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How to deliver a premium customer experience in a discount store

11th Jul 2014
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Questions have been raised about the longevity of discount stores in a post-recession Britain. Yet shops like Aldi and Lidl are thriving, eating into the market share of their mid-table counterparts and forcing some competitors to go back to the future, in order to keep up.   

A jewel in the discounters’ crown, Poundland was one of the retailers originally deemed most at risk to the impending public snubbing, and yet the single-price superstore has just announced annual sales of almost £1bn and a growth of 13% on the same period of 2013. Having been successfully floated on the London Stock Exchange back in March, the brand has even expanded into Europe under the moniker, Dealz. Clearly its achievements don’t rely on every member of the public being totally skint.    

“When we were born in 1990 everything was a pound,” says the company’s CEO, Jim McCarthy. “Now, 24 years later, despite inflation, rising costs and competition we are still selling all of our products for a pound. The only variation is that we might sell two products for a pound. Customer trust and confidence has built up over 24 years.”

The concept that you can’t be a low priced store and deliver a good customer experience is a common misconception Poundland has had to fight in its 24 years. Things have been on the turn recently, however; the company has “rocketed” up the Customer Experience Excellence Index in 2014, and McCarthy believes there are a number of simple yet significant details behind this growing appreciation.

“We have just over 530 stores and in my view they are treasure troves. Apart from the 3,000 core products, including 1,000 brands, that we carry everyday there is constant change with new products coming in and products going out.  22% of our customers are AB social demographics.  They are looking for value, they are looking for new as well as their favourites. To understand our customers we have a fantastic EPOS system which cuts and splices the information in all sorts of ways so we can see the buying patterns. That said, the best way to understand customers is to do specific research. We do a lot of research for a company of our size. We organise focus groups and we even use schools to research children’s ranges – we show them products and designs and they help us with their feedback. 

“When we are in store we speak to customers. Apart from greeting them warmly, we ask them - what are you buying? What don’t we have that you would like to see us stock? Do you shop here regularly? What do we do well and what not so well?  Obviously we ask a lot more, but understanding the customer, their needs and concerns is vital.”

Information sharing

McCarthy praises his store-level staff, and says the company instils an information-sharing attitude from “the coalface” upwards, so it can stay on top of the issues customers have as well as the products people expect the stores to stock. It was this kind of top-to-bottom collaboration that led to Poundland shifting away from being a cash-only store, in 2006, because “it became clear that the amount of people who left a basket full of shopping on the floor because [Poundland] didn’t take debit cards was significant”.

“I calculated there was a big sales upside if we processed debit cards,” adds McCarthy. “The accountants said the charges associated with debit cards would be prohibitive. I’ve been brought up on providing the customer with what they want. If they wanted different forms of convenient payment methods then that should also include debit cards. So we made the decision to take on the extra cost but our calculations were that it was right for the customer and so therefore right for the business and that we would make more money out of it. That has proven to be the case.”

Poundland is now a fully omnichannel organisation, having implemented methods of communicating with customers not only face-to-face but through its website, but also focus groups, a customer service desk and market research. It uses social media to communicate with customers and gauge the types of products being talked about that the company’s stores may yet stock. McCarthy states that the key to these types of insight are acting on them quickly, something he believes Poundland can do relatively quickly, thanks to the organisational ethos it has created:

“We do tend to make decisions more quickly than most. We are easy and simple to deal with, it’s not a very complex structure so we make those decisions about products very quickly. 

“You need to have new products. People like to try things and at one pound it’s low risk as you only have to spend a pound. We turn over around 200 new products a week and around 200 older products are going out and that gives the treasure chest experience.”

Gauging the temperature

The company is now planning to launch its own ecommerce site in response to the insights it has gained through multichannel engagement with customers, something McCarthy believes is inevitable given recent changes in customer behaviour and that “the use of all channels to satisfy customer needs is a key requisite”. However, while he accepts new technology plays a major part in keeping customers happy (the company now uses various data analytics tools to glean insights from customer feedback online), McCarthy also states that it is the personal touch that still creates loyalty in Poundland’s customers:    

“Occasionally I will make a phone call to a customer. I think that’s important. If I’m going to phone somebody I will spend 10 to 15 minutes with them on the phone talking about their experience, be it good or bad. I think people feel happy that somebody with my title has listened to them. Most people want to be listened to. I think it’s a good way of gauging the temperature and very often we can improve things as a result.

“The whole of my operational team are very good at engaging with customers. As soon as we pick up on a trend or a criticism, we try to deal with it. Our colleagues are dealing with and speaking with customers at store level every minute of every day and so they are also very important to be listened to.

“It’s basic but effective. Person to person, team to team communication is very powerful and the building block which is supplemented with the other things we do. We build all of this activity into our core values, which are – to put customers first, to keep it simple, individual responsibility – team delivery, to treat every pound as your own, to respect each other and to recognise and celebrate success.”   

Interview with Jim McCarthy was courtesy of MyCustomer's sister organisation Sift Talent.

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