Why are health food stores still such miserable-looking places? Yes, they may generate impressive sales and profits. And yes, some of them may fulfil their basic function of selling, sometimes at very reasonable prices, a vast range of natural remedies and foods. But all too often, the products look dull, the merchandising duller still, and there are no floor staff around to advise on what you should be looking for.

While their counterparts in the natural cosmetics and organic and whole foods arenas have moved with the times aesthetically – think Neal’s Yard Remedies and Planet Organic – the health food gang seem to be stuck in an 80s time warp where a quasi-pharmaceutical setting is considered all that is necessary to flog a few supplements and cereal bars.

Successful health food retailing
Do... Ensure staff are adequately trained to give detailed advic; categorise goods by ailment; make sure signage is colourful, clear and easy to read; consider providing education through workshops on health-related topics; try to widen offer to include healthy fresh food, cosmetics and toiletries

Don’t... rely too heavily on promotional items; have dimly lit areas in the store – supplement bottles are difficult enough to read; cram items together – create space where possible; skimp on staff numbers – customers need help with products; ignore the potential online market.
Surely with the credit crunch threatening discretionary spend, the incursion into their territory by the natural and organic players and the growing threat of internet sites, it’s time for a makeover, one that will make them worthy of the products they sell and drag them into the noughties?

Within the health food retailer fraternity, the attitude seems to have been: if it ain’t broke why fix it? And you can see why they may think that. Last year the UK health food sector was worth £464m according to Mintel, up 19% on 2002. While this growth didn’t match that of the supermarkets – which have been keen to jump on the healthier-eating bandwagon and have been fierce competitors to the specialists – it did outstrip overall retail growth.

Hard times have their ups and downs
Top of the heap despite – and some may argue because of – its utilitarian decor is Holland & Barrett’s estate of 544 stores in the UK and Ireland. For the year to September 2006, the latest figures available, UK sales were £264m and pre-tax profit £81.3m, up 2.7% and 48% respectively on 2005.

“It is one of the most profitable in all of British retailing,” says Robert Clark, senior retail partner at Retail Knowledge Bank. “It has steady footfall, big buying power and a loyal following. For 07/08, we don’t expect to see an increase in sales, and operating income is likely to fall back, but it’s still pretty healthy.”

Despite the expected dip in performance, Holland & Barrett potentially strengthened its position further with the acquisition of the better-looking but underperforming Julian Graves from Baugur. That is, if it can improve the appearance of its stores.

The problem that health food stores like Holland & Barrett have is that they have overplayed their discounter credentials, say experts. They are over-reliant on promotions, there is not enough information to explain what products are and do and staff are insufficiently trained to give good advice, according to Mintel. Moreover, unlike the supermarkets, which feature many of the same products, they don’t have a wide enough range of healthy as opposed to health foods and they do little to tempt in the impulse shopper.

“Broadly speaking you look at health food stores and they haven’t changed much in the past five years. Holland & Barrett, for example, is looking tired,” says James Flower, retail analyst at Verdict Research. “They’re not really giving customers enough incentive to return.”

Indeed, the merchandising is so non-descript that many shoppers find it difficult to differentiate between many of the products on sale, claims Jeff Kindleysides, founder of design consultancy Checkland Kindleysides.

“Holland & Barrett shops are solid establishments with lots of wood, products and not much else,” he says. “The products are in transparent bags piled up, and there’s no light and space.”

Of course, Holland & Barrett is far from the only offender, but it is the highest profile and its task may have just got harder with the acquisition of Julian Graves. One of the reasons Julian Graves’ pre-tax profit shrank from £3m in 2006 to £700,000 in the year to March 2007 may have been that it had become a victim of its own success, say experts.

“The issue with Julian Graves is that if you do too well at anything to do with food, the big boys will start to muscle in on that part of the market,” says Flower. “The bigger you get, the more the supermarkets think you’re on to a good thing and will replicate your offer accordingly but make it more affordable.”

What next for Holland & Barrett?
As Julian Graves demonstrates, it isn’t just about looking pretty. But it helps. As the economy worsens, Holland & Barrett is already addressing some of the criticisms levelled at it, admits Peter Aldis, newly promoted CEO of NBTY Europe, Holland & Barrett’s parent company.

“Our current performance is not as strong as it has been,” he says. “Next year will be difficult, but our changes in marketing strategy and price positioning will help us.”

In an attempt to modernise the brand and make it more relevant, the company is revamping 200 stores, both new and relocated, says Aldis. “Historically, we’ve advertised on price. We’re not a discount retailer, but to attract people we have to give consumers a reason to come and visit. We felt we were getting overly recognised on price rather than our key strengths. Our point of difference is our knowledge and expertise.”

The retailer’s new store at Cabot Circus shopping centre in Bristol is a sign of what’s to come, he says. Products are now categorised by ailment to make it easier for shoppers to find the right products. A brighter, more modern palate of colours has been used and the signage has been improved with ‘bus stops’ and ‘blip boards’ introduced to flag up the different categories.

Next year, the retailer also plans to broaden its range by launching an exclusive line of toiletries that will allow it to create some more theatre, adds Aldis. And from this month, a new TV advertising campaign will air using the strapline Price and Advice in an effort to reinforce the advice message. There is an important caveat.

“In low-turnover stores we would question the investment as you wouldn’t get a return on some of that,” says Aldis. “We need as much linear footage as we can get. UK rent is going up despite the economic climate.”

It’s clear that changes are afoot at Holland & Barrett and where it leads other health food retailers will surely follow – especially as the challenge from the multiple supermarkets and online intensifies. Clearly offering advice could prove a useful differentiator, and it’s not the only retailer setting a good example in this respect. Neal’s Yard Remedies, which operates in the closely related field of natural skin and healthcare products, has responded in an even more emphatic way to growing consumer demand for advice and expertise.

Making healthy shopping enjoyable
The majority of its 34 stores nationwide feature therapy rooms hosting workshops on subjects such as aromatherapy and Pilates. A crucial aspect of the store design has been to provide space for customers to learn about the products, adds PR and events co-ordinator Gabbi Moisley.

“It’s about providing an education space,” she says. “As there’s so much people don’t know, we have books and reference pages. Rather than having aisles, our shops are open and interactive so things are easy to see. We need to have space so we can discuss products with customers. It’s so important to be able to interact and feel comfortable. If people need to ask anything there is always someone there.”

There are also lessons to be learnt from other retailers that include but don’t specialise in vitamins and mineral supplements. Planet Organic, Fresh & Wild and Whole Foods Market all present a broad array of healthy as opposed to health foods in attractively laid out stores.

These types of stores tend to be much better at merchandising, says Kindleysides. “At Whole Foods, even the loose products look fabulous, and commonplace items such as tins are orchestrated in a way that makes you feel the product is the most important thing. There is an art to it. It’s all about keeping the environment nicely lit, airy and simple.”

Does size matter?
Get the merchandising and decor right and Clark believes health food stores will ride out the economic storm.

“This sector is a fairly durable, niche market. Prices are attractive and constant offers pull people into the stores so I think it’s pretty well placed.”

A pretty healthy outlook for health stores, then.

Case Study: Planet Organic
Health food stores could learn a thing or two from Planet Organic, the UK’s first certified organic supermarket, which opened its doors in Notting Hill, London, in 1995. Ninety per cent of its foods are organic and its range covers fresh fruit and vegetables, meat and fish as well as household products, cosmetics and toiletries. Extra services include personal health consultations and home delivery.

This year, the company has opened two new stores, one in Islington and the other in Muswell Hill, taking its total number of stores to five – all in London. The stores target shoppers who are health-conscious and environmentally aware and so are willing to pay the premium. Both its new stores include an in-store café and the Muswell Hill branch also offers parking facilities for shoppers. One of the criticisms levelled at health food stores is that they are impersonal.

That couldn’t be said of Planet Organic – it claims to offer help on everything from trying out new ingredients to choosing the best bodycare or natural remedy. Its philosophy is to form a strong bond with the local community, explains MD Brian Elliot.

“Unlike the supermarket giants, we’d like to preserve the relationship held between the independent shopkeeper and customer, as well as provide a place for locals to lunch, meet and interact,” he says. “We also plan to form working relationships with local independent businesses – from nurseries to charities – promoting good health, good food and useful services within the community.”