Opportunities for Poundland in the recession

Students taking AQA BUSS4 this summer are asked to research the recent recession in the UK, and the first research bullets requires students to consider “how the recession can create opportunities and threats for businesses and industries”

Here the BBC are reporting that Poundland and other everything-for-a-pound stores are expanding fast from 380 stores ten years ago to 742 at the end of 2009.

Poundland are planning to open one store a week in the next year on the back of a 4.4% growth in like-for-like sales. Students should consider whether it is only the recession which has allowed this growth or whether other factors are part of the change. The article suggests a number of other factors as well, including
- increased use of the internet for shopping around and the use of comparison websites;
- a new appetite for discount vouchers raising awareness of bargain-hunting;
- more vacant shop units meaning that premium space is becoming cheaper to rent;
- seizing opportunities as a result of the failure of other discount chains like Woolworths.

There are also some interesting comments about the strategy that any shop called Poundland, Pound Crazy or Mr Pound has to follow when VAT rises back to 17.5%. They can hardly raise their prices above £1 to reflect the higher rate, so they have to absorb it, and look for cheaper suppliers, smaller sizes, or focus on products for which other retailers all charge more than £1 in order to keep their margins.