Poundland looking for certainty with 99p Stores purchase

There are few certainties in business and the retail sector specifically operates in an environment where there are now ever fewer guarantees. Where once growth was driven by simply adding physical stores, today’s digital world means things are a lot more complicated.

What might have been regarded as a rare certainty was a green light – stamp of approval – being given by the Competition and Markets Authority (CMA) to the recent proposed acquisition of 99p Stores group by Poundland.

But no, this did not happen and the CMA decided to block the bid while it undertakes an in-depth investigation into the potential ramifications across the market from the combined group.

Its initial view was that the deal could reduce the competition in as many as 80 areas where there is an overlap of stores (99p Stores trades as ‘99p Stores’ and ‘Family Bargains’) that could likely prompt closures.

To some extent this is based on the premise that Poundland and the other fixed-price discount stores compete directly with each other. This is rather flawed as there is a strong argument that Poundland is competing with a much broader swath of the high street including general stores, the major supermarkets, and the convenience stores.

With its high level of retail professionalism it is arguably fighting it out at a quality level above many of the other fixed price operators. In this context the deal should not be considered just in the universe of fixed priced stores but as a component within a much bigger retail market. This would suggest there are few competition fears for the CMA from giving the nod to the deal.

Because of the high retailing standards of Poundland it could be argued that the deal will actually enhance shopping for consumers in many areas because its improved range, merchandising, branding, and service will bring a step-change in the quality of the experience they presently have within the 99p stores and Family Bargains outlets.

At least Poundland and 99p Stores do not operate online stores (yet) as the CMA could have found itself in an even more confused position.

Glynn Davis, editor, Retail Insider

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.