Is Boots equipped to face the challenges of grocery? Elaine Watson reports
Richard Baker knows a thing or two about selling toiletries, and with lengthy stints at the marketing departments of Mars and Asda under his belt, he knows a fair bit about building brands as well. But can he get the country’s largest health and beauty retailer on a competitive footing with the multiples in convenience? The former Asda marketer, who takes the helm at Boots on September 15, will have to tackle some endemic problems, say consultants.
“The supermarkets have moved into Boots’ core market,” says one, “and no-one has managed to work out exactly what market it ought to be operating in instead.” Attempts to diversify into more specialised areas, such as ‘wellbeing’ services and ‘pure beauty’ cosmetics stores, have proved pretty disastrous - both have been axed - while an ill-fated tie-up with Sainsbury was disbanded earlier this year as the two could not agree over “commercial terms for a roll-out”.
To suggest Boots has lost its way is off the mark, however, says one City analyst. The company’s gross profit margins still put the multiple grocers to shame, he points out, adding: “Conventional wisdom has it that Baker has assumed a horizontal position in front of the supermarket steamroller. Rubbish! Boots is simply an under-managed business that has prioritised the wrong things.”
What Baker needs to do, he says, is refurbish more stores, build on range - especially premium own label - yet stay competitive on key items, something Boots is already attempting with its ‘Lower prices you’ll love’ campaign.
The notion that Boots has the most to lose from deregulating pharmacy licensing is also off the mark, he adds. As superstores can only trade for six hours on a Sunday, they would have to open instore pharmacies for more than 15 hours a day to meet new licensing requirements (opening 100 hours a week).”It might be cost-effective to pay shelf-stackers to work the night shift,” he notes, “but not a qualified pharmacist.”
The move to branch out into convenience with the trial store in Holborn has received a mixed response in the City, with some analysts seeing it as a sensible means of sweating assets in high footfall areas and others convinced it is a distraction from the core business - selling toiletries.
The logistical challenges of enhancing the grocery offer shouldn’t be underestimated either, says Gist business development director Mike Flynn. “If you are not a destination outlet for groceries, you could run into all sorts of problems with shelf life and stock management.”
The more pressing issue for Baker, however, is deciding what Boots actually stands for, says one analyst. “They are making real progress on range, price and service. The issue is how they are merchandising their goods and how they are communicating their brand.”
Richard Baker knows a thing or two about selling toiletries, and with lengthy stints at the marketing departments of Mars and Asda under his belt, he knows a fair bit about building brands as well. But can he get the country’s largest health and beauty retailer on a competitive footing with the multiples in convenience? The former Asda marketer, who takes the helm at Boots on September 15, will have to tackle some endemic problems, say consultants.
“The supermarkets have moved into Boots’ core market,” says one, “and no-one has managed to work out exactly what market it ought to be operating in instead.” Attempts to diversify into more specialised areas, such as ‘wellbeing’ services and ‘pure beauty’ cosmetics stores, have proved pretty disastrous - both have been axed - while an ill-fated tie-up with Sainsbury was disbanded earlier this year as the two could not agree over “commercial terms for a roll-out”.
To suggest Boots has lost its way is off the mark, however, says one City analyst. The company’s gross profit margins still put the multiple grocers to shame, he points out, adding: “Conventional wisdom has it that Baker has assumed a horizontal position in front of the supermarket steamroller. Rubbish! Boots is simply an under-managed business that has prioritised the wrong things.”
What Baker needs to do, he says, is refurbish more stores, build on range - especially premium own label - yet stay competitive on key items, something Boots is already attempting with its ‘Lower prices you’ll love’ campaign.
The notion that Boots has the most to lose from deregulating pharmacy licensing is also off the mark, he adds. As superstores can only trade for six hours on a Sunday, they would have to open instore pharmacies for more than 15 hours a day to meet new licensing requirements (opening 100 hours a week).”It might be cost-effective to pay shelf-stackers to work the night shift,” he notes, “but not a qualified pharmacist.”
The move to branch out into convenience with the trial store in Holborn has received a mixed response in the City, with some analysts seeing it as a sensible means of sweating assets in high footfall areas and others convinced it is a distraction from the core business - selling toiletries.
The logistical challenges of enhancing the grocery offer shouldn’t be underestimated either, says Gist business development director Mike Flynn. “If you are not a destination outlet for groceries, you could run into all sorts of problems with shelf life and stock management.”
The more pressing issue for Baker, however, is deciding what Boots actually stands for, says one analyst. “They are making real progress on range, price and service. The issue is how they are merchandising their goods and how they are communicating their brand.”
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