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Peckham's Poundland closure highlights wider struggles for UK discount retailers
Residents of Peckham, south London, lost their local Poundland this week after 11 years, as the discount chain accelerates store closures amid financial pressures. The Rye Lane branch, a staple for bargain hunters in an area facing high deprivation, shut its doors despite the cost-of-living crisis-precisely when such stores should thrive.
"Everyone came here; it was very cheap," said shopper Becky Cullen, staring at the empty storefront. "It was always busy. Where are we going to shop now?" The closure reflects a broader trend: over 100 Poundland locations have shut or been earmarked for closure since summer, following the chain's June sale for a nominal £1 due to "challenging trading conditions."
Why budget retailers are faltering despite demand
Poundland's troubles are part of a wider pattern. The Original Factory Shop has closed at least 22 stores, Maxideal collapsed entirely, and B&M Bargains-a major discount player-launched a turnaround plan after weak sales. These retailers, theoretically positioned to benefit from financially strained consumers, are instead grappling with a perfect storm: rising costs, shifting shopper behaviors, and fierce competition.
Retail expert Catherine Shuttleworth of Savvy notes that consumers have grown savvier, cherry-picking deals rather than relying on single stores. "Shoppers are outsmarting budget shops," she said. "They know prices inside out-sometimes even photographing deals to share with friends." Meanwhile, operational costs, from wages to freight, have surged, squeezing already thin margins.
"A pound isn't what it used to be. Selling something for £1 in 1990 is like selling it for 40p today, after inflation."
Retail analysis based on Poundland's founding era
Inflation and the death of the 'pound shop' model
Chris Edwards, co-founder of Poundworld (sold for £150m in 2015) and now behind OneBeyond, admits the traditional £1 pricing model is unsustainable. His chain initially launched as OneBelow in 2019, selling everything for £1 or less, but pivoted to OneBeyond-with most items priced above £1-after post-pandemic shipping crises made costs prohibitive. "The pound game wasn't going to work anymore," he said.
Yet Edwards insists his model still works through a mix of UK-sourced bargains and direct Chinese imports, where he negotiates "keen prices." His Croydon store, bustling with weekend shoppers, demonstrates the strategy: customers buying Coca-Cola might also grab a China-sourced item with higher margins. "We know what the customer will buy before they do," he claimed.
Supermarkets, online rivals, and the fight for the budget shopper
The discount sector's woes extend beyond inflation. Supermarkets like Aldi and Lidl have sharpened their pricing and loyalty schemes, while online "extreme discounters"-Shein, Temu, and AliExpress-are siphoning off customers with ultra-cheap direct-to-consumer goods. Mintel data shows 30% of UK online shoppers used Temu in the year to September 2025, with AliExpress at 14%.
Amazon's new low-cost section, Amazon Haul, further intensifies competition. "If Amazon is reacting to this market, it's a sign the trend is significant," said Nick Carroll of Mintel. TikTok Shop adds another layer, with sellers undercutting physical stores by avoiding overheads. "Shoppers will go anywhere for the right price, time, and place," Shuttleworth noted.
"Budget shopping isn't just a necessity for some-it's a hobby. But for others, it's the only option."
Catherine Shuttleworth, retail expert, Savvy
The high street's shifting landscape
Between 2009 and 2015, UK budget retailers doubled their footprint to 3,400 stores, filling gaps left by collapsed chains like Woolworths. But growth has stalled since. Out-of-town retailers like B&M and Home Bargains thrived by catering to car-owning shoppers with bulkier items, while high street stalwarts face rent hikes and changing foot traffic.
Poundland's missteps-abandoning its £1 core, introducing unpopular Pepco clothing lines-accelerated its decline. "They forgot what they were," Shuttleworth said. The chain's turnaround plan includes closing 105 unprofitable stores and renegotiating rents, aiming to stabilize at 650-700 locations by 2026, down from 800+ earlier this year.
Who's winning the budget battle?
Not all discount retailers are struggling. The Range expanded by 60 stores this year after acquiring Homebase, while Home Bargains and Savers (which is taking over Poundland's Peckham site) continue growing. OneBeyond, though slower to expand, remains profitable by focusing on Christmas and Halloween sales-critical for annual viability.
"We're not earning fortunes," Edwards admitted, "but we're paying our way." The sector's future may hinge on consolidation, with stronger players absorbing weaker ones. Shuttleworth predicts survival will depend on "being the best of the best-whether you're at the top, middle, or bottom."
The human cost of discount retail's shakeout
Behind the numbers lie communities like Peckham, where budget stores fill gaps left by economic inequality. For some, these shops are a lifeline; for others, a ritual. As shuttleworth put it: "For some people, budget shopping is a hobby. But for others, it's an absolute necessity."
