If you should name some of the biggest Dutch shops, that not only thrive domestically but also are doing well internationally, which one would you name? I would immediately think of a shop like Albert Heijn, but a recent report shows that another Dutch shop is also doing well: the Action.
For those who do not know the shop: the Action is a shop in which you can buy all sorts of products at a low price. The report from 3i, the British group that owns the Action, shows that there has been quite some growth over the past period by the Action. Sales increased by 5.6% over the past ten months, and in the same period almost 150 new locations of the store have been opened. This is especially remarkable as lately it seems that stores are becoming less visited due to the increasing popularity of online stores. Personally I hardly ever go out to buy something, but rather order it online. In the last five years many stores have gone bankrupt and the online stores are usually given the blame for this. But what is the reason that the Action is still growing, while other Dutch shops such as V&D and Bart Smit have gone bankrupt?
One possible reason that the Action’s sales are increasing could be that the prices of the Action are that much lower than the prices of other firms, such as the V&D. Sometimes you might find the same product for a lower price at the Action than at another store. And even if the Action might not always have the exact thing you are looking for, the probability is high that somehow you still find something else you did not realize you wanted or needed, but because the price is low you still might buy it. Could it be that due to the low prices people will go to the Action more often? Probably, but another reason could be that they just want to snoop around to find a deal.
Naturally after the success of one company, more will follow with the same strategy: selling things that do not cost much for a little bit more than what they are worth. In the Netherlands there are now stores like SoLow and Big Bazar which follow the same strategy, while in other countries you might think of stores like The Pound Shop. They buy cheap products from other stores that do not sell those products anymore, and sell them for a little bit more. However, the question remains. Why does the Action in particular remain growing? These other shops have also been around for a while, so one would expect the sales to stagnate.
3i, the parent firm of the Action show in the report that the Action is worth more than 10 billion euro. Last year the firm was worth about 6.5 billion euro, so that is a great increase. Personally I never expected the firm to be worth even near such a value, but maybe that could be a cognitive bias on my part for expecting a firm that sells cheap products to be not worth themselves as well. 3i, which owns other Dutch firms like Hans Anders and the Basic-Fit, sees Action as their most valuable asset.
My problem with this entire article is that it might explain a little bit about how the Action has come to its current place in the Dutch economy, but it does not explain how there is still a growth in sales of 5.6% or a growth in value of about 3.5 billion euro. Personally I have no real idea how the Action remains growth while competitors seem to mimic their strategy, and with many other shops being brought to their knees by online shopping. To me this is a little bit of a mystery. If anyone has any idea, please do share it with me.
By: Merijn van der Leeuw