After Poundland, it's Poundbakery

Poundland has been a phenomenally successful business, especially in recent years when it has added stores like topsy while most other retailers have been shedding outlets.

Yes, Everything's £1.

Whether you believe this is down to the skill of able chief executive Jim McCarthy or the tough economy that has driven consumers to seek out great value, there is no doubt that its success has prompted envious looks from others operators in the sector and various copy-cat entrants.

The most interesting newcomer into this fixed-price, value-led end of the market is Poundbakery, which does not quite limit itself to selling everything for a quid but does not sell anything for more than this amount. So you've got sausage/bacon barms at £1, meat and potato pies at 2 for £1, tea/coffee at 80p and scones at 4 for £1.

2 for £1 anybody?

Many commentators expect some success from the chain as it takes on Greggs and plans to add 50 new stores. Retailinsider.com reckons the business model has both pros and cons that will ultimately decide whether it delivers on its early promise or not.

Unlike Poundland and the other fixed price stores, Poundbakery is not a general merchandise business and does not have any restrictions on product sizes. It could therefore sell its loaves for 20p a pop (it might need to do this the way wheat prices are going) but they won't be very big. This ability to sell the majority of its products at any size/weight/volume is a distinct advantage.

In contrast, Poundland has a few more restrictions - particularly with its branded goods. For products like After Eights whose regular pack size could not possibly be sold profitably for £1, the only way it can price such goods at this level is to either re-engineer them with the manufacturer or to source unusual sizes. This might mean selling After Eights with pack weights at 100g or 130g less than the regular 300g box size.

Who'd have thought you could re-engineer After Eights.

Similarly, the retailer might sell eight Sony batteries in a pack when commodity prices are high rather than its regular 10-packs. Such has been Poundland's success of late that it now has an increasing number of big brand owners keen to produce bespoke pack sizes to enable it to hit its £1 price point.

While having to work hard at re-engineering products and being very canny in buying its branded goods, the fact that it is selling well-known named products makes Poundland an attractive place to shop for many people.

Poundbakery will have no branded goods so will not have this as a draw to customers. Its attractiveness will all revolve around the quality of its baked goods (at its low price, of course). While the initial focus is on the north-west of England it will be interesting to see how the model stacks up elsewhere in the country where there  is not quite as much price sensitivity and where the key focus is arguably more about the quality. Is the steak slice at 2 for £1 good enough for these customers.

Alteration to the correction to the 'Is it the enda Venda?' story

Following the recent publication of the story 'Is it the enda Venda?' on Retailinsider.com I would like it to be made clear to readers that it was misleading for this website to portray the business as one in financial difficulties.

Instead, I would like it to be made clear having considered the accounts of Venda that I accept this is not true and the inferences drawn in my earlier article to the contrary are and were inappropriate and misleading.

The earlier article asserted that Venda had built up a creditor base that is currently owed around £14 million. The true position is that the creditor position on the company's accounts relates to preference equity held by some of Venda's shareholders.

These creditors are not trade creditors and the suggestion drawn in my article that Venda had accumulated trade creditors of this magnitude was wrong and misleading and I wholly withdraw this.

[For reference - preferred stock/equity, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument]

Retailinsider.com would therefore like to apologise to Venda for any reputational damage that the company may have suffered as a result of the misrepresentations and misleading statements that were made by Retailinsider.com.

Food and drink could save retail

Westfield Stratford shopping centre officially opens on September 13 in what is just as tough an environment as when its sister site Westfield London opened its doors in 2008.

We're almost there with another shopping mecca.

But what Westfield has sussed-out better than most landlords is the benefit of leisure tenants. That's why it has one of the highest percentages of food and drink outlets in its centres and why it is performing relatively strongly compared with the rest of the retail sector - chiefly the high streets.

This has been taken up by other mall operators and Capital Shopping Centres (CSC) recently indicated that 'Catering' (cafes and restaurants) now accounts for 8% of the group's total rent roll - which hits 10% at its larger Gateshead Metrocentre and Lakeside venues.

Indicative of Westfield's desire for leisure tenants is the planned opening of the first brewpub in a UK shopping centre, Tap East, which will be run by the same operators as The Rake bar in Borough Market.

And it will be joined by the second mall pub from Geronimo Inns (now owned by Young's) called The Cow. This follows the success of the first Geronimo, in Westfield London, The Bull. The pub sits alongside a big array of food and drink operators who are arguably clamouring to get into shopping centres.

Small but perfectly formed.

This is partly because of the heavy footfall that goes through the larger, more successful, centres but also because of the difficulty restaurant operators are having securing prime sites in city centres.

Perversely, while vacancy rates on high streets rise, the leading restaurant chains are battling to find suitable units. This is because of the shortage of decent A3 units (that have planning permission for restaurant usage) while there is a raft of A1 (limited to retail usage) available. Gaining permission to transfer properties from one to the other is not considered an option.

Moving from A1 to A3 is tough. 

The shopping centres therefore offer an attractive alternative to the food operators. So while the high street withers - but hopefully doesn't slowly die - the malls are bucking the broad trends of declining retail sales and attracting shoppers to their locations through an appealing array of food and drink options.

The final words go to Simon Kossoff, chief executive of Carluccio's, who when speaking at the Allegra Restaurant Leader Summit earlier in the year, suggested the inability to find sites was "such a nonsense when the internet is murdering the retail industry and the high street is dying".

Guest Slot–Recruitment Insider - Nigel Sapsed

Ten years ago the food offer in garden centres consisted of nothing more than a bland cafe plonked in the middle of a load of plants. But today a visit to places like the Squires Garden Centre in Farnham reveals an immense open plan eating area that resembles the food courts found in the big shopping centres.

Retailers had never really thought that highly of selling eat-in food until merchants like Tesco got their hands on a few garden centres and saw what the Squires of this world were up to. They then realised there might well be something more in running cafes than they’d initially believed. Not to mention the typical 70% margins.

The unpalatable face of supermarket cafes.

The garden centre treatment of food is so vastly better to that in the supermarkets - and significantly more profitable as a result – as to surely make it inevitable that the days of the bolt-on supermarket cafe with uncomfortable plastic seating and equally unappealing food are numbered.

My prediction is that cafes will become more integral to the shopping experience and sit more centrally within the big grocers’ stores. But to make this a reality retailers need the necessary leisure and hospitality expertise.

While Tesco and Sainsbury’s might be slowly moving in this direction Marks & Spencer still leaves its cafes firmly in the hands of its stores’ general managers. What you therefore end up with is M&S’ top-notch retail presentation skills coming through with the food but the overall offer is let down by shocking service because there is no food and beverage expertise involved.

In complete contrast Debenhams is making great progress. Its private equity owners realise the need to maximise all parts of the business – including the food and beverage offer – and so it has sought to at least match the quality of the food offers found on the high street.

Has smelt the coffee.

Crucial to its success has been the appointment from Pizza Hut of a very capable regional director for the food business. He understands that Debenhams wants to create a food and beverage offer that challenges the coffee houses and mainstream casual dining offers.

As part of its food and beverage mix Debenhams now has small espresso bars on each floor by the entrances and a contemporary feel to all its eating and drinking areas. Gone are the days of ‘Are You Being Served’ at Debenhams.

We're still not being served by most retailers.

But don’t think it is a one-way street - with only leisure specialists moving into retail. There is just as much expertise starting to go in the other direction. There is a realisation by some leisure companies that they are not creating the directors of the future.

They are also beginning to look at bringing in specific retail industry skills – specifically the trading mentality that can impact positively on how they deal with products and pricing.

It is not unusual for leisure businesses to have rigid national pricing policies whereas it is widely known that retailers change their pricing by location and store format. They also price flexibly for locally sourced products.

The leisure companies now want to buy in some of this knowledge and style of operating and there are some large players currently looking to recruit individuals that can bring with them this trader mentality with the result that margins can be boosted across their businesses.

There are clearly many skills that can be passed between each of the industries and it will be interesting to see which is the most pro-active at initiating change. Will it be the retailers who improve their cafes first or will they beaten by the leisure companies and the introduction of flexible pricing.

I think I’ll pop down Squires and consider the options over a lunch of salmon quiche and Eton mess.

Nigel Sapsed is director of executive search specialist Sapsed Stevens

Surveys tell us cash is king and cash is dead

Cash is still the preferred method of payment for the vast majority of people in the UK, crowed a survey from Wincor Nixdorf. But at the same time a conflicting survey from Barclays and Barclaycard found that more than half of consumers believe cash will become extinct.

Cash: as popular as ever.

What are we to make of this slightly contradictory research? It seems that we all like using cash but that we won't be able to use our preferred method in the future. This doesn't exactly sound like giving consumers what they want.

The drive by the payment world to convince shoppers that they don't really want to use cash continues unabated. And to some extent this is true - the Wincor research found 63% of people would be willing to move towards a cashless society. But they would only do so if the right infrastructure was in place and cash was not an option.

These seem rather big obstacles. It's hardly likely that the distribution of cash will suddenly cease, and with regards to the infrastructure point - the 'right' back-bone is far from being in place. There are many cash-replacement card types out there, NFC solutions aplenty, and numerous contactless initiatives but none of them is fully convincing consumers and retailers in sizeable numbers.

The infrastructure for a cashless society is not yet there.

Rather entertainingly the Wincor survey found 32% of people felt they were more in control of their finances when using cash, while Barclays/Barclaycard found 17% think card payments allow them to better track their spending.

This not only shows that 51% of consumers have got no idea about their spending but also suggests that many industy surveys give us just as little idea about consumers' spending.

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