Business review: Clicks

Clicks and UPD both occupy market-leading positions in South Africa and their operating margins rank in the upper quartile of global drugstores and pharmaceutical wholesalers.

Clicks logo

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.

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Health and beauty sales* % increase % contribution to sales
Pharmacy 3.2 29.0
Front shop health 19.7 26.0
Beauty and personal care 4.7 29.0
General merchandise 8.8 16.0
Total turnover 8.4 100.0
* Includes Clicks, The Body Shop, GNC and Claire’s.

“Strong health and beauty sales growth was driven by competitive pricing, product differentiation, convenience and new stores.”

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%.

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Market share (%) 2020 2019
     Retail pharmacy* 23.8 24.1
     Front shop health** 32.2 31.4
     Baby** 19.7 17.0
Beauty and personal care
     Skincare** 39.2 37.6
     Haircare** 30.3 29.6
     Personal care 18.2 18.0
General merchandise
     Small electrical appliances*** 19.2 16.4
* IQVIA (Private retail pharmacy S1-6; restated)
** AC Nielsen (restated)
*** GfK

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.

Extending convenience

Clicks opened 39 stores and expanded its footprint to 743. The brand’s focus on convenience format stores, which account for 74% of the store portfolio, proved highly beneficial during the Covid‑19 lockdown when consumers chose to shop closer to home at convenience and neighbourhood shopping centres and avoided major malls.

The pharmacy network was increased to 585 with the opening of 40 in-store pharmacies, with 50% of the country’s population now living within six kilometres of a Clicks pharmacy.

The Covid‑19 lockdown accelerated the growth in online purchases, with the online “store” now being the largest and fastest-growing store. Online sales in Clicks increased by 361% off a low base for the second half of the financial year. The investment made by Clicks in its online and digital capability over the past four years enabled the chain to manage the increased demand and ensure an efficient and convenient service to customers during lockdown.

The online store extends customer convenience and has enabled Clicks to enter product categories that are sold online only, including premium beauty, health mobility and baby hardware such as prams, car seats and cots.

“Clicks’ focus on convenience format stores proved highly beneficial during the Covid‑19 lockdown.”

Engaging customers through personalisation

ClubCard is an iconic loyalty programme and was again voted by customers as South Africa’s best programme in the annual South African Loyalty Awards in 2020.

ClubCard is central to the Clicks personalised engagement strategy which enables the brand to use digital technology to personalise communications with customers, and influence their shopping behaviour.

ClubCard active membership increased by over 500 000 to 8.6 million, despite the reduced footfall in stores in the second half of the year, with members accounting for 78.2% (2019: 77.6%) of sales in Clicks.

The Clicks mobile app has been downloaded by over 1.1 million customers. The app incorporates a virtual ClubCard which allows customers to receive personalised offers, monitor reward points and cashback in real time, submit scripts and order repeat medication. Personalised promotions were launched in March 2020 through myClubCard, enabling customers to select their own promotions on the app.

Two strategic partnerships were launched during the year. Engen South Africa was introduced as ClubCard’s exclusive fuel partner, enabling members to earn loyalty benefits when filling up at Engen’s network of over 1 000 fuel stations across South Africa.

eBucks, South Africa’s largest banking rewards programme, partnered with Clicks as their preferred health and beauty retailer, enabling eBucks members to earn up to 15% back on their spend in Clicks stores.

The ClubCard extends into other key customer markets, with the Baby Club membership at 458 000 and the Seniors Club at 1.2 million members.

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.

Growth plans for 2021

Clicks is committed to expanding its store footprint in South Africa to 900 over the long term, with a pharmacy in each store. In the new financial year the chain is again targeting to open 25 to 30 new stores and 30 to 35 pharmacies, while a further 45 stores will be refurbished or expanded to ensure the stores remain modern and appealing to customers. Customer convenience will be further enhanced with the expansion of the pharmacy delivery service from all stores during November 2020.

The contribution of private label, exclusive and franchise brands to front shop sales is targeted to increase to 30.2% in 2021 as Clicks continues to innovate and introduce new products in line with market trends.

ClubCard membership is targeted to grow to 9.0 million with the focus on migrating new and existing customers to the Clicks app and virtual ClubCard to accelerate the personalisation and digital engagement strategy.

Capital expenditure of R305 million will be invested in retail information technology systems and infrastructure in the new financial year to support the increased scale of the business by improving efficiencies in the distribution centres and across the supply chain.

Performance against objectives in 2020 and plans for 2021

Deliver a competitive and differentiated front shop product offer

Plans and targets for 2020
Achieved in 2020
Plans and targets for 2021

Increase front shop private label and exclusive brand sales to 29.5%

Front shop private label and exclusive sales 29.2% of total sales

Increase front shop private label and exclusive brand sales to 30.2%

Create a great customer experience

Plans and targets for 2020
Achieved in 2020
Plans and targets for 2021

Expand private label scheduled generic medicines range to 165 products

162 private label medicines

Expand private label medicines range to 188 products

Increase repeat prescription service to 50% of repeat scripts

52% of scripts now on repeat prescription service

Repeat prescription service at 53% of repeat scripts

Grow the retail footprint to enhance convenience

Plans and targets for 2020
Achieved in 2020
Plans and targets for 2021

Open 25 to 30 new Clicks stores

Net 39 stores opened 743 stores at year-end

Open 25 to 30 new Clicks stores

60 stores to be expanded or refurbished

53 stores expanded or refurbished+

45 stores to be expanded or refurbished+

Open 30 to 35 new pharmacies

Net 40 pharmacies opened 585 pharmacies at year-end

Open 30 to 35 new pharmacies

Improve personalised communication across multiple channels and personalised rewards

Launched myClubCard deals providing personalised rewards activated on the Clicks app

Personalisation of the Clicks website and mobile app

Drive customer loyalty through personalisation and rewards

Plans and targets for 2020
Achieved in 2020
Plans and targets for 2021

Grow Baby Club to 500 000 members

458 000 Baby Club members

Grow Baby Club to 505 000 members

Grow Seniors Club to 1.3 million members

1.2 million Seniors Club members

Grow Seniors Club to 1.35 million members

Enrol 1 million customers to virtual ClubCard

1.1 million customers enrolled to virtual ClubCard

Enrol 1.25 million customers to virtual ClubCard

Ensure supply chain excellence

Plans and targets for 2020
Achieved in 2020
Plans and targets for 2021

Centurion Distribution Centre phase 2 expansion to be completed in the 2020 financial year once planning approval has been received

Town planning delays mainly caused by lockdown have extended completion of the project into 2021+

Centurion Distribution Centre phase 2 expansion to be completed in the 2021 financial year+

Commission single pick retail facility within the Centurion Distribution Centre

Single pick facility fully operational

Maintain a motivated and skilled workforce

Plans and targets for 2020
Achieved in 2020
Plans and targets for 2021

320 pharmacy assistants to be enrolled

332 pharmacy assistants enrolled

440 pharmacy assistants to be enrolled

123 pharmacy bursary students

112 pharmacy bursary students

100 pharmacy bursary students

70 pharmacy internships

68 pharmacy internships

70 pharmacy internships

20 graduates to be enrolled on graduate development programme

8 graduates enrolled on graduate development programme+

10 graduates to be enrolled on graduate development programme+

+ Indicates metrics which have been impacted by the Covid‑19 lockdown.