The pound store phenomenon: high demand for low prices

As the BBC programme "Pound Shop Wars" demonstrates, shopping for bargains continues to be a key aspect of consumer behaviour--and competition for customers is intense. Pound stores are a relatively recent retail development. Poundland was founded in 1990, 99p Stores was founded in 2001. One reason that pound stores were able to expand so rapidly was the demise of Woolworths, which left many high street retail locations vacant.

Another reason for the pound store phenomenon is that middle-income shoppers are increasingly concerned about the price of their household items and want to stretch their budgets. This results in high demand for low prices. Online shoppers are also bargain hungers: Poundshop.com was founded as an online retailer in 2014, for example.

Soon, 99p Stores will be rebranded because it has been acquired by competitor Poundland. The acquisition will mean Poundland operates 800 stores. Despite its size, the retailer will still have to compete with the mighty Aldi, Asda and other large-scale rivals that promote deep discounts to attract shoppers.

As the recession recedes, many shoppers will continue the routine of hunting for bargains. Therefore, the pound stores must now increase their efforts to attract new customers, retain existing customers and clarify their value propositions for meaningful differentiation.