Business review: Clicks

The Clicks brand continued to prove resilient and defensive in constrained consumer spending markets which contributed to retail health and beauty sales increasing by 8.4%. The performance was driven by competitive pricing, product differentiation, convenience and new stores, which translated into market share gains in most core categories in Clicks.

Customer spending behaviour, changing shopping patterns and lockdown restrictions in the second half impacted the health and beauty sales performance for the year. Detail on the group’s response to Covid‑19 and the impact of the related lockdown is covered in the Managing the impact of Covid‑19 report.

Sales performance

Front shop health sales increased by 19.7%, with strong growth in the vitamins and supplements category as customers focused on preventative healthcare to boost their immunity levels in response to the Covid‑19 pandemic. This was supported by continued good sales in baby products and GNC. The baby category is strategically important in attracting new customers and grew market share from 17.0% to 19.7%.

Pharmacy reported sales growth of 3.2% owing mainly to the low incidence of colds and flu during winter due to the national lockdown. Social distancing, wearing masks for protection, working from home, school closures and restricted travel were all factors which limited the outbreak of the traditional flu season. Value growth in the pharmacy category was further suppressed by the continued commitment by Clicks to switching patients to lower-value generic medicines. Retail pharmacy market share declined slightly from 24.1% to 23.8% due mainly to consumers choosing to stay away from shopping malls and opting for home delivery of medicines which benefited independent pharmacies.

Beauty and personal care sales growth of 4.7% was also impacted by large numbers of South Africans working from home, the wearing of masks during lockdown, lack of social interaction as well as the restriction on sales of certain products considered to be non-essential during stage 5 of the national lockdown.

While restrictions were also imposed on general merchandise products in the early stages of lockdown, the category delivered good growth of 8.8%, benefiting from people working and staying at home which increased demand for household appliances. Clicks increased its share of the small electrical appliances market from 16.4% to 19.2%.

Maintaining value

Value is increasingly important to hard-pressed consumers in the deteriorating economic environment. Clicks strives to offer competitive everyday pricing and appealing promotions, with the chain being price competitive with all national retailers. Health and beauty markets are promotionally driven and in the past year promotional sales increased by 14.7%, accounting for 40.2% (2019: 38.4%) of turnover.

Value is also offered through the generous loyalty benefits of the ClubCard, with R504 million being returned to customers in cashback rewards in the past year and R2.2 billion over the past five years.

The brand is also committed to offering patients a lower-priced generic alternative to originator medicines in Clicks pharmacies to save customers money and extend their medical funding benefits. Generic medicines account for 56% (2019: 54%) of sales and 68% (2019: 66%) of pharmacy volume.

Differentiated product offer

Private label and exclusive brands offer differentiated ranges across all merchandise categories at competitive prices while increasing the appeal of the Clicks brand and enhancing margin. The international franchise brands, The Body Shop, GNC and Claire’s, further differentiate the Clicks offer.

Sales grew by 12.3%, supporting total sales growth and margin. The contribution of private label increased to 23% of total sales in Clicks, with front shop sales at 29.2% (2019: 29.1%) and pharmacy 8.6% (2019: 7.1%). Despite the disruptions in the second half, Clicks introduced 970 new private label products in the year.

The private label offering in Clicks is tiered, with the Pay Less brand being the entry point, Clicks being the mid-tier brand and Expert the higher tier. The Expert range was launched in dermatological skincare and was expanded into the hand sanitiser category during the Covid‑19 crisis.

As customers are becoming increasingly aware of the environmental impact of the products they consume, Clicks introduced the My Earth range of eco-friendly products, aligning to the group’s sustainability drive.