Jim McCarthy, the man who developed T&S Stores into a chain that once sold to Tesco gave the UK’s biggest supermarket a huge lead in the convenience channel, is now heading Poundland, which provides a whole new set of challenges for local shops.
How does the magic work? “What we look for is the cash gross margin,” Mr McCarthy tells the FT. “It’s all about volumes, not percentages.”
Gold products are those with high margins and high volumes, such as fizzy soft drinks. Bronze products are those with very low margins but very high volumes, such as Maltesers.
Most of the products they sell are neither leftovers or short dated, Mr McCarthy says. It is simply about trading off volume and price. In five years he says only three SKUs have been loss leaders, of which the most recent were Christmas selection boxes.
What they are good at is selling well known products in different pack sizes to achieve the £1 price point. A 600g loaf costs £1. The 800g loaf in the supermarket is cheaper by weight.
Mr McCarthy’s outlook has always been about getting the retailing basics right. He is making 42p profit for every £10 of sales, which compares well with the figures achieved by the major supermarkets. Shoppers seem to like the concept. Will it work for local shops? Only if you can increase your footfall and sales volumes.
