Poundland breaks festive records despite a ‘lean marketing team’

Poundland has revealed its best ever Christmas trading figures despite chief executive Jim McCarthy admitting advertising spend was “minimal”.

The single price retailer said total revenue grew by 9.8% to £328.4m over the 13 weeks to 28 December.

The record numbers were achieved despite a slow down in LFL sales. House broker Shore Capital estimated that LFL sales were between 1% to 2% growth – a noticeable drop from 4% growth in the second quarter – due to the late opening of new stores.

Following this latest milestone, Marketing Week spoke to Poundland boss Jim McCarthy to discuss its marketing strategy, rapid store expansion and role in unsettling the big boys of British retail.

After a record festive period, what’s the secret to Poundland’s marketing success?

I’m sure you’ll hate such a simple response but our slogan “Amazing Value, Every Day” is the best possible marketing tool. We aim to communicate those buzzwords in everything we do.

We’ve obviously moved into celebrity ranges with the exclusive Jane Asher bakery products we launched last year and they’ve already been sold to six million people. Jane has done loads on the social media side and there’s videos of recipes all over our website.

We’re now working with Tommy Walsh of Ground Force on a DIY range too to challenge B&Q as there’s a lot of store closures within that market space. There are more celebrity names in the pipeline. Word of mouth buzz means everything  to us. Recently our make-up products were featured in Vogue and on breakfast TV, that unbelievably boosted sales.

How will the marketing develop as store numbers rise?

I’m unable to discuss ad spend but it is very minimal. Gill Stewart-Clarke (formerly head of customer insight at Morrisons) is the head of marketing and she has a lean team as you’d expect at an efficient discounter.

I’m not going to rule out TV as there will come a point very soon when we’ll have to look at whether it will be profitable to do our first advert.  Our social media spend over Twitter and Facebook is making a real difference to sales and engagement levels, that will continue.

Yes, marketing is important, but our fundamental success is due to unique value and a broad range of products – we offer 17 different categories. Aldi and Lidl are proving a simple business model, from the supply chain to the boardroom, can create massive growth. I don’t want to change things too much.

Would it be fair to say Poundland managed to steer a lot of customers away from the big four supermarkets over Christmas?

Yes, we are increasing our share of customers from all the big supermarkets but when you consider food only represents 16% of our total sales, it’s clear that Aldi and Lidl are making the biggest inroads.

Look, our average basket is still only £5 so we can’t take too much credit but there’s certainly evidence of people who went to us for gifts such as cards and toys over a Tesco at Christmas. I think on value we are beating everybody out there and that can’t be ignored as shopping habits have fundamentally changed. Discounts and bargains are now everything to Brits and that plays to our strengths.

Since the £750m float last year, you’ve made no secret of your plans to expand across Europe. Just how big can Poundland become?

We’ve barely scratched the surface. This is a relatively immature market in the UK when you compare to the US where single price retailing has been around for 50 years or so with the likes of Dollar General. We are on target to deliver 60 new stores this year and a similar number next year. We have 534 stores right now in the UK, I think within 10 years we can get to 1,000.

In Europe we currently have five stores being trialled in Spain and 39 stores in the Republic of Ireland – both trading under Dealz, our multi-price offer. We have two more European territories planned and I think in the long-term you’ll be speaking more about Dealz as it will certainly surpass Poundland when it comes to global store numbers. If you look at Ireland, where the population is circa four and a half million, Spain is ten times that so it can become a huge market for us!

And how about online? You’ve publicly committed to several dates in the past for a retail website to no avail. Is it a case of when it’s ready, it’s ready?

Tesco, the largest online food retailer, and Ocado to name a few, are all proving it is hard to make a profit from online. The issue is we’ve yet to see the wall mature on delivery charges, and that’s the difference at the moment between making a profit and a loss. We have to find a unique way to not disturb our store sales too.

I’m still not convinced online is at an attractive stage for Poundland but we will progress with a low-key trial at some point. The delay has benefited us as we’ve seen the rise of click and collect in the few years we’ve been planning, and that’s certainly something we’ll look to utilise when we do come to launch.

The other thing is we have two fascia’s with Dealz expanding rapidly. I’d say that Poundland will be the brand for online, but we would add a multi-price Dealz offer to also include higher priced products. Having everything at £1 online is hard to make work when you factor in the costs of delivery.

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