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How to start a pound shop

How a discount store could soon have you coining it in

 

The pound shop is now a common sight on high streets up and down the country flying in the face of modern thinking which suggests people nowadays have more sophisticated tastes and are only interested in branded products. The fact is, though they might not be the most fashionable of shops to be seen in – either in front of or behind the counter – that doesn’t stop them being profitable, particularly as the credit crunch tightens its grip on high streets and consumers turn to budget retailers to keep their costs down.

The recession has helped pound shops thrive. The combination of consumer demand for value products and the cheap retail space available, as high street brands such as Woolworths fell by the wayside, has led to a boom in pound shops over the past two years. Data specialists Experian report that the number of shops with ‘pound’ in their name has doubled in the past decade. There were 380 in 1999 but this soared to 742 at the end of 2009. However, the increase in popularity of the pound shop cannot be entirely attributed to the recession – the number of stores had already grown to 628 by 2004, several years before any whiff of the credit crunch.

The pound shop phenomenon began with the UK’s original outlet, Poundland. The store opened in Burton-on-Trent at the end of 1990 in an shopping centre that was struggling to attract tenants and took an incredible £13,000 in its first day of opening alone. More stores were to follow and in March 2008, as the ‘Aldi effect’ started to become apparent, the nationwide chain with a range of over 2000 products on its shelves saw its profits jump by 122% to £8m. That’s a lot of pound coins.

“Pound shops have been around for a while and people know what to expect from them and feel comfortable shopping there,” says Len Griffin, company secretary of the Association of Independent Retailers. “People love finding a bargain, and pound shops follow on from things like antique shops and flea markets, because you’re never quite sure what kind of a great deal you’re going to come across. And of course, if what you buy isn’t that great, you’ve only spent a pound on it.”

How do I get started?

Though pound shops are fairly common, this fact still has not made it any easier to find the right premises in which to set up shop. As is true of many retail businesses discovering suitable and affordable property to rent or buy still remains one of the most difficult tasks any new retailer will face.

For example, if the shop is in a top location, it tends to be owned by a corporate fund which is really only interested in national chains because they can get them to commit to long leases and know they are going to be able to afford high rents. And finding suitable premises is made even harder for potential pound shop owners, as selling low-ticket items means, to maximise revenue, as much stock as possible needs to be displayed - so a good-sized outlet is a must.

David Wilson runs a pound shop in West Cornwall with its own website, poundshop.co.uk, along with another venture, smellybits.com, and he believes size is important. “Selling low ticket-times is a gamble, because you are literally going to be making pennies on each item so volume is the key. You need to have the right sized outlet which will enable you to handle large volumes of stock.”

But just because you might not be able to afford your first, second, or even third choice, don’t despair. One of the benefits of pound shops is that they often fare better in the less obvious locations, rather than trendier and more expensive districts. And customers who are looking for a bargain will be prepared going that little bit further to find you, if they know the savings are going to make it worth their while.

Ready to get started? Find out everything you need to know about how to start your own business here.

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