Poundland founder Steve Smith to launch online pound shop

Poundshop.com, which launches in the next 3 to 6 months, will have a minimum order value of around £20 with a delivery charge on top, although the exact amount is yet to be decided.

It would be the first single price point ecommerce proposition. Both Poundland and 99p Stores have eyed an ecommerce offer but have put off launching due to the substantial overheads associated with online.

However Poundshop.com would operate without the constraints of a costly store base and Smith feels confident that it will work if he can sell high volumes of product.

He told Retail Week he was confident he could keep the cost base low by securing good deals. “We’re negotiating on delivery, pick and packing. I’ll get it as cheap as I can and pass savings onto the customer,” said Smith. “We’ve very tight margins, so you need big volumes.  A lot of people find it hard on the distribution side but my background is supply chain and distribution. I’m known in his game so the phone hasn’t stopped ringing.”

He said there would be a delivery cost to the customer, of about £3, but pointed out that shoppers have to pay parking costs to visit the high street as well as transport costs. “People are used to delivery costs,” he said.  “My challenge is to make sure it works out cheaply for the customer.”

Smith is in negotiations to sign for a distribution centre in the Midlands and plans to base the model on customer demands.  Smith said he is considering both a home delivery and a click-and-collect model through partnerships with other retailers and shopping centres.

Smith has conducted consumer research to help him devise his business model.

“We asked them how much would you spend, what would you like us to sell, would you like it delivered to home or stores?43% said they’d like it delivered to a shop. I’m a strong believer in giving customers what they want,” he said.

Poundshop.com has already launched a trial in London and had great success, according to Smith. “The average spend was a lot more than expected,” he said.

He said that an online business would work as it offers customers greater convenience and a wider breadth of range. “Most pound shops close at 6pm, yet most people get in from work at 7pm or 8pm,” he said. “A lot of people these days don’t have the time.

“The other thing that makes us different is the new categories of product, such as business cards and personalised greetings cards. There’s a lot more categories you can go into online.”

He also said Poundshop.com could wholesale. “The thing Poundland doesn’t do is selling big packs of stuff. It’s another type of customer,” said Smith.

Smith has dipped his toe in value ecommerce before. He launched an ecommerce offer 15 years ago while he was at Poundland, but the online business was disbanded when the retailer was sold. “This is something I did in my life that I never saw through,” he said. “I’ve had a lot of people contact me asking when I’m going to do it online. It seemed like a good opportunity.”

Smith, who is backing the venture with his own money, said there was no plan to open physical shops. “I’ve been there and done that,” he said.

Smith co-founded Poundland with Dave Dodd in 1990. Smith sold his share in Poundland for £50m in 2002.