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Brought to you by Retail Insider and K3 Retail

As B&M casts its eye over the former BHS stores, with a view to further growing its presence in the UK, it highlights how the bargain stores are taking an ever greater slice of shoppers’ cash at the expense of others in the retail sector.

According to Nielsen, British shoppers spent nearly £5 billion at bargain stores over the past year – up 17% on the previous year. This has been driven by a combination of an increase in the number of customers crossing the threshold and the average spend moving upwards as people shop across more categories in these stores – which include Poundland, B&M and Home Bargains.

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Expect to see more of these.

Nielsen found a seriously hefty 2.2 million people bought goods from these bargain stores for the first time during the past 12 months, which means a chunky 78% of UK households now shop in them. This compares with a slightly smaller 75% at the discounters Aldi and Lidl.

Bargain stores are following a similar trajectory to that of the discounters, whereby shoppers initially use them for household goods and general merchandise – in particular health & beauty – but then broaden their repertoire onto perishable goods. This is certainly noticeable at my local Poundland where the amount of food and drink lines represents a noticeable amount of square footage.

Also noticeable at this particular outlet are the goods priced above £1. Although they are congregated around the entrance and checkout area rather than on the main shelves, so as not to confuse the fixed £1 proposition of Poundand, the fact that they are there at all says a lot about how the bargain stores are looking to broaden their pricing opportunities.

Across the bargain stores as a whole this move to offer flexible pricing – to enable a broader mix of products to be stocked – is proving another driver of increased sales at this group of operators.

Such behaviour from shoppers represents yet another challenge for the big grocers as the Neilsen research also shows that 73% of the spend that shifted to the bargain stores came from the four largest supermarkets. Unlike B&M it is unlikely the big grocers will be looking to take on any of the former BHS stores.

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.