Fionnuala Carolan speaks to Dealz senior business manager Leonard Brassel about the new concept discounter's ambitious plans for the future
Apr 12 2012
Dealz is a part of the UK discount retailer Poundland and has the same board and management team led by CEO Jim McCarthy. With over 370 stores in the UK, Poundland is currently Europe’s biggest single price discount retailer.
Warburg Pincus, a global private equity firm acquired a majority stake in the company in May 2010 with the management at Poundland retaining a minority shareholding and continuing to lead the business.
The company had been planning a move into Europe for quite some time and in June 2010 it announced its expansion into the Republic of Ireland, opening its first store in Portlaoise in August 2011.
Aside from own label products, Dealz stands apart from other discounters in that it also stocks well-known brands at a standard price point of €1.49.
So how is it managing to sell branded products so cheaply on an ongoing basis? According to Brassel the rate of turnover of stock and the buying power of the parent company allows them to get the best deals available.
“We have nine stores in Ireland but we are part of a larger organisation that has 390 stores in the UK,” says Brassel. “We are giving suppliers a huge opportunity to tap into a large network of stores. We present their product very well, and because we turn the product so fast we can negotiate very good deals.”
Dealz is selling four cans of Coca-Cola for €1.49 and two litres of milk at €1.29 which he claims is the cheapest in the country.
While the value is certainly impressive, grocery is only one department in its stores. The Dealz grocery offering consists of a lot of confectionery, biscuits, tea and coffee and the only fresh foods stocked are milk, eggs and bread. Some of the stores have a frozen section but not all so one could not carry out a full weekly shop here.
Aside from grocery the other product categories in store are health and beauty, baby, batteries, homeware, pets, books and DVDs, toys, celebrations and seasonal ranges such as Valentines, Mother’s Day and Easter. With all of these combined it would certainly have the capacity to hurt if it arrived on your doorstep.
Leonard Brassel, senior business manager, Dealz
Joining the team
Brassel joined the company just a few days before the first stores opened. He brought with him over 15 years of retail management experience having held senior management positions with various retailers including regional manager with the Heatons Department store group, and operations manager for Sportsworld Ireland.
Brassel was told about the Dealz position from former colleagues who were working with Poundland in the north of Ireland.
“They approached me and said the guys were looking to open up down south and build up the business down here. I met with Tim McDonald, the operations director and Steve Hayward, the regional manager for Scotland and the north of England and to be honest with you Tim in particular blew me away with his enthusiasm and the promise of a great working environment.”
Having taken on the role he said he realised why McDonald had been so enthusiastic. “We sat in Costa Coffee in Blanchardstown the day we opened that store and saw how busy it was and I realised that’s why these guys have a smile on their faces all the time.
“At the moment a lot of businesses are hunkering down and cutting costs where they can and don’t believe they can grow sales in any form but this is a positive, growing business and it is terribly exciting to be part of that.”
There is considerable focus on the Dealz model, being the first step outside the UK market for the company but Brassel says that all stores are trading well ahead of expectations. “We had originally hoped to open six stores by the beginning of March but as of last week we have nine stores open.”
Portlaoise and Blanchardstown were the first stores to open last September and since then stores have opened in Santry, Letterkenny, Killarney, Newbridge, Limerick, Cork and Athlone. Most of the stores have between 30 and 40 staff and over 300 jobs have been created nationwide.
Difference between Poundland and Dealz models
The main difference between the Poundland model and Dealz according to Brassel is that in Ireland the company is dealing with a lot of Irish suppliers like Tayto, Jacobs, Dale Farm, Brennans Bread and Ballygarvy Eggs. “Next month we are doing an open day with Irish suppliers to try to get more on board. I think one of the things you’ll see over here, is the product range is slightly different in that it’s a locally sourced product. We are currently looking at the possibility for some Irish brands to be held by the UK stores where there is a large Irish market, but at the moment they are just available in Ireland.”
Another difference is that the average Irish store is about 30% bigger than the ones in the UK. He says that a major misconception people have is that the Dealz stores are similar to other small discount shops around Ireland. “We’re nothing like that,” he says. “If you take Blanchardstown, it’s 8,000 sq ft with 6/7 ft wide ailses. We’ve spent over €2 million so far kitting out the stores so they’ve a really nice look and finish to them. People have preconceptions about discounters but we are blowing that away.
“I don’t want to name check but we would be the Marks & Spencer of the discount world with regards to the fit out and appearance of our stores and the quality of our products. You walk into our stores and you see all the brands that you see in other retailers. For example in our health and beauty section, you will see huge quantities of Johnson and Johnson, Pantene, Head and Shoulders and plenty of other well known household brands.
“If you go into our grocery section you’ll see Cadbury’s, you’ll see Jacob’s, you’ll see Heinz and you’ll see Tayto. In the UK we’re one of the biggest retailers of the Weight Watchers range. So all of the brands that people are shopping in other stores for, they will see them here but the difference is that they are €1.49 or less here.”
Finding locations for new stores is not a problem with plenty of retail space lying idle around the country but these stores are best located near other retailers as the company feels the value it offers beats all others. The locations are varied with sites in retail parks, high streets and shopping centres but they’re always next to existing stores.
While Brassel doesn’t put a figure on the amount of stores the company hopes to have open by the end of 2012, he says it plans to keep expanding at the current rate. This would mean Dealz would be nearing double digit growth by the end of the year. Current customer numbers are very positive with the Cork store seeing footfall of 11,000 a week.
But Brassel says it’s the reaction from the customers that has been most telling.
“At the opening of the Newbridge store, people were stopping half way up the first aisle and ringing their friends and telling them they wouldn’t believe it that everything was €1.49. And when we opened up Portlaoise, the manager of the store was constantly being called out to the front of the store and people were actually shaking him by the hand and thanking him for coming to the town. They were bussing people in from surrounding towns and villages because they thought it was a short term offer and they couldn’t believe the value that was there. All you have to do is walk into our shops, see the price and go into a competitor and compare and you will see the difference.”
Brassel is always watching the activities of Dealz’s competitors to keep abreast of what’s happening in the market and ensuring it is offering the best value. “I think I can comfortably say that in 80/90% of cases, we are between 30% and 50% cheaper than out competitors on like-for-like product.”
While other retailers will admit that the grocery sector has reached saturation and there is no room for any more competition, Brassel is inclined to disagree.
“I haven’t felt that in our trading pattern at all. The grocery market may be saturated but the value that we are offering transcends that.”
Dealz has recently opened in the Isle of Man and the company has identified other opportunites in mainland Europe to target after this. It’s certainly one to watch.