Once the stores open the company’s portfolio will be extended to around 240 shops, after it opened 40 new sites this year.

Chief executive Jim McCarthy said: “Times are tough and customers know Poundland offers quality brands at the incredible £1 price point on all products every day.

“We are convinced that Poundland will continue to help shoppers through the tough times in even more locations next year.”

This year the discount firm revealed annual profits until the end of March were up by 122%.

McCarthy said at the time: “Poundland’s unique single price strategy is providing even greater value. We are perfectly positioned to take advantage of customers’ flight to value.”

By contrast, Woolworths will shed 27,000 jobs after its administrators Deloitte failed to find a buyer for the company.

The global economic downturn has had a significant impact on the retail sector – albeit to a lesser extent on the grocers, due to the fact that food remains a non-discretionary purchase.

Nonetheless, grocery retailers have primarily responded to the downturn in two ways:

1. Promoting value through the expansion of discount stores, economy ranges, price investments and increased promotions.
2. Reducing costs and preserving cash by slowing growth plans and making staff redundant.

Over the next five years, Planet Retail forecasts the Top 30 to grow sales through grocery formats at a compounded annual growth rate (CAGR) of 5.2 per cent, compared with the 10.8 per cent recorded for the previous five years.

Store numbers, meanwhile, are expected to rise at a CAGR of 3.5 per cent, reflecting the fact that a slowdown in expansion will see retailers focusing on their most profitable existing stores.

Discount and small formats to the fore

One of the winning formats for the Top 30 will be the discount channel, which is expected to add $71bn in sales over the next five years. Driven by retailers such as Aldi and Schwarz Group, the no-frills format continues to attract cash-strapped consumers both in developed and emerging markets. By 2013, the Top 30 retailers operating in the discount segment are poised to open an additional 12,600 stores.

Discount stores are just one of the smaller store formats doing well. Retailers are increasingly likely to focus their efforts on small-box stores, given that they require less capital both to build and operate. In fact, stores less than 26,910 sq ft are poised to grow their store network by 4.1 per cent over the next five years compared with just 2.2 per cent for the large hypermarkets.

Also, in the long run, the outlook is positive for proximity retailing as demographic changes mean that there will be more single households combined with lower incomes (because of a higher share of pensioners) and less widespread car ownership.

This is especially the case in the US, where Tesco’s entry has sparked a series of reactive pilots, the most notable being Wal-Mart’s Marketside format, the retailer’s first new concept in the US in a decade. It is too early to say whether small-box will change the face of grocery retailing in the US, as this type of format caters to a very different shopping mode (high frequency/low spend), assortment (greater emphasis on fresh, private labels) and consequently calls for more frequent distribution.

As well as requiring relatively high investment, hypermarkets and superstores, despite being the backbone of many retailers’ strategies, are faced with a lack of available sites, increasingly prohibitive regulations, and a high degree of retail maturity in developed markets such as Western Europe and North America.

However, in the future, the channel will find more fertile grounds for growth in the developing markets of Asia and Latin America. Retail giants such as Auchan, Tesco, Carrefour and Wal-Mart still want to expand their hypermarket presence in markets such as China.

That said, the fact that such retailers are experimenting with smaller formats in these regions (eg, Tesco Express and Wal-Mart’s Smart Choice) suggests they are already planning for the increasing saturation in the large store sector in the emerging markets.

Indeed, internationalisation will continue to be a key trend, with the world’s largest grocers continuing (and in some cases increasing) their investment and commitment overseas. For many, such as Tesco and Carrefour, reducing their reliance on saturated home markets is part of a long-term strategy that will involve them looking beyond the present economic climate to years, if not decades, ahead.

With this in mind, markets such as India – where market entry by the world’s largest retailers is imminent – and Vietnam assume an even greater importance.

Multichannel, single-brand

Another key trend is the move towards multichannel/single brand. Carrefour’s conversion of its French store base to trade under the eponymous Carrefour name should help to strengthen the brand and create buying synergies across its supply chain and via its marketing campaigns. The retailer’s recent announcement that it is to replace its existing No. 1 economy private-label range with the new Carrefour Discount brand is all part of this approach. It is likely that future conversions will occur – particularly in Europe, where operating multiple formats is commonplace.

Private labels set for renewed focus

Against a background of tightening consumer spending, private labels are set for strong growth in almost all markets and for virtually all retailers.

Like discounters, the growth of private labels is nothing new. However, as economies weaken and consumer confidence dips, we are seeing accelerated growth in this arena. The trend is not just confined to the more mature markets either. While private label penetration is presently lower in emerging markets such as India, Brazil and Mexico, these countries are poised for the fastest growth in the coming years.

Also worth highlighting is the sophisticated positioning of own-label products emerging from some retailers, much to the dismay of many brand manufacturers. Retailers are cherry-picking consumers at both ends of the market by developing their economy ranges as well as premium lines.

One such example of a shift in strategy is Tesco’s new Discounter brand. Representing a shift away from the traditional three-tier strategy, Tesco is launching its first labels without the Tesco brand in order to fight German discounters Aldi and Lidl.

The growth of private labels represents a huge threat to the brands that have to compete, not just in terms of price but also for less shelf and promotional space.

With this in mind, Wal-Mart’s recently revamped, expanded and relaunched Great Value private label offering is sure to send a shiver down the backs of both major food and drink manufacturers and competing retailers in the US. With price differentials of up to 20 per cent over national brands and with a stylish new look, this might be the most significant makeover in the US retail sector in recent years, with significant long term impacts.

Is price here to stay?

The big question is what will the retail landscape look like when economic conditions improve? Certainly, some trends such as internationalisation will remain as important as ever as retailers are looking at the long-term picture in such cases.

But, what of the current popularity of discounters and private labels? In both cases, evidence suggests they will continue to grow – albeit at much lower levels than what we are seeing at present.

The past two decades have seen ongoing growth of discounting and private labels globally, even when economic conditions have improved. With many consumers stepping foot inside a discount store or switching from a brand to a cheaper private label for the first time, such recently formed shopping habits may prove to be difficult to break.

Robert Gregory is retail analyst at Planet Retail.

After several months of declining sales, value retailers such as Big Bazaar, Vishal Megamart and Pantaloon have witnessed a smart recovery, while mid-priced and premium lifestyle format stores such as Shoppers’ Stop, Provogue and Life Style are lagging behind with almost flat sales growth, according to industry estimates.

“Broadly, value retail segment has regained an average sales growth of around 7-8% in the past two months, while lifestyle formats are growing at around 0- 4%,” said Rahul Mehta, president of Clothing and Manufacturing Association of India (CMAI). Consumers are clearly not in a mood to shell out a premium, and apparel retailers are now working around the current consumer sentiment, said Mr Mehta. “Lifestyle formats are recording flat growth rates and, in fact, growth was (-)3% in January,” said BS Nagesh, managing director & CEO of Shoppers’ Stop.

Retailers are hoping for an upswing in the lifestyle segment by September 2009 on account of festive buying. Analysts believe that economic turnaround will first benefit the value retail, which would propel the future growth in organised retail sector. In April, Pantaloon, with value and lifestyle sales ratio of 60:40, has marked a sales growth of 23% and 18% in the respective segments. It was 5% and 4% in March, and there was a negative growth in December. Provogue recorded (-)9% sales growth in December. However, in April and May it rebounded to 10-12%, based on same store sales, said Nikhil Chaturvedi, MD, Provogue India.

Roughly, value and lifestyle segments share the organised apparel retail market in a proportion of 3:2 in tier-I and tier-II cities, and recorded an year-on-year growth of 10-12% in the corresponding months of last year. Organised retail has been under pressure since September last year. Apparel retail was worst hit during the period. With consumers starting to cut back on spends, most of the retail outfits suffered negative growth in the second half of the last year. However, with the start of new financial year the organised retail sector has seen a gradual improvement.

GOING SLOW

Value retailers like Big Bazaar, Vishal Megamart and Pantaloon witnessed a smart recovery
Mid-priced & premium lifestyle format stores such as Shoppers’ Stop, Provogue and Life Style are lagging behind with almost flat sales growth Retailers hoping for upswing in lifestyle segment by Sept ’09