to the brand has come to an end – with more than one in five of its shoppers now in the top socio-demographic band. Five years ago it was only one in 10.

Retail experts and economists believe the plans by Poundland show a permanent shift in the shopping habits and confirm discount retailers as the big winners from the recession, with its rival B&M Bargains also eyeing up a stock market floatation.

Poundland’s chief executive Jim McCarthy, who will pocket several million pounds from the listing, said: “The value retail sector has been through a period of profound change in scale, customer perception and financial performance. The sector is now a mainstream feature of the UK retail market and Poundland has been a central architect of that change.”

With wages failing to rise in real terms for at least four years, shoppers have felt the pinch and are turning to cheaper retailers.

Matthew Whittaker, senior economist for the Resolution Foundation, explained that income for a typical household has fallen by more than 5 per cent between 2008 and 2012 and is not expected to rise again for at least another year.

He added: “We are still feeling the effects of an unprecedented squeeze on living standards which has seen falling wages and a rising cost of food and other essential items. Given these pressures, many households are making tough choices about how and where to spend their limited disposable income.

“This is unlikely to change until we see a sustained rise in wages.”

Poundland has benefited from the recession, with a rapid expansion seeing stores go from just over 200 five years ago to nearly 500 today. During that time, sales have jumped from £400m in 2008 to £758m in just the nine months to December 2013, and bosses now want to expand into Europe, with 10 stores in Spain already due to open.

Bill Grimsey, former chief executive of Iceland and author of a report into the state of Britain’s high streets, explained: “I think the economic conditions are causing the likes of Poundland and B&M Bargains to transcend socio-economic groups. You’re getting middle-class punters because of the squeeze they have had on disposable incomes, which has led to their success.”

He added that many of the traditional retailers had failed to keep up with the pace of change and that the discounters had managed to win over customers from the likes of Tesco and Morrisons.

Poundland opened its first store in 1990 in Burton-on-Trent and slowly expanded, replacing many of the independently run discount stores. Graham Soult, a retail consultant at CannyInsights, revealed that Poundland took advantage of Woolworths’ collapse, with 93 of its stores located on former sites of the now defunct retailer. Iceland is second with 69 stores, with 99p Stores taking 60 sites and B&M Bargains 54.

He said: “It’s an incredible transformation when you think back to how pound shops were perceived 10 years ago. The growth is coming from ABC1s, which is why you see stores in upmarket towns and shopping centres. By starting to offer quite a nice shopping experience, it has managed to overcome the snob factor of people saying they wouldn’t be seen dead in them.”

Landlords are now welcoming the high footfall offered by discounters and see them as a way to get more shoppers to the high street. Margins at Poundland are also as high as 38 per cent, far higher than supermarkets.

Bryan Roberts, retail insights director at Kantar Retail, explained the appeal of discount shops over supermarkets, saying the latter had too many complex deals for customers to be sure of getting value for money: “People are short on time and want to know instantly whether they are getting a good deal, and pound stores are superb for that.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent