Seeking inspiration from the US and growth from Europe, B&M Bargains is clearly ‘thinking global’ as it prepares for its forthcoming IPO. 

Seeking inspiration from the US and growth from Europe, B&M Bargains is clearly ‘thinking global’ as it prepares for its forthcoming IPO. 

Dollar General has been identified as B&M’s  role model, whilst majority-owned German-based JA Woll the potential European bridgehead.  What similarities does B&M have with the former and what potential does the latter offer?

Dollar stores (or ‘value channel retailers’, to give them their correct moniker)  have become a major force in the US competitive landscape in a very short space of time – Planet Retail’s data show that there are over 26,000 such stores now trading, generating annual sales approaching $50bn. 

Dollar General is by far the largest operator, with over 11,000 outlets and sales of over $17bn. B&M is not the market leader in the UK, that accolade is held by Poundland, but there is other, more telling, commonality with its American Idol – it is a not a single-price operator.

The downside of not having crystal-clear price communication to shoppers is more than offset by the benefits of a flexible pricing policy that allows for far greater manoeuvre on margins.

But it is worth stressing that all is not necessarily rosy in the dollar store garden in the US.  Smaller players such as Big Lots and Fred’s are struggling and Family Dollar, the third biggest US player, recently revealed a major rationalisation and store-closure programme.

B&M may have picked the best role model in high-flying Dollar General, but it would also do well to heed the wider malaise that frantic over-expansion has brought generally.  Also worth flagging are the very different operating dynamics of the US value market, particularly the ready availability of real estate and the associated low operating costs.  How long would a retailer last in the UK, generating sales densities of just $230 sq ft (£145 sq ft), as Dollar General does? Not long.

Continental Europe is at the other end of the maturity spectrum.  The concept of value/single-price general merchandise shopping is at its infancy relative to the US.  And where better than Germany to branch out? 

The German shopper remains a curious beast; the love of low-price constantly outweighing any other purchasing decision, including quality.  In the land that pioneered grocery discounting, even the most affluent consumers continue to seek out bargains wherever they can. JA Woll (get the pun? So much for German’s not having a sense of humour) has all the hallmarks of being a business in the right place at the right time, both in terms of sourcing and store expansion.

But B&M is far from done in the UK as well. In terms of maturity, the UK value market probably sits somewhere between the US and Continental Europe. 

Those that thought the ‘pound shops’ were just a passing phenomenon, borne of recession, need to think again.  There is still significant scope for B&M to expand its currently 373-strong domestic network, particularly if its statistic that 66% of the population does not have access to one of its stores is to be believed.

  • Stephen Springham is senior retail analyst at Planet Retail