Analysis

Can Poundland make home delivery profitable?

UK discount retailer Poundland announced this week it is trialling a home delivery service as part of a packages of measures designed to ensure resilience during the Covid-19 pandemic.

The raft of measures, called Project Diamond, include opening new stores, updates to IT and a new pricing structure which will accommodate items outside of the usual £1 range.

The plan also includes Poundland piloting an online store early next year, operating from a distribution centre in the West Midlands. One of Poundland’s existing stores in Cannock will be closed from 18 July and converted into an online distribution centre.

Barry Williams, Poundland managing director, said: “We’re stepping up to support high streets after the impact of the coronavirus by being customer-focused, people-led and tech-enabled.

“This is the biggest transformation in our history as we look to secure our future for another thirty years.”

Founded in 1990 with a single store in Burton-on-Trent, Poundland netted over £1.5 billion in revenue in the year to September 2019. It saw revenue growth in the six months to February of 2.2%.

Poundland relies on buying large consignments of goods in bulk and selling large volumes of them at low prices. It has a fast-moving supply chain which allows it to quickly stock new items, typically including food and everyday household products.

Whether this model will easily translate to online, considering how much the cost of home delivery will eat into margins, is a different question. Even long-established supermarkets find it difficult to make a profit from selling online. The company will need consumers to view Poundland as a shopping destination for a wide range of goods in order to justify making a purchase there.

The model will be impossible without some sort of minimum spend and delivery charge. Poundshop.com, which sells low-cost goods online, currently charges £4.95 for its standard delivery service with a minimum order value of £30.

The move also indicates a seeming recognition by Poundland that the shift back to physical shopping is not going to happen overnight.

One thought on “Can Poundland make home delivery profitable?

  1. Given the massive impact of coronavirus in the world of retail, it comes as no surprise that discount chain Poundland is planning to trial a new online delivery service next year as part of its ‘biggest ever transformation’. We’ve seen first-hand how important online delivery has been for consumers over the last few months and this ecommerce boom is set to continue. I expect other retailers who don’t currently have an ecommerce offering will soon follow suit as they adapt to the “new normal”.

    But for a budget retailer like Poundland making its first move towards online delivery, there begs a question around how it can actually make money and ensure its ecommerce debut is a success. It will all come down to creating an exceptional customer experience. In the age of customer centricity, the customer is always the top priority and the most successful bricks and clicks retailers are creating seamless branded experiences that start from checkout and carry on right through to returns.

    As more and more retailers move closer to an all-digital business model, a recent Nuxeo report found that 63% of UK shoppers would be more loyal to a retailer that offers exceptional customer experience – important elements of which were cited as good value and reliable delivery services.

    When it comes to running an ecommerce website, the customer journey does not stop at the point of purchase. How customers are treated during the shipping process directly affects their impression of the retailer. Many retailers still haven’t woken up to the full potential of the post-purchase experience so, for Poundland breaking into this new market, this presents a golden chance to steal a march on its ecommerce rivals. Proactive post-purchase comms can give customers the ‘Amazon-like’ experience they all crave, which not only makes them feel engaged with a brand but they are more likely to become long-term loyal customers.

    Beyond simply offering product tracking details, post-purchase comms allows retailers to guide customers through the shipping process with regular personalised messages, while keeping a close check on the delivery to pre-empt any issues by giving shoppers advanced warning. This post-purchase phase, which is a whole new world for traditional retailers, also maintains engagement with customers, allowing brand reinforcement. It also presents the opportunity to share offers with customers and suggest complementary purchases, boosting both awareness and sales. And given the low price point products that Poundland sells, using this channel to cross-sell items will be more crucial than ever.

    Whether online or offline, the trick to creating the best multi-channel retail experiences comes down to consistent and personalised communication to build brand loyalty and create long-term customers. Poundland might sell cheap products but for its online delivery trial to be a success, the real differentiator needs to be a first-class post-purchase experience.

Comments are closed.