Retail Week sits down with Poundland boss Barry Williams to discuss the challenges and opportunities presented by the cost-of-living crisis, the retailer’s growing focus on new categories and building a profitable online business from a standing start
On a blustery, late summer’s day, thousands of Poundland store managers from across the UK have descended upon the town of Telford in Shropshire for a two-day Christmas conference.
The event is part new product briefing, part team bonding exercise and part excuse to have a party at company expense. Whispers abound that certain senior members of staff may even don Father Christmas suits as part of proceedings.
While the weather outside is much warmer than one might find at the North Pole, being shown around this conference by Poundland’s managing director Barry Williams is nonetheless reminiscent of a guided tour of Santa’s grotto.
As we weave between stalls decked out with the value retailer’s festive offering across general merchandise, homewares and fashion, Williams is greeted with waves, smiles and the occasional shout by store managers and other staff members.
The cavernous hall of Telford International Centre also boasts an inflatable football goal, supplied by Poundland-partnered Walsall FC, a huge display of parent company PepCo’s new autumn and winter fashion lines, and a stall dedicated to action taken by the business on sustainability and the environment.
In the next room, a stage has been erected where Williams will address his store managers before, much later, the three remaining members of the boyband 5ive have been booked to play.
As we sit down in the main hall, the room is slowly filling up and the air is full of anticipation ahead of one last knees-up before all eyes turn to trading through the vital golden quarter.
Value above everything
While Poundland has spared little expense on its Christmas conference, Williams is keenly aware of the impact the cost-of-living crisis is having – both on his customers and on his staff.
“Price and value are everything right now,” he says. “The pandemic really interrupted what was a long-term shift in customer behaviour away from the big four [grocers] and those kinds of retailers towards discount, both in grocery and the value end of the spectrum more generally. Inflation over the last few months has only accelerated [the return to] that trend.
“But it’s not just customers – it’s our colleagues, too. I want to make sure that we look after our 18,000 colleagues as much as we can possibly afford.
“We already pay above the minimum wage and the minimum wage is going to go up exponentially this year. It usually goes up about 6% – I bet it’ll go up about 8% or 9%. All that just feeds its way into higher costs and higher prices.”
But inflationary pressure and wage uplifts aside, Williams says the opportunities being presented to retailers like Poundland in the current climate are hard to ignore.
“Everything screams opportunity to us. We’re currently serving 6 million customers a week”
Barry Williams, Poundland
The value retailer bought frozen food specialist Fultons Foods in 2020 and more recently announced it would be doubling the number of £1 items in store across grocery categories, as well as launching its first-ever fresh meat and fish lines.
“Everything screams opportunity to us,” Williams says. “We’re currently serving 6 million customers a week. If you went back five years, they couldn’t buy an item of clothing from us – but they all wear clothes.”
Since the Pep&Co brand started seven years ago, sales have surpassed £200m a year.
“They also couldn’t buy any chilled or frozen food from us, but they eat,” he says. “There are these huge markets that are complete whitespace for us with small incremental sale increases that we weren’t currently tapping into – think fresh food, produce, alcohol. The opportunities for us to expand our proposition and gain more market share are almost endless.”
Williams is clearly pleased with how the focus on Poundland’s traditional £1 price point is doing in during the cost-of-living crisis.
Nevertheless, it does represent a shift away from the multi-price strategy that he and, by extension parent company Pepco, has pursued until now.
Shortly after Williams joined Poundland in 2017, the business introduced 50p, £2 and £5 fixed price points across its store estate for the first time.
At the end of the 2021 financial year, Pepco noted elatedly that 36.2% of Poundland’s sales for the period had come at a price other than £1 – up from 26% the previous year.
While the strategy has allowed Poundland to expand into new categories, such as homewares and food, the business has received some criticism for ditching its USP, making it harder to stand out from competitors such as B&M and Wilko.
While Williams defends Poundland’s shift to a more fluid price point, he believes the current climate demands the value retailer reiterates its affordability credential to shoppers.
To address this, Poundland added 1,000 products across its homeware range to its £1 store prices and launched an online initiative called ‘Value Heroes’ that offers a range of household staples for £1, as well as a penny sale on one product every Wednesday.
Alongside its work on expanding its £1 price point, Poundland has also been experimenting with new store layouts and refitting many of its 800-plus existing stores to bring customers a broader range under one roof.
Today, Poundland has a food and fashion offering just shy of half its store network. Williams says, by the end of next year, customers will be able to get chilled and frozen food and Pep&Co categories such as clothing and homewares across the whole Poundland estate.
“It’s a natural idea for us to expand the proposition like that,” says Williams. “It just seems to have happened at a time when customers are migrating to that value channel anyway. I’d love to tell you we sat there as a senior leadership team and foresaw everything that’s happened over the last few years, but we got lucky really.”
Lucky or not, Williams is hugely confident about Poundland’s long-term growth ambitions and says it does not fear competition from anyone in any category – be that the Co-op, Wilko or even Boots.
“I was devastated when Boots said they were closing stores,” he says. “Because every time I got a shop next to a Boots, we’d do well on health and beauty.
“I don’t want to grow my business at the expense of another or see other businesses struggle. I see them there as a good reference point for us on value because then it’s clearer for customers.”
Sustainability focus
While Williams and the Poundland team are hugely focused on helping customers through the current cost-of-living crisis, issues around the environment and sustainability more generally have rapidly become a big focus for the brand.
In 2020, Williams helped set the programme up from nothing and is now driving substantial change across the business, from the products it stocks to the shops they are sold in and the way staff members get themselves around.
“It was something that was missing from our agenda a couple of years ago,” says Williams. “It was after one of our conferences and I met up with the guys and said: ‘This keeps me awake at night’. What kind of retailer are we? And what impact are we going to have?”
Williams says that, while Poundland was already installing LED lights in its stores, that was being done more for cost-saving than sustainability reasons.
Now as part of the brand’s goals to halve its carbon footprint by 2024, Poundland has rolled out a range of initiatives:
- All freezer cabinets will have doors by the end of this year with an 80% reduction in energy consumption
- Dedicated investments for solar/wind
- Energy building management system across the estate (allowing store temperatures to be set from HQ)
- Zero waste to landfill complete across the retail estate (no edible food now in bins)
- Solar to be installed in Harlow and Wigan DCs later this year
- In transport, double-decker trailers introduced to bring further savings on top of a 300,000 reduction in road miles
- All bags for life are now recyclable or made from recycled materials
- In Pep&Co, cardboard hangers are used for key categories and 40% of cotton used is Better Cotton Initiative-accredited
- Only electric cars in the company car fleet
Williams insists the work is hugely important as Poundland is showing its value and discount colleagues that doing right by the planet is not just the preserve of the super-rich.
“What I find really interesting is that sustainability, being green, is not just the luxury of affluent people. You can do it as a value organisation and you can democratise it,” he says.
“Don’t get me wrong – we’re not perfect, but we’ve got a plan and we’re making progress. That feels good to me.”
Christmas crunch time
As the music in the main hall swells, Williams takes me to the conference’s designated ‘Christmas room’. The huge space is set out something like a big-format Poundland with the new seasonal ranges towering up nearly to the ceiling on shelves across all four walls.
At the room’s centre stands a monolithic cube covered in television screens. As we enter, a couple of technicians are lying underneath it, fine-tuning it for later. Williams explains that the cube will play pre-recorded videos from each of the buying teams, allowing store managers to walk around the room and familiarise themselves with new products while learning more about the lines.
“Christmas for us will be good,” he insists. ”I’m sure Halloween will be pretty decent as well. After the pandemic and now the cost-of-living crisis, people are going to want to celebrate those moments with family and friends.
“That trend of people searching for value is only going to accelerate. They’ll still want a good Christmas but most people won’t be going to Waitrose.”
“Our customers are making this shift towards grocery and household products. That’s them telling us they’re focusing on their needs, not their wants”
Barry Williams, Poundland
The Waitrose comment is pertinent because Williams expects to see an even bigger shift of spend towards more household products at Poundland this Christmas.
Once customers have come for savings on these products, he says, they will be drawn in by Poundland’s wider ranges.
“Our customers are making this shift towards grocery and household products. That’s them telling us they’re focusing on their needs, not their wants, at the moment. Grocery is firing really well for us,” he says.
“But clothing is doing well for us and so is our general merchandise – when you get to Christmas that will really come to the fore.”
Williams is particularly taken with Poundland’s £1.50 Christmas tree baubles. “They’re really good quality,” he beams. “They’d be £4 or £5 anywhere else.”
Online just in time
While Poundland is preparing for Christmas with a broader clothing and food offering, Williams is also confident because of another relatively new strategic focus: a transactional website.
Most value and discount retailers have been reluctant to move into the ecommerce space, and Poundland has been no different. One of Williams’ first major calls as Poundland boss was to pull the plug on the retailer’s first foray into ecommerce in 2017.
“I made the decision at the time to focus on the principal channel: stores. That was where we made all of our money and drove all of our customers. At the time, it was the right decision,” he says.
“During the pandemic, we decided we wouldn’t mind a bit of an online business so we spun out a real low-cost solution and serviced it out of a dark store.”
Williams says this limited trial helped Poundland realise “customers really wanted to engage with us online”.
As a result, the business bought online discount retailer Poundshop.com in March, which is now its main online platform.
The acquisition has been a game-changer for Poundland online, Williams says, giving it the extra infrastructure it needs to facilitate nationwide home delivery, with Pep&Co fashion and homewares being added to the mix.
”We’re really excited by where we are right now. I would argue that, for the first time, Poundland is now a truly omnichannel business,” Williams says, noting that Poundland expanded the Poundshop.com team in the summer.
But the retailer’s online offer has raised eyebrows for its comparatively high delivery charges. Poundland has a £5.95 delivery fee on orders between £20 and £29.99, and £3.95 on orders between £30 and £39.99.
Williams refutes the suggestion that its fees are high, claiming Poundland’s online customers are voting with their devices.
“They’re doing the value equation and what they save on the basket means they’re still coming out quids in, even with the delivery fee,” he says.
“What it does for us in terms of economics is it encourages them to spend even more on the basket because it increases the savings. We see Poundshop.com as a real growth engine for us.”
With every room now visited, the main hall is packed and buzzing, and Williams is needed elsewhere. He will wear many caps before the conference is done: retail boss, 5ive warm-up act and, if the rumours are true, maybe even a Santa hat, too.
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