This article relates to Secrets of Poundland.
The British high street is in crisis. Or so many of the statistics seem to suggest, with one in seven of all shops lying vacant and a number of high profile names going bust in recent years.
But one sector is thriving: discount shops, with the biggest one of them all, Poundland, seemingly immune to the recession.
I have covered the retail sector, on and off, for more than a decade for business magazines and The Daily Telegraph. And I can think of few businesses that have managed to both catch the imagination and thrive in such a compelling way.
Almost single handedly it has made the discount shops respectable, winning over an increasing number of middle class shoppers (you can even pay using American Express), who use it to stock up on After Eights, Christmas decorations, children's party equipment, Colgate toothpaste, Sugar Puffs, even basics such as milk and bread - all for exactly £1.
There was even beef meatballs on sale in my local Poundland and the shop sold an astonishing 2,500 miles of bunting in the run up to the Queen's Diamond Jubilee.
In the year to April 2012, the retailer posted sales of £780m, up 19.3% and pre-tax profits of £18.3m, up from £12.2m in the previous year.
This is incredible, because unlike other retailers - faced with the same rising costs, higher rents, bigger business rates - it does not have the ability to increase its prices. Everything is always a £1.
Dispatches wanted to get to the bottom of how the company did this. How does it keep on increasing its profits, when it has an 'inflation-busting style' that gives shoppers 'irresistible value', a statement it prints on posters in many of its shops?
Well, it is not inflation-busting in the strictest sense of the word. Many of its items have shrunk as the chief executive Jim McCarthy has admitted. He calls it 're-engineering'.
In recent years the shrinking has been quite severe. Back in 2007 shoppers would have got 10 packs of Quavers in a family bag for £1. This was reduced to seven packs last year, and shrunk further to five packs this year. Last year £1 got you 12 Kodak AA batteries; it is now 11. Toblerone, Cadbury chocolate fingers, Wotsit crisps - all have shrunk.
It also sells a number of popular items in non-standard sizes. For instance, a loaf of Warburton's sliced white bread for £1, which appears to be fantastic value until you realise it is a 600g loaf, rather than the 800g size, which has been the standard size for bread since the Victorian era. You can pick up two 800g Warburton loaves for £2 at Tesco this week.
Poundland point out that the size of the loaf is clearly printed on the packaging.
The company has various other canny marketing and packaging tricks to encourage shoppers to spend.
The most common of which is to shout very loudly on the packaging of goods that their customers are getting '50% extra free' or '60% extra free' or even '100% extra free'.
So, shoppers can pick up eight bars of two-finger Kit Kats for £1. This is sold with a large yellow banner around the multipack saying '5+3 bars, 60% Extra free'. Asda is currently selling the same eight Kit Kats for £1, but without the '60 extra free' flash. And the supermarket describes them as 8 bars, not 5+3.
Both are clearly labelled. Both are good value. But one is shouting about it, and the other isn't.
Dispatches spoke to a number of consumer and marketing experts to find out more about the tactics of Poundland and whether customers really were getting a good deal in comparison to the supermarkets. And their conclusions were surprising.
Poundland is seen by many as cheeky upstart on the high street, challenging the big boys. But as it increases in size itself, opening nearly 70 shops a year, with an ambition to hit 1000, does it risk losing the affection of many consumers?
