Evidence of retail price deflation has descended on Eastleigh with the opening of a new discount store ’89p Extra’ in the Towns High Street. The new store will provide competition for the exsisting 99p Stores outlet in The Swan centre which it claims to undercut.
This will be a new experience for the 99p store in Eastleigh as when it first opened it suceeded in undercutting the two exsisting discount stores ‘The Stockmarket’ and ‘T.M Stores’ to the extent that both shops went out of business within months.
99p stores has been held responsible for the closure of number of profitable small businesses up and down the country, despite running at a loss itself, losing £1.4 million in 2007. This year they are reporting a slim £3.2 million operating income on a turnover of £113 million – a 2.8%.margin. It is interesting to note that this years 2.5% reduction in VAT has not resulted in a reduction in prices or rebranding as ’96p Stores’.
There is no doubt that customers ‘vote with their feet’ and that this is a formula which has proven very popular with consumers from what the Financial Times refers to as the ‘lower socio-economic classes’. They have used the income from a high turnover (and an £8 million cash injection for Barclays and Lloyds) to expand quickly and aggressively – but is this a business model that can only prosper in a recession?
‘Not so’, said a manager at the new ’89p Extra store. ‘This is a business for any time, people love value for money’ he added pointing out a range of multipack crisps which retail for £1.21 in Tesco but are on sale for 89p in his store.
While declining to make any further comment on either his store or that of his rivals he explained that the new business was only the second branch to be opened ( the other being in Poole ) and that the owners were looking to expand further.
Whether or not discount shops prove to be a viable business model with the national economic uncertain remains to be seen.
In the meantime Eastleigh consumers can enjoy the benefits of having two cut price retailers to choose from!