Can the pound shop model work online?

Over the past fortnight, two pound shops have launched ecommerce sites, which makes it some sort of trend in my book.

The two sites are Poundworld, and hereforapound.com, and all offer broadly products, though the former has a greater volume on offer.

‘Value’ retailers such as pound shops and fashion brands like Primark have been some of the few success stories during the recession, but will this model work online?

By Graham Charlton February 14th 2014 10:15

The challenges for discount retailers online

Perhaps the most obvious example of a popular retailer which doesn’t sell online is Primark (though it has started selling some products via ASOS).

It has been phenomenally successful on the high street, and there is a demand for it online.

We did explore this topic recently and, though there were some strong arguments in favour, the drawbacks were around the low margins on products.

According to Depesh Mandalia, the margins may be too low for ecommerce:

Basically it comes down to the shipping process. There is a substantial cost difference between shipping pallets to stores vs picking individual customer orders and breaking up large pallets, and the storage and distribution challenge of fragmentation from a warehouse viewpoint.

The costs associated with this would probably leave them with a negative margin so whilst there is the Amazon effect of becoming market leader at cost of profitability, perhaps Primark just cannot survive like that.

With such low margin products, perhaps the same problems apply to pound shops, so how can they overcome this?

Delivery costs and minimum order values

Clearly, there is a threshold at which orders become profitable for these sites, so these sites have set minimum order values.

On Poundworld, which redirects to poundshop.com, the delivery charge of £3.65 and minimum order of £10 is clearly communicated on the homepage and throughout the site, which is a good way to reinforce this message.

On hereforapound.com, there is no minimum order, and delivery is £3.50. Spend over £30 though, and delivery is free.

Increasing basket values

The key to profitability for such sites will be in maximising customers’ basket values. For this, navigation needs to be easy to use, cross-selling should be used smartly, while the transition between adding products and continuing shopping should be smooth.

So how are these sites achieving this?

One thing sites can do is make it easy to add items to the basket from category pages.

Customers don’t necessarily need to see too much detail before buying facial cloths, so allowing them to quickly select items is good practice.

Hereforapound.com does this here, and also provides a ‘quick look’ option in case shoppers need more detail.

However, the placement of the navigation bar on hereforapound is unusual, while the icons and text labels don’t catch the eye.

Hereforapound presents plenty of cross-selling options on product pages, and these are easily visible:

Poundworld does the same, though cross-selling options are further down the page, where they may be missed.

Next, the ‘basket add‘. Here, it should be easy for customers to continue shopping once they’ve added an item to their basket.

It can also be a good idea to provide clear prompts to continue shopping, and perhaps offer more product options at the same time.

Here, Pen Heaven uses a pop-up to indicate that items ave been added, and uses a pop-up to ‘force’ customers to choose between heading to the basket page and carrying on shopping.

According to Greg Power, who worked on this:

From all the (cross-sell) impressions generated, we saw a 7.71% CTR and a subsequent 8.52% conversion rate in directly-attributed sales. Those stats are specifically for the lightbox implementation in August, stats differ for the other cross-sell implementations.

Poundworld indicates this on the page, but just leaves customers there. Thanks to the persistent navigation options, shoppers have somewhere to go, but there could be more prompts.

Hereforapound takes a broadly similar approach, with a quick flash of the shopping cart’s contents, leaving customers on the product page.

In both cases, given the need for maximising order values, I think more could be done to encourage shoppers to add more items.

In summary

Both sites are reasonably easy to use, though I think navigation and ease of product selection could be improved, especially on hereforapound.com.

It should also be noted that neither site is responsive, or has a mobile version, though perhaps this is planned for the future.

I can see the value in allowing customers to quickly add items to their baskets from category pages and this, combined with better filtered navigation could be very effective.

There are broader questions about how this business model will translate online. Will the minimum orders and delivery charges deter some shoppers? Will people spend enough on each visit to allow these sites to make a profit?

This remains to be seen, what do you think?