Boots must focus on differentation as competitors gain momentum, says GlobalData

Following today’s release of Boots UK figures for Q2 FY2020/21; Mahya Agorlou, retail analyst at GlobalData, a leading data and analytics company, offers her view: “Boots’ performance over the period highlights its ongoing struggle against the pandemic – especially in its retail sales, which saw a 13.9% decline in H1. However, UK H1 pharmacy sales were up 2.8%, aided by NHS reimbursements and stronger pharmacy services in Q2, which alleviated the issue of lower prescription volumes. While performed well, with triple-digit sales growth in Q2, the strong online performance proved only partly able to offset the decline in footfall and lower volumes due to the reduction in social events.

“COVID-19 has also encouraged consumers to transfer their health & beauty spend to grocers, something warmly welcomed by the supermarkets. Sainsbury’s, for instance, has adapted floor space to incorporate 134 beauty halls and 48 wellness hubs offering over 1,000 health focused products. Hence, there’s now an increasing level of urgency for Boots to keep up with grocers in terms of look and feel. Boots’ tired-looking stores have long been criticised and, with additional pressure from other channels, Boots will find it increasingly difficult to justify such a large store portfolio as retail emerges from the pandemic. Furthermore, as other operators look to take share of the more consistent pharmacy market (most notably Amazon UK’s recent trademarking of “Amazon Pharmacy”), Boots must ensure its health & beauty retail proposition remains competitive, on price, range, and fulfilment options.

“Despite the challenges mentioned, there lies opportunity for Boots to poach premium end beauty consumers from ailing department stores. Boots, due to the portfolio of brands it stocks from everyday to premium cosmetics, is better placed to lure ardent beauty shoppers versus its direct high street competitor Superdrug and other grocers; however, it must act swiftly and address the ambience and experiential element of its stores if it is to strengthen its appeal. Boots can also protect market share through quicker reaction to changing consumer demands – particularly in sustainability. GlobalData’s January 2021 consumer survey revealed that 81% of consumers consider the sustainability and ethics of a retailer when shopping for health & beauty products, yet seemingly the issue remains low on the list of priorities for many beauty players. With the physical estate of department stores (such as John Lewis & Partners) dwindling down, now is an opportune moment for Boots to become a leader in this space through focus on initiatives such as recycling schemes and supply chain transparency.”