Trust Boots to succeed

By Lucy Douglas

Established back in the mid 19th century, Boots has become a beacon of the British high street. Marking an almost forgotten generation of retailer from an era when business was a family affair and customer care and convenience were the very foundations of a brand, Britain’s beloved local chemist has kept hold of its longstanding customer-centric reputation and made it central to its success. Today, the iconic blue and white logo can be found on every high street in the UK, with global branches reaching such distant destinations as the USA and Thailand. “Our purpose is to help people look and feel their best,” explains Alex Gourlay, CEO of Health & Beauty at Alliance Boots, which represents the retail arm of the lifestyle and wellness giant. “Whilst our products are key to this, so is the experience our customers have in our stores and the trust they place in us.”

Gourlay's comment denotes a company ethos familiar to the British shopper; Boots is famous for its dedication to customers, and the company's loyalty programme is amongst one of the best loved and well subscribed in the industry. But his words also reflect Gourlay's own belief in what the company is trying to achieve. When he took up the position of CEO in January last year, he was in his 34th year of employment with the company, having started as a Saturday assistant back in 1976. During that time, he explains, the company has undergone a number of changes, mergers and re-brands, but has never lost sight of its core ideals. "Some things have not changed since I first joined Boots," he says. "The values around what Boots stands for continues to make it one of the most trusted brands in the UK, and the care for its people and customers still remains at the core of the business today."

Opened in 1849 in the Goose Gate district of Nottingham, the original Boots store was founded as a herbalist retailer by John Boot, but it was his son Jesse Boot and daughter-in-law Florence that are widely attributed as the business brains responsible for developing the chain as it is known today. The 20th century saw the chemist grow into one of the most recognised and trusted brands in the country, a diversified family retailer of health and beauty products, pharmaceuticals, photographic products and optical healthcare, with outlets in every town in the UK and, by the end of the century, several countries around the world. Indeed, the €8.37 million merger with Alliance Unichem in 2006 to create Alliance Boots, one of Europe's largest drug, health and beauty groups, put the company in a comfortable position to enjoy further global expansion as well as develop domestic operations.

But longevity itself is not enough to protect a chain from sinking in the current economic climate, as retail stalwart Woolworths unfortunately proved in December 2008. Rising overheads, limited access to credit and reduced customer spending have made the high street a hostile business environment that even the country's most beloved brands find it tough to operate in. So just how has Boots managed to maintain such levels of success during the downturn?

"We are a focused healthcare group, and this has helped in the downturn as demonstrated by the health and beauty market which has continued to grow," says Gourlay. He maintains that Alliance Boots has a clear strategy "to continue investing in developing our pharmacy-led health and beauty customer offering and expanding the scope of pharmaceutical wholesaling, all of which is focused on driving future growth". And despite the crippling economic maelstrom that has all but obliterated many of the longstanding retailers that once stood alongside it on the high street, it's a tactic that appears to be working: Boots' sales figures have repeatedly made headlines throughout last year and into the early part of this year for all the right reasons. In the first half of 2010, it was revealed that the retail arm of Alliance Boots is one of only three UK chains that have managed to break the £1 billion annual profit mark, alongside Tesco and Marks & Spencer, an achievement that the group's Executive Chairman Stefano Pessina has put down to Gourlay's success as a leader. In May, Boots then announced a profit growth of 13 percent on the previous year, marking the third consecutive year it has enjoyed double-digit profit growth.

Both staff and analysts commonly attribute the success of the brand to two things: a strong history of strategic partnerships, and the company's well-developed reputation for excellence in customer care among the British public. The diversified product base, combined with the attractive and convenient facilities of the local pharmacy, have helped to establish Boots as one of the most popular in the UK market. Gourlay explains that, for Boots, the "customer is very much at the heart of the business strategy", a value that he holds dear as a leader; it was Gourlay, for example, who was responsible for developing the re-brand of 1000 Your Local Boots Pharmacies. He highlights that responding to customer demands swiftly is key to a retailer's success. "We have had the confidence to invest in the customer, which has rewarded us with customer loyalty, particularly during this tough economic climate," he says. "Increasingly, customers now expect businesses to be responsive to their feedback and suggestions. At Boots we take customer feedback very seriously."

Securing customer loyalty has undoubtedly gone a long way to securing the success of the company. Commonly acknowledged as the most generous customer loyalty scheme in the UK, the Boots Advantage Card, launched in 1997, remains to date one of the longest-running and most successful reward schemes on the British market. After it was overtaken in popularity earlier this year by the Nectar card, which allows customers to collect loyalty points with a number of retailers including supermarket Sainsbury's and BP petrol stations, Boots announced plans to open up the Advantage Card to other retailers, a decision that has been described as potentially "groundbreaking" for retail. Today, more than 15 million British people own a Boots Advantage Card, representing around one in four people throughout the country. A report conducted by business consultancy firm Promise Corp., found the reasons for the success of the Advantage Card is its simplicity, the flexible rewards it offers and the relationships that are generated between Boots and its customers.

"We continue each week to analyse over 25,000 customer responses to in-store marketing surveys to better understand our customers' evolving needs," Gourlay explains. "We are pleased that our customer care numbers improved year-on-year as a result of our ongoing focus on key areas that we know are important to our customers." These include value for money, speed and ease of payment, the availability and approachability of staff, and the time it takes to get a prescription.  As a result, says Gourlay, "unsolicited customer compliments more than doubled."

Joining forces

However, it was not always plain sailing for Boots. That same image of reliability and convenience that the company had founded its reputation on was fast becoming tired, and widely diversified supermarket heavyweights were able to sell many of the same cosmetic products at lower prices. The early years of the last decade saw Boots's sales falling, stores being sold up and down the country and stock prices diminish in value. It was time for a new approach.

The 2006 merger with pharmaceutical wholesaler Alliance Unichem to create Alliance Boots provided a much-needed shot in the arm and prevented the company from sinking further. The backing of a multi-billion euro company renewed both consumer and investor confidence in the brand, and helped re-assert the company's dominance on the UK high street. At the time of the merger, then-CEO Richard Baker issued a statement saying: "The merger will enable us to improve the offering for both our wholesale and retail customers. While there is a lot of hard work ahead and it will take time to deliver the full benefits of this merger, we are already making changes for our customers in the UK with a range of popular Boots products available in 500 Alliance Pharmacies from today." &nbs

The move marked the culmination of half a century of mergers and take-overs that have shaped the Boots brand. From the 1960s onwards, Boots has been adding to its group, diversifying its product range and expanding its market presence, merging with chemist retailers, research laboratories and opticians. "We have a strong history of both organic growth and forging successful partnerships," says Gourlay, explaining that these partnerships and mergers have been pivotal to the success of the brand. And the huge potential of its latest merger was quickly realised, with many of the benefits Baker spoke of coming to fruition much sooner than expected. "At the time of the deal we set ourselves a challenging synergy target to hit," explains Gourlay. "It is testament to the strength of the Group that we have continued to grow and are on track to become the world's leading pharmacy-led health and beauty group." Revenues have grown steadily since the merger, with the company hitting that magic £1 billion mark earlier this year. An ambitious £100 million cost saving target set at the time of the merger was also achieved 18 months ahead of schedule.

But the merger does not mean the brand is resting on its laurels; the strategic partnerships continued and Boots has since announced a number of new initiatives for expansion and development. Gourlay reveals that in recent years Alliance Boots has invested £1 billion in developing and improving the high street brand, a massive sum certainly, but one that is already generating substantial returns. "It is important to focus on customer loyalty," he says, and highlights a selection of Alliance Boots' projects that will aid the expansion of the already wide reaching business. A recently announced venture with Waitrose supermarkets will see a selection of each company's products sold in the other's stores; childcare product retailer Mothercare is currently designing a new range in children's clothing for Boots; and Procter & Gamble will distribute and promote the Boots Laboratories' skincare range in Italy. "You should always try to give your customers a reason to come back," he explains.

Looking forward

One of the biggest new ventures from Boots was rolled out last year; October saw the launch of the BootsWebMD, an online health and wellness information service that will use expertise from the National Health Service and British Medical Journal, among other healthcare specialists, to provide healthcare information to users. Currently only available in the UK, this service "will allow Boots to provide accessible healthcare for all with an unrivalled reach", according to Gourlay. The web portal marks another step in the company's online presence, which has been expanded significantly in order to maintain its strong reputation for customer convenience. Gourlay explains that the online channel has continued to grow for many retailers, and that he and his staff are pleased with the performance of the Boots site so far. "During the year we also substantially increased the number of Boots stores where customers can collect goods ordered on our boots.com website," Gourlay says. "Our 'order-online collect-in-store' service is now available in more than 2000 stores across the UK, providing customers with access to the extended Boots range." He goes on to explain that this collection service has proved extremely popular with Boots' customers, and the company is continuing to develop its multi-channel offering in order to improve the customer experience.

"We recently commenced our trial of accepting contactless card payments using Mastercard Paypass," Gourlay explains, telling me that following the first of these transactions, which took place in the firm's Canary Wharf outlet, customers can now buy everyday purchases totalling £15 or less with contactless payment technology at 21 different stores across London and Liverpool. "We believe that contact-less payments could be an innovative way to speed up traditional card payment," he says, "and as part of this trial we hope to see faster payment times at our tills where we implement this fully integrated solution."

Conquering the British market took time, but it is fair to say that Boots has succeeded; through steadily diversifying first its product range and then its operating platforms, the firm has maximised its reach across the British market. Consequently, the greatest scope for expansion is now coming from its increasing international operations - a challenge Gourlay is relishing. Thanks to a perceptive and strategic customer offering, though helped significantly by the merger with Alliance, Boots is now a market leader across the European market, having broken into Norway, Holland, Ireland, Italy and Russia. "Pharmacy is different in every market in Europe," he explains. "As such, we focus on developing country-specific Boots branded trading formats to meet local needs. A successful recent example is the rollout of the 'Boots apotek' pharmacy concept in Norway. We have also now extended the concept in Holland and we are evaluating franchising opportunities in other countries. In addition, we will consider establishing Boots pharmacy chains in new countries where it makes economic sense to do so." Summer has seen the company expand to sell products in more European markets and in July Boots announced plans for a joint venture with Farmacevtföretagarna, a Swedish pharmacy, to create a chain of high street pharmacies throughout the Scandinavian country. 

Undoubtedly, strategic partnerships have provided a huge boost for the Boots brand, allowing it to penetrate new markets and increase revenues. Ultimately however, it all comes down to the customer, Gourlay says. "Retailers should remember that the customer must remain at the heart of everything they do. They should try to be as transparent as possible and deliver on promises made. Customers today are in fact one of a company's most powerful marketing assets as word-of-mouth endorsements have become even more important given the growth of online forums, blogging, review sites and things like that. We remain committed to making high quality healthcare more available and accessible, and although we are planning for consumer demand across Europe to remain subdued, we are confident about our prospects for the year ahead."

---

1849 John Boot opened a herbalist shop in Goose Gate, Nottingham.

1877 Jesse Boot took over control of the shop.

1884 Boots first pharmacist appointed

1892 Flagship Boots store opened at Pelham Street, Nottingham.

1935 No. 7 cosmetics launched by Boots.

1947 Boots established companies to carry out wholesale businesses in Australia, Canada, Pakistan and the Far East

1969 Boots launched Ibuprofen (Brufen) in the UK

1971 Company renamed The Boots Company Ltd. Acquisition of Crookes Laboratories Ltd by Boots

1987 Boots Opticians Ltd formed, with the acquisition of Clement Clarke Ltd and Curry and Paxton Ltd. Boots Opticians became the UK's second largest retail optics chain.

1990 Boots Contract Manufacturing and Boots Healthcare International established

1996 First Boots store in the Irish Republic opened, in Dublin

1997 Boots Advantage Card launched.

2006 Boots Group merged with Alliance UniChem to form Alliance Boots plc, an international pharmacy-health and beauty group.

---

Vintage British retailers still going strong...

Boots est. 1849

House of Fraser est.1849 The department store has 62 stores up and down the UK and reported a revenue of £596 million in 2008

Moss Bros est. 1851 The high street tailor and men's fashion retail chain reported revenues of £128.7 million last year.

John Lewis est. 1864 The department store, which also owns supermarket Waitrose, announced record sales during the Christmas period 2009, with weekly revenues of up £110 million. In March, all John Lewis staff were award a bonus worth 15 percent of their salaries.

Marks and Spencer est. 1884 The food and fashion retailer sits alongside Boots as one of only three UK brands to enjoy annual profits of over £1 billion. It is one of the leading retailers for online presence and social media marketing, recently announcing the launch of it m-commerce application.

Those that fell...

Woolworths est. 1909 The beloved high street retailer of almost everything from confectionary to entertainment goods to children's clothes fell into administration, eventually closing its doors for good at Christmas 2008, aged 99 years old.