I went into “Poundland” today - a private equity owned chain store where everything costs … £1.
Knowing it’s private equity, I started squinting at the prices and checking them online. OK - toothpaste, £1, cool. Coke can marked £0.45 for £1 … haha surely not!? Right, three for £1.
Then I noticed Ibuprofen and paracetamol … £1 each. I recognised the box - they’re 40% of that price in a major chain pharmacy.
It struck me that what these companies do is get people seriously excited about cheap living, have branding that effectively deters the upper income echelons, and suck in naive customers to spend more money than they ever would have, anywhere else. Some lovely algorithms and analysis, and you’re really coining it on the back of peoples’ ignorance (as in, truly not knowing, rather than stupidity), and taking serious advantage of them.
I’ve noticed this and been caught out by it. Mainly because in my town Poundland, Superdrug and Tesco are very near each other. Because I’ve been caught out and they’re so close I can pop in to all of them and buy the stuff I need at the cheapest price. Kind of a win for me.
Speak of the devil - Warburg Pincus bought the business in 2010 for £200m, getting ready to IPO now for up to £800m. x4, not really bad if you’re in the business.
Nearly 5m customers per week. Pre-tax profit runs at 3% of sales, but growing at 30%.
So - they’re not really ripping people off in terms of the overall operation, but they’re not necessarily giving the best deals out there.
And when the big investors are in there, it’s a sure thing that every penny is being squeezed from every consumer.
It’s the same with places like Aldi and Lidl - some things at a very good price, some at a reasonable price, and some which are just damn expensive compared to other shops.
Heh. Now they’ve got some been-round-the-block 20 times guy signing up - a real wheeler-dealer from the investment world - I wouldn’t want to be their customers!
