99p Stores is planning to launch a transactional website, as it reported a 55% drop in profits.
The single-price point retailer revealed that it has invested in bringing all website design and development in-house so it can create a transactional site.
Value retailers have found it difficult to launch transactional websites due to their low price points. Within the general merchandise value sector just Pound Stretcher and Home Bargains have opened websites, but a single-price point retailer is yet to make the leap. Poundland has also said it is working on a transactional site.
The strategy comes as 99p Stores revealed a £6m drop in EBITDA to £4.9m in the year to January 31, which the retailer blamed on investment in the buying teams, retail operations, IT, finance and HR and to support its growing 231-store estate.
Gross turnover increased 27% to £391m in the year, while gross profit fell “marginally” by 0.28% due to “substantial” cost pressure from raw material prices and wages.
Commercial director Hussein Lalani said: “Last year was a consolidation year in which we built infrastructure for continued growth and these results were in line with expectations.”
Lalani said since year-end “trading has been steady. We have seen year to date margin improvement of 1.4%”.
99p Stores is planning to open another 120 UK stores by 2017, aiming for a 350-store estate. Lalani said there was scope for 1,000 UK stores.
He added: “We are going to expand into the north of England where we do not have many stores and in Scotland, where we just opened our first store in Ayr in June. We have 231 branches and there is potential to expand to 1,000 stores in Britain.”
The news comes weeks after Poundland revealed it wants to grow to 1,000 stores in the UK, while 300-store Home Bargains is aiming to open 400 more stores in the next five years.
Lalani said he has been strengthening the retailer’s offer by investing in chilled food distribution and that 99p Stores has the widest offer among the value retailers. It has also invested in building a design studio so it can create its own products such as greetings cards.
In addition, 99p Stores has been fuelling price-cutting competition in the sector after Retail Week revealed earlier this year that rival Poundland stores had been cutting prices to 97p in areas where new 99p Stores had been opening. In these cases 99p Stores has been dropping some prices to 96p.
Lalani said: “Our selling point is to always sell products a penny cheaper than our rivals. If any of our competitors drops their prices we always strive to undercut them.”