It is fascinating to see yet another significant investment in UK retail from Christo Wiese, the South African billionaire. This follows his investments in New Look and Iceland, and the launch of Pep&co. All are value retailers. Wiese has spoken publicly of his confidence in the UK value market and this is not surprising.. What is more intriguing is the timing. If one splits retail into value, middle and premium it is the first of these that has been the outright winner over the past 15 years.
The irony is that back in 2000 he already owned Poundstretcher which back then traded through more than 600 stores. This gave it much more than a head start on the stars of the value market like B&M, Poundland and Home Bargains who have made fortunes from massive growth that has largely passed Poundstretcher by. So having missed out and then exited (he sold in 2009), why he has waited until now to return, when its growth is slowing markedly?
The new chain will take on the likes of B&M and Home Bargains, with 10,000 square foot units in secondary locations. One big difference with these two very well-established players will be clothing, with Pep&co merchandise sitting alongside household goods and (mainly) ambient groceries. Like Pep&co, the business will be led by Andy Bond, the former CEO of Asda. He plans to have two trading by March and a further 8 by the middle of 2016.
Another big question is why start from scratch? With a massive war chest, why not buy an existing player. There have certainly been opportunities. As with my discussion about Pep&co (Paper December 18th 2014), one has to take a player like Christo Wiese seriously. He has the finance and an impressive team is being put together. Like Pep&co however, this new (as yet unnamed) business will be up against exceptional very well established players with great teams and firepower of their own and gaining traction will be very tough.