Why is Poundland going online as other discounters retreat?

Three years ago, then Lidl GB CEO Christian Härtnagel told The Times the discount retailer would not be selling online any time soon.

The online boom in the pandemic was “not the new normal”, he said, even though Aldi had responded to it by launching on-demand delivery with Deliveroo.

Härtnagel had probably been asked the same question by every journalist he’d met that year. And not without cause: Lidl GB had raised expectations by setting up a digital logistics arm in 2018, only to wind it down about 18 months later.

But now, with Aldi, Lidl, B&M, Home Bargains and Poundland all riding high on the post-pandemic return of shoppers to their bricks & mortar stores, Härtnagel seems vindicated – and the narrative has changed. The question for discounters is no longer when will they go online, but why would they bother?

So, why is Poundland bothering? The variety discounter’s consumer-facing website became fully transactional last week, allowing customers to shop a range of 3,000 products for home delivery, including fmcg. It was the result of the digital migration of the e-commerce operation from Poundshop.com, the online retailer Poundland bought last year to accelerate its move into the channel.

The minimum order is £20, with a £5.95 delivery charge, dropping to £1 for orders over £50.

Aldi has made a series of retreats

It takes Poundland in the opposite direction to its biggest direct rival, B&M, which launched an online pilot in June last year only to drop it by January. The service offered home delivery of about 1,000 bulkier general merchandise products which customers might struggle to transport themselves, including garden and indoor furniture, electrical equipment and toys.

The lesson of the pilot was evident in B&M’s annual report this summer. “B&M operates in a number of markets where sustainable and profitable online business models remain unproven and this is to our advantage, where we offer low prices without suffering from margin dilution due to cross-subsidisation of online activities,” it said. “Not all consumers want to shop exclusively via home shopping, or even at all.”

Aldi, too, has made a series of retreats from online post-pandemic. First, it ditched the partnership with Deliveroo at the start of last year. Then, earlier this year, it wound down its longstanding online home delivery service of general merchandise ‘Specialbuys’ and wines & spirits.

That left click & collect groceries, another service Aldi launched during the pandemic, as its only remaining online offering. And that has since been axed from 12 of the 200 stores in which it was available.

Speaking to The Grocer earlier this month, Aldi UK & Ireland CEO Giles Hurley said it had become “very clear that customers wanted to be served in a different channel” during the pandemic, but online’s share of the market had “reduced significantly” since. Aldi would “listen to customers and serve them in the channels where they want to be, and right now that’s bricks & mortar”, he confirmed.

If a recent report by the Retail Sector Council is anything to go by, it’s a consumer preference that is here to stay. It forecasts discounting and online will both grow in the years ahead, but quite separately. Discounters, including Aldi, Lidl, B&M, Home Bargains and Poundland, will open 1,000 stores or more in the next five years, it says, while adding: “It is important to note these retailers tend not to have any major online operations, even though several have experimented in the past.”

Wilko hoped online growth would be its saviour, but we all know how that ended. Indeed, pinning its hopes too much on that prospect helped bring it down.

Poundland’s online operation is still in its infancy. Pep&Co clothing is not yet included, but is “certainly part of the development plans for the future as we extend the ranges”, a spokesman tells The Grocer. Clothing has played a major part in Poundland’s successful bricks & mortar strategy, with Pep&Co ranges rolled out across its estate between 2017 and 2019.

Online clothing sales will make the difference to Poundland

Is clothing any more proven as a model for online discounting than other categories? “Not really,” says Savvy Marketing CEO Catherine Shuttleworth. “Clothing has the biggest return rates and is a huge cost.”

However, retail analyst Nick Bubb believes “clothing will make a difference, particularly as most Poundland stores haven’t got the space to do the range justice”.

“And I think there’s a middle-class customer who would shop online for cheap party gifts etcetera, without the stigma of going into the stores,” he adds.

Full-exemption accounts for the 12 months ended 30 April 2021 put Poundshop.com’s total net liabilities, including those due after more than a year, at getting on for £2.6m. That the was the year before Poundland bought the business for £1, gaining with it an online fulfilment centre in Wednesbury, West Midlands, and the capacity to fulfil orders nationwide.

Small company accounts for the 51 weeks ending 23 April 2022 put Poundshop.com’s turnover at £6.4m, down from £8.4m the previous year. It made an operating loss of £1.2m, compared with a £576,000 operating loss the year before.

Poundland is of course a phenomenal retailer, capable of making things work where others fail, not least on high streets. And it would be far too early to guess whether or not its online venture will succeed. Nevertheless, it is fair to say it seems out of step with emerging consensus.