As more customers turn to discount retailers during the cost-of-living crisis, Retail Week takes a look at what changes the value sector is making to appeal to a wider range of customers
While the UK continues to endure economic distress and high rates of inflation, shoppers are flocking to shop with discount retailers.
According to research from GlobalData, the UK value, discount, variety stores and general merchandise retail channel is expected to grow 5% per year, meaning the industry will be worth £59.4bn in 2027.
Supermarkets have been doing everything they can to stem the stream of customer spend flowing to cheaper retailers and almost all the grocers, from Sainsbury’s to Iceland, have made price cuts, while The Co-op recently announced a £70m investment in member prices.
But what have the value variety discounters like B&M and The Range been doing in response?
Poundland commits to price cuts
Even though value retailers are already providing low-cost items at great value, the economic state of the country has caused shoppers to look for bigger bargains on essential products such as food and hygiene wherever they can.
Last month, Poundland announced its commitment to lowering prices even further in an initiative dubbed “Operation Sell for Less”, which has seen various big-selling products reduced or returned to a £1 price point.
A Poundland spokesman told Retail Week the retailer “tends to avoid yo-yo promotional pricing” and is much more focused on keeping prices low for customers.
“Part of Poundland’s role is to make sure it’s a break across the market,” he said.
“We might be a small player but we can still play a very positive role in terms of pricing across the whole market.”
So far, many of the value retailers have been quiet on their decisions on price cuts, but discount grocer Aldi has reduced over 130 prices in the past two months.
This strategy is working as both Poundland and Aldi have reported growth in sales, with the latter being named the fastest-growing grocer as more shoppers flock to the value-led supermarket.
AI company Peak’s retail director, Tom Summerfield, predicts Poundland and Aldi’s decision to bring down costs could be the turning point where consumers take control.
“Those that don’t follow suit will be left on high ground by consumers who’ll vote with their feet,” he said.
“As prices start to lower across the market, it will increase the pressure on other retailers to react in the same way.”
It seems that despite Poundland’s efforts to start a sector-wide pattern of price cuts, many value retailers aren’t following suit.
Instead, promotional offers such as discounts, buy one get one free, loyalty schemes and multibuys are all the rage across retail, and incentives are being used to keep current customers and stop them from looking elsewhere.
What are discounters offering?
B&M
B&M offers a selection of monthly exclusives and limited edition items as part of its Wow! deals, which include groceries and everyday essentials from well-known brands. It also advertises manager’s specials that showcase the latest bargains in-store.
Although it is not announcing any price cuts or new promotions, a spokesperson said the retailer insists on maintaining its model of “keeping prices as low as possible”.
Home Bargains
The cost-of-living crisis hasn’t deterred this retailer from sticking to its guns of favouring low pricing over promotions. Home Bargains does offer runs of deals through a promotional special named Star Buys – changing regularly and often prevalent in its seasonal ranges, gifts and home essentials.
The Original Factory Shop
In June, TOFS announced it would bring back its physical club card and extend club pricing for its most loyal customers in a bid to offer the best value.
Although it didn’t confirm whether it would eventually look at price cuts, a TOFS spokesperson told Retail Week: “We are always looking to offer our customers the best possible value. Customers who sign up for the free TOFS Club+ can access exclusive member prices and offers on certain items, just by downloading our app or having our club card.”
The Range
The Range launches a new collection every fortnight called Unbelievable Value where everyday essentials, gardening, DIY and cleaning products are reduced. The initiative was introduced in March 2022 to help customers through the crisis. The retailer also offers savings on garden furniture and pet products as well as seasonal discounts for the back-to-school period and bank holidays.
The Works
Chief executive Gavin Peck told Retail Week: “We regularly review pricing but haven’t been implementing significant or tactical price changes to drive short-term profitability and don’t intend to in the future.”
Sticking to its strategy makes sense when you consider The Works’ success of late. Earlier this year, exclusive research by Retail Week found it was the fastest-growing discounter in the UK.
The Works has been improving on its store format and despite not making strategic price changes, it continues to offer multibuys such as three books for £6, mix-and-match deals, and three for two on art supplies.
“As a value retailer, we are proud to provide our customers with the products they love at affordable prices. This is especially important during times of economic hardship when disposable incomes have been squeezed,” said Peck.
But whether retailers roll out price cuts or choose promotions, it seems the value sector can do no wrong as shoppers with tight budgets hunt out the retailers with the lowest prices.
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