With COVID-19 impacting the way people shop, each channel has had to adapt to satisfy changing shopper needs. The discount channel has had a mixed experience dealing with these changes throughout the pandemic. Sales have been negatively impacted due to shoppers using fewer channels and avoiding smaller stores.
For the variety discounters, such as Poundland, they have also had challenges including temporary store closures due to reduced footfall. Across the channel, there has also been the wider question over how to respond to the rising demand for online. In this article we look at how the discount channel is evolving due to the changing trading environment.
Variety discounters Poundland and B&M looking to develop their online proposition
We have seen a mixed response to the rise in demand for online services in the discount channel.
With Lidl remaining firmly committed to its store-first strategy and Aldi dipping its toe into ecommerce with the launch of its click and collect service. Now we are seeing a response from the variety discounters; Poundland has launched a trial home delivery service in Ireland.
It will initially be available to 18,000 staff and selected guests. There will be a limited range of products of around 2,000 available, including food and general merchandise. This follows the retailer closing one of its stores in the UK (Cannock), to convert it to an online fulfilment centre.
Poundland has said it will begin trialling online delivery in the UK in 2021. B&M has appointed Jens Sorensen as a new digital director. His previous position was as The Range's chief digital and omnichannel officer.
Although B&M has not commented on what his role will be, or whether they are moving into e-commerce, his appointment suggests the retailer may be focusing more online in the future. In France, the retailer launched a click and collect service in 2020 and it is likely it will be looking to this market for learnings in the future. For subscribers looking for more insight, check out our How will discounters respond to online?
Aldi and Poundland trademark convenience formats
We are increasingly seeing the discounters adapting their propositions to suit smaller locations, for example the launch of Aldi Local in 2019.
Further developments are potentially on the horizon as we see retailers trademarking new format names; Aldi has trademarked 'Shop & Go' with the Intellectual Property Office. This is likely to be linked to a new checkout-free solution, such as a pay-and-go app, as this requires less investment from the retailer than a new store format or self-scanning technology.
To find out more about potential technology innovation at Aldi, read our Aldi explores checkout-free solutions article. Poundland has applied to trademark 'Poundland Local' and 'Poundland Go!', pointing to its latest plans for new convenience store formats. Poundland Local is to apply to stores in small towns and close to urban neighbourhoods, while Poundland Go! is for a new convenience format near transport hubs.
The retailer first announced it would be segmenting its store estate in July last year. As part of the process of revamping its existing estate and opening new stores, it will be splitting its stores into three format categories:
- Destination stores offering the full range of products including food, homeware, health and beauty and clothing
- Core stores offering a wide range of products on high streets
- Convenience stores offering "grab and go" easy shopping
Poundland has also recently added its new chilled and frozen range to 46 stores, bringing its total stores carrying the range to 175. The plans is to roll it out to over 500 stores.
It also opened its 350th Pepco shop-in-shop this month. Both of these additions to the stores show the retailer is looking to satisfy different, wider missions, giving shoppers more reasons to visit. For subscribers looking for more insight on the convenience channel, check out our three part series on how you can grow in the convenience channel.
New players: Mere and JFT Central
Two new value retailers look set to open in the near future, adding more competition to an already competitive sector;
Russian retailer Mere aims to open four stores in the UK. Svetofor is a Russian discounter that has 3,200 stores worldwide. The company expanded to Europe in 2018, operating under the name Mere.
It will open its first store in the UK by the summer in a former Nisa branch in Preston, Lancashire. The other stores will open in Wales and Yorkshire. Following this, the retailer is said to be looking for future expansion across the UK.
The retailer claims to be 30% cheaper than Aldi and Lidl and operates a hard discount model with no marketing, and few staff. Stores will have around 1,200 SKUs. JFT Mega Discount Warehouse is opening a new format. It currently has 12 outlets on retail parks in the Midlands and the north of England.
The warehouse and online business currently sells a wide range of products including food & drink, health & beauty, garden, and DIY products. Customers have to sign up to a free membership scheme to shop in its warehouses. Its new format will be called JFT Central, and it will be another value-based variety store.
The retailer has said it is looking to open at least 50 stores, according to The Times. It will be run by Jeremy Coombes, a corporate financier with experience in lending to small and medium-sized enterprises. He said that the market was full of opportunity because of low-rent deals currently on offer as landlords were desperate to fill empty units.
The first opening is set to be in Hull in a former Mothercare store. We do not currently know the opening date.
Going forwards the discount retailers will need to find more ways to remain relevant in the changing environment. With retailers such as Tesco and Sainsbury's offering price matches to Aldi, the low price differentiator is not as strong as before.
Expect more development in the channel as the retailers look to satisfy the rising demand for online, and different shopping missions.
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