The recent headlines from Ireland’s retail sector have focused on Superquinn‘s fall into receivership and Musgrave Group’s plans to buy the business. However, with the economy in the doldrums, discount retailers have been gaining more ground. This week, UK retailer Poundland announced plans to open stores in Ireland and industry watchers believe the business has potential across the Irish Sea. Michelle Russell reports.

Poundland’s plans to open six stores in the Republic of Ireland is the UK firm’s first expansion outside of its home market and may mark the first of a growing rank of UK pound stores looking to expand abroad.

The move, which will see the bargain chain initially open four stores, comes at a time when the Irish consumer appetite for discounts is at an all-time high.

There is no doubt that the Irish national economy is struggling to recover from the effects of the financial crisis. Businesses are being negatively impacted by issues around credit, cash flow, rising costs, weak consumer spending power and the Black economy, and there are no signs of an immediate pick-up.

Economist Jim Power told The Irish Examiner last week that no improvement in consumer spending is likely for at least another 18 months and that the country’s unemployment rate is likely to widen to 14% by the end of 2011.

No wonder then, that Mark Thomson, business unit director at Kantar Worldpanel, believes the expansion into the Republic of Ireland for Poundland is a logical one.

“It’s quite a good fit in a way because you’ve got a simple trading model, it’s quite straightforward … and the bargain with suppliers is quite straightforward,” he told just-food. “If you look at the shopper landscape in Ireland, you’ve got one in five people now unemployed. People are managing their shopping better and promotions are becoming more important in Ireland across many categories, so the landscape fits the business model in terms of how shoppers are behaving.”

Shore Capital analyst Clive Black echoed this sentiment. “Poundland is a tremendously effective and successful retail format under a magnificent CEO in Jim McCarthy and I see no reason, given the similarities in markets, why its broad formula cannot work in the Irish Republic, where discount retailing is less engrained than Continental Europe or the UK,” he said. “Poundland trades in Northern Ireland, which makes a move to the Irish Republic less of a leap than a manageable step forward.”

The new venture however, will trade under the name Dealz, shunning the ‘Euroland’ label, which Black believes would have been considered the logical next move.

Nonetheless, he adds: “Such a label [Euroland] has political connotations and so Dealz provides Poundland with much more flexibility with respect to markets and price points – we will need to see what transpires format-wise.”

A spokesperson for Poundland told just-food that the name was chosen because customer research showed that names with ‘Euro’ in “wouldn’t be popular”. 

Indeed, Poundland CEO McCarthy believes the name will enable it to expand the brand in mainland Europe.

With a network of 347 stores in the UK, Poundland has already signalled it had expansion plans, confirming to just-food earlier this year that it planned to open some 50 new stores in the 2011/12 financial year, albeit not specifying where.

Currently, the GBP1.7m project involves plans for six stores in Ireland before March, which Poundland says will create 180 jobs. Longer term, however, the move across the Irish Sea inevitably forms a stepping stone to a potential network of hundreds of further stores for the company across mainland Europe.

Thomson believes that any country battling the tough financial climate could be a beneficial target for Poundland, excluding Germany, whose high exposure to discount supermarkets could prove a barrier for entry for the retailer.

“Germany would be tougher because the shops are much more familiar with discounting and discounters have a far higher share there,” he said. “But if you look at other countries in the Eurozone such as Portugal and Spain, they are all coming under a very tough financial climate at the moment. Any country that has huge austerity at the moment and general shopper thrift would be a good trading ground for Poundland.”

For the time being, however, the potential for Poundland in Ireland is sure to put a spring in its step. Discounters are continuing to gain share in Ireland, with LIDL and Aldi posting strong growth in recent months, despite a slowing of the overall grocery market.

According to the latest Kantar Worldpanel figures, Lidl saw its sales rise 7% in the 12 weeks to 10 July, taking its share of Ireland’s grocery market to 6.2%. Aldi, meanwhile, posted a 26% rise in sales, which took its share of the market to 4.4%.

The spokesperson for Poundland told just-food that there is “plenty of room in the market in Ireland for Dealz”. Lidl and Aldi are discount retailers, the spokesperson explained, whereas “Dealz will be a fixed (if not a single) price retailer”.

The firm would not confirm whether Dealz will trade using a single price-point, insisting that a structure has not yet been confirmed.

“Once it has been decided, it will be fixed prices, so that people can still do the easy in-basket budgeting that they are used to being able to do in Poundland,” the spokesperson said

Black agrees that there will be space for Poundland in the country’s discount arena, despite Aldi and Lidl’s success to date.

“Poundland is very different and more varied than Aldi and Lidl, which are limited range grocery discounters, therefore we can see the three trading well against each other,” he said.

There is no doubt that Poundland’s presence on the UK high street has grown alongside that of the discount phenomenon and the consumer’s ever-increasing hunger for a bargain. Whether Poundland can replicate that in Ireland is anyone’s guess but the signs are positive.