Hot on the heels of a disappointing set of results for the UK chemist chain, the US owner of Boots the Chemist is looking at closing as many as 200 outlets.
According to Sky News , Walgreens Boots Alliance (WBA), which owns Boots, has placed the stores under review and that “a significant number will shut”. The move follows an announcement by WBA in April that it was “focusing on low-performing stores and opportunities for consolidation”. If 200 stores close, the would account for 10% of the chain’s UK footprint.
The UK health and beauty retailer saw profits fall by more than 18% last year, and has warned that it would be included in a broader push to cut costs by £1.2 billion by the 2022 financial year.
It has also announced plans to cut hundreds of jobs at its head office in Nottingham.
In a statement issued alongside its second-quarter results last month, a Boots spokesperson said: “We currently do not have a major [store closure] programme envisaged, but as you’d expect we always review underperforming stores and seek out opportunities for consolidation.
“As is natural with a business of our size, we have stores opening, closing and relocating on a regular basis, but we have had around 2,500 stores open for several years now.”
The spokesperson highlighted “a huge merchandising project to update our self-selection cosmetics areas” and the opening of a flagship store in London’s Covent Garden on the site of a former Marks & Spencer outlet.
According to GlobalData’s 2019 How Britain Shops survey shows 41.9% of UK health & beauty shoppers purchased from Boots in the past year, down 7.1% from 2015. This highlights Boots’ shopper desertion with many consumers prioritising the discounters for cheaper branded toiletries amid squeezed budgets. To better cater to price conscious shoppers, Boots must ensure its prices are competitive and that promotions offer real value.
“It has taken Boots a long time to address the midmarket squeeze that has wrought so much damage to major multichannel retailers in other sectors such as food, fashion and department stores,” says Patrick O’Brien, UK Retail Research Director at GlobalData. “Shoppers have been trading down to discounters, and trading up to higher end retailers for more expensive treats and gifts.”
O’Brien continues: “Like Tesco and M&S it has actually been in this predicament for years, but unlike them, it has done little to address the issue until very recently, and now we have to wonder if Boots has left it too late to halt its market share decline. Long term lack of investment in stores has become more noticeable to shoppers, and its dated approach also extends to pricing, where multi-buy promotions and a generous loyalty scheme have made its shelf edge prices uncompetitive with discounters such as Aldi, Lidl and Savers, who have all been eating into its market share in health and beauty.”
Leigh Moody, UK managing director, SOTI believes that the key to taking on these retailers and online pureplay competition lies in looking at strategies that compliment changing shopping habits, not trying to compete with them.
Moody says: “The recent news following the “most difficult quarter” in its history, serves as another stark reminder that brick and mortar retailers urgently need to adapt in order to survive in today’s competitive retail landscape. Rather than competing against the online world of e-commerce, retailers should be adopting the right strategies to complement it and accommodate changing shopping habits. If store retailers want to remain competitive in today’s volatile climate, they need to be agile and adopt systems that make online to in-store transactions seamless. Retailers must consider integrating a mobile first strategy across their entire on and offline operations to streamline the value chain, from supply to distribution to shop floor. They should be offering personalised services, and mobilising retail staff through technology to streamline intelligent customer interactions.
“There is a clear opportunity here for bricks and mortar retailers to innovate, harnessing all of the capabilities that technology now provides, such as artificial intelligence and the Internet of Things both through digital and physical channels, to enhance the customer journey. This will also provide real-time, data-driven insights that retailers can use to improve their interactions with customers and ensure their stores remain competitive in the digital transformation age.”
Boots declined to comment on the number of stores it was now examining for potential closure.
