Peckham, a vibrant and diverse neighbourhood in South London, has recently lost its beloved Poundland store, which closed this week after 11 years of operation. The closure has left local residents, like Becky Cullen, searching for alternatives to meet their budget-conscious shopping needs.
“Everyone comes in here, it’s very cheap. I buy stuff for my kids, snacks, toiletries,” Cullen laments, staring at the empty shop. “It was always busy… Where are we going to shop now?”
Peckham’s high street, Rye Lane, is a bustling hub of Caribbean grocers, beauty salons, and the occasional hip vintage shop. Yet, despite the area’s high levels of deprivation, where a bargain store should be thriving during a cost-of-living crisis, Poundland has found itself in the midst of a store closure programme.
More than 100 Poundland stores have either shut or been earmarked for closure since the summer, after the business was sold in June for a nominal £1 amid “challenging trading conditions”. The company now expects to end up with between 650 and 700 stores, down from the 800-odd it had at the start of the year.
Poundland’s struggles are not unique. Across the UK high street, other budget chains like the Original Factory Shop and Maxideal have also faced challenges, with the latter closing altogether. Even B&M Bargains, one of the country’s largest discount chains, has launched a turnaround plan due to weak sales.
Retail expert Catherine Shuttleworth believes that shoppers are “out-smarting” budget stores, knowing their prices inside out and sharing the latest deals with friends and family. But the challenges go beyond savvy consumers – budget chains are also grappling with rising costs and increased competition.
“All big retailers have faced a substantial increase in employer costs because of last year’s Budget, but it’s more difficult when you’re selling the cheapest products because there’s less wiggle room to absorb the extra costs, or to pass them on to customers,” Shuttleworth explains.
The pound shop model, in particular, has become increasingly difficult to sustain, as a pound is no longer worth what it used to be. Inflation has eroded the purchasing power of the once-mighty pound, with £1 in 1990 (when Poundland began) now equivalent to just 40p today.
However, not all budget retailers are struggling. Chris Edwards, the businessman behind the Poundworld and OneBelow chains, has found success with his new venture, OneBeyond, by adapting to the changing market. He recognises that the “pound game” is no longer viable and has adjusted his strategy accordingly.
“We realised the pound game wasn’t going to work any more,” Edwards admits. “What tipped us over the edge was the [post-pandemic] shipping crisis, when we couldn’t get containers through and the cost of freight was ridiculous.”
Despite the challenges, Edwards believes his business model still works, thanks to his experience, negotiation skills, and a carefully curated product mix. His Croydon store, with its colourful Christmas aisle, is bustling with shoppers stocking up on essentials and impulse buys.
However, the budget retail sector is facing a perfect storm of rising costs, increased competition, and shifting consumer behaviour. The emergence of Chinese e-commerce platforms like Shein, Temu, and AliExpress, as well as Amazon’s own low-cost shopping section, have introduced a new wave of ultra-low-cost options that traditional budget stores struggle to compete with.
“There’s a lot more coming into that space. So this sort of wave of low-cost influence from outside of the UK isn’t slowing down, and I think there’s much more to come,” warns Nick Carroll, director of retail insight at Mintel.
The future of budget retailing on the UK high street remains uncertain. Consolidation and the survival of the strongest players seem inevitable, as the sector navigates the cost-of-business crisis and the evolving shopping habits of cost-conscious consumers.
As for Peckham’s Poundland, its closure is a stark reminder of the challenges facing budget retailers in the current economic climate. For some residents, like Becky Cullen, the loss of this affordable shopping option is a significant blow. But as the retail landscape continues to shift, the search for the next bargain hub in the area is sure to continue.
