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Success stories: Low-cost chains see sales soar
[January 17, 2013]

Success stories: Low-cost chains see sales soar

(Guardian (UK) Via Acquire Media NewsEdge) So much for a digital Christmas. A mix of low prices, snazzy stores and up-to-the-minute fashion delivered a 25% rise in sales for Primark, right, in the three months to 5 January without a single item sold online.

While rivals rush to invest in smartphone apps and battalions of delivery vans, John Bason, Primark's finance director, said the company had no plans for an internet store. "Our focus is clearly on the high street consumer experience. This Christmas was a demonstration to me that the high street is not going to disappear any time soon," he said.

Low-price food stores such as Aldi and Lidl and discount chains including Poundland, 99p Stores and B&M Bargains are also seeing a sales boom without any help from the internet. They are all opening stores and attracting cash-strapped shoppers by holding down prices.

Poundland is estimated to have seen a 20% rise in sales over Christmas, Aldi saw sales growth of more than 30% and Lidl's market share hit a new high.

"These stores are giving hope to the high street. They are a chink of light in a very dim retail world," said Neil Saunders, managing director of retail consultancy Conlumino. Although some see discount stores as part of the decline of the high street, Saunders said most now look good and keep an area vibrant by attracting shoppers looking for a bargain. "Landlords can't afford to be snobbish about a tenant that is successful," Saunders said.

Poundland, for example, could double its number of stores to 1,000 over time and B&M is opening a store a week.

As rival fashion chains close stores, Primark plans to open 200,000 sq ft of new space this year on top of 1.1m sq ft in 2012, which included a second big store on London's Oxford Street. New developments will include extensions to its Newcastle and Manchester stores and a new store in Frankfurt, Germany. It is also hoping to open a trial store in France this year.

Bason said Primark was spending money on making its high street stores look more exciting and modern, keeping prices low and ensuring it had the right range of clothing.

"Anyone can see Primark has got a strong proposition out there as people are looking for value for money," said Freddie George, retail analyst at Seymour Pierce. He said it was trickier for low-price retailers to make online sales add up because the cost of delivering goods to homes was expensive relative to the price of their products. Sarah Butler (c) 2013 Guardian Newspapers Limited.

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