Is the Pound Still Powerful? The Struggles of Budget Retailers in a Cost-of-Living Crisis

In a surprising twist during a cost-of-living crisis, Poundland, a long-time fixture on UK’s high streets, has had to close its Peckham store after 11 years, among over 100 closures across the country. Despite being a popular destination for bargain hunters, especially in economically deprived areas, Poundland has struggled amidst rising competition and increasing operational costs. The company was sold for £1 in June following challenging trading conditions and has been forced to revise its strategy, aiming to shrink from around 800 stores to between 650 and 700.

Experts highlight that consumers are becoming savvier; they meticulously compare prices, sometimes sharing deals via smartphones, making it harder for budget retailers to maintain their foothold. The original appeal of budget shopping is still alive, but consumers are now navigating the market differently. As inflation continues to erode the value of a pound, the traditional bargain offerings of places like Poundland are being undermined. For example, the value of a product sold for £1 today is barely equivalent to 40p back in 1990. Retailers like OneBelow, which originally operated solely on the £1 model, have also shifted their pricing strategies due to the financial pressures exacerbated by the post-pandemic shipping crisis.

In addition to internal challenges, budget retailers are facing stiff competition from supermarkets offering better prices and loyalty programs and the rise of extreme discounting platforms like Temu and AliExpress. New avenues such as TikTok Shop allow sellers to undercut traditional retailers, complicating the landscape further for established budget brands. Analysts predict that many smaller players could face oblivion in a market where price competition is ruthless.

Some budget chains are faring better than others. Home Bargains and The Range continue to expand, attracting customers even as others close stores. As the holiday season approaches, these budget retailers may see a resurgence with shoppers looking for affordable options for festivities. However, for many, budget shopping remains both a hobby and a necessity, prompting speculation on how established players can adapt to an increasingly competitive and economically challenging environment.