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E-commerce isn't a bargain insists B&M, even as Poundland steps up its online game

Stuart Lauchlan Profile picture for user slauchlan July 13, 2023
Physical is the future for bargain retail, according to B&M's CEO. Someone needs to tell that to Poundland then...


A lot has been written about the resistance to online commerce at the high end of the retail sector, a resistance that has perhaps crumbled somewhat since the pandemic, but where the objective is still to get high-spending customers into the physical store. 

But what about the other end of the scale? At a time of a cost-of-living crisis biting into most people’s budgets, attention turns to the likes of Poundland, Primark and B&M Stores for bargains at a more affordable price. But those bargains and the related margins associated with them have typically meant that brands have not provided transactional e-commerce.

That said, Poundland, which runs a network of 850 stores, this week announced plans to relaunch its website as a fully-transactional platform. Last March, the company acquired online retail operation, for an undisclosed sum, with the stated intention of using it to provide the infrastructure to underpin a national roll-out of its own pilot e-commerce operation. 

As well as combining and, the company intends to recruit 120 warehouse workers for its South Yorkshire distribution centre as it plans to expand its e-commerce offering. (A new scalable Oracle ERP platform is also set to go live at Poundland this summer.)

But not every discount retailer is as enthused about online. B&M, which has 1,100 stores across the UK and France, dabbled with a online home delivery service last year, but dropped it after seven months. Shortly before the launch of the trial, outgoing CEO Simon Arora commented in the company’s annual report that this pilot was taking a “test and learn” approach: 

The B&M website has not historically been transactional, instead acting as a footfall driver into stores and a channel through which to engage with an online community of customers. All that remains true.

However, at the time of writing, an online home delivery service will shortly be launched on a limited range of items. This trial will ultimately extend across circa 1,000 SKUs representing in part bulkier or higher ticket general merchandise items, which customers cannot always easily transport home from stores themselves, or products that do not require disproportionate mail order packaging.

Given the disruptive B&M price position, the business believes this could prove an attractive proposition for customers.

It didn't.

Not economical 

Flash forward a year and things have changed. The latest annual report notes “the loss incurred from the online trading trial” and focuses on a Vaccine Economy return to the physical store:

Consumers have returned to store shopping in large numbers since lockdown restrictions were lifted, and this is to the benefit of B&M. In-store retailing remains the number one choice for most consumers and in many cases it remains the most convenient form of shopping. For example, for groceries almost 90% of purchases are conducted in stores - despite home delivery having been an available option for most consumers for over 25 years.

The leading supermarket chains might well have something to say about that last assertion, but moving to B&M’s own policies, the report goes on to address the cost-of-living crisis: 

Low prices have always been a major determinant of shop choice for many consumers – after all, why pay more for the same product? Even when we look at the growth of the online channel in many categories, it has been driven by low prices and low-cost operating models. There are not many, if any, online retailers with higher price points winning share from lower-priced bricks-and-mortar retailers. Convenience and home delivery may have played a role in the growth of many online operators, but it is low prices and discounting that have been the main driver. 

Not all categories are suitable for home delivery models - and that’s good news, insists B&M: 

If high delivery prices, relative to the value of the product, are incurred, consumers will prefer to shop in store for a lower overall price. This is a situation and consumer trend that favours B&M. With many items which we sell being low ticket price items, expensive delivery options are uneconomical. It is notable that the fastest growing retailers in the UK with regard to store numbers, tend not to have online operations.

So, the focus is to be on store expansion, not online: 

Compared to the start of the global financial crisis, there are 2,000 more discount stores in the UK, and this trend will continue. While many headlines have been focused on the growth of online and home delivery companies, the discount channel has remained in strong growth and is set to continue to do so for the foreseeable future – even after the current cost-of-living crisis comes to an end.

As to what happened during the online trial, CEO Alex Russo explains: 

The sales came through. They were interesting, but I took the decision that actually it was a marginal disruption, it was an unprofitable marginal disruption. So I took the decision…that we're going to stick to what we do best - we’re going to be a physical business. We're going to win on price, product and store standards.

He concludes: 

There is plenty of competition out there that can play the online game. I don't think that the B&M proposition lends itself particularly well [to that]. Good luck to the other guys. I'm happy with playing the physical [game].

My take

As someone who doesn’t live in a town with a B&M store in it, it’s frustrating to hear Russo’s comments. But clearly a commercial decision has been made and everyone will have to live with it. Ironically I’ve got several Poundlands within walking distance, so I’m unlikely to be tapping into its transactional e-commerce offering. But it will be fascinating to see how that plays out in what is a hugely untapped section of the online retail space. 

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