Clicks business review

Value is increasingly important to hard-pressed consumers and Clicks strives to deliver on its ‘feel good, pay less’ customer promise.

Clicks delivered another resilient performance in overcoming mounting economic headwinds and slower consumer spending, while certain merchandise categories benefited from the opening up of the economy post Covid-19, contributing to retail sales increasing by 11.7%.

Competitive pricing, product differentiation, convenience, rewards and new stores continued to be the drivers of growth in Clicks.

Clicks played a major role in supporting the national Covid-19 vaccination programme. As the largest vaccination provider in the private sector, Clicks has administered 3.5 million vaccinations since the start of the programme in May 2021. At the height of the programme, Clicks operated over 500 vaccination sites nationally.

Clicks performance against objectives

 

Sales performance

Pharmacy sales, excluding vaccinations, increased by 7.7% in value and 9.1% in volume. In the reporting period Clicks administered 2.9 million vaccinations and saw a marked decline in the rate of vaccinations in the second half of the year. Clicks’ accessible, convenient and expanding pharmacy network contributed to an increase in the retail pharmacy market share to 23.7%.

Front shop health grew by 3.9% off the high base set in the Covid-19 impacted prior year, with double digit growth in the medicinal and sports supplements sub-categories. While the front shop health market share declined marginally by 10 basis points, share gains were recorded in sports supplements, footcare and sunscreen.

Baby accessories and toiletries similarly achieved double digit growth, with a particularly strong performance in baby hardware off a low base, driven by the Clicks Baby standalone stores and online offering.

The lifting of Covid-19 restrictions contributed to the recovery in the beauty and personal care category which grew by 13.1%. As social engagement increased and more South Africans returned to working from the office, colour cosmetics grew by 21% compared to a decline of 6% in the prior year. Clicks achieved strong market share gains in the beauty sub-categories of skincare, haircare and personal care.

General merchandise sales also rebounded as shopping activity normalised post Covid-19, with a strong recovery in the convenience offerings of beverages, impulse confectionery and snacks. Sales of small household appliances delivered double digit growth and the sub-category grew market share by 150 basis points to 18.6%.

Offering value

In the current constrained consumer spending environment, value is increasingly important and Clicks strives to deliver on its ‘feel good, pay less’ customer promise. The brand offers competitive everyday pricing and appealing promotions, with Clicks being price competitive with all national retailers. Health and beauty markets are promotionally driven and in the past year promotional sales increased by 8.5% to 42.3% (2021: 41.5%) of turnover.

Value is also offered through the generous loyalty benefits of the Clicks ClubCard, with R601 million being returned to customers in cashback rewards in the past year and R2.6 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 accounted for 58% (2021: 56%) of sales and 70% (2021: 69%) of pharmacy volume.

Extending convenience

Clicks expanded its footprint to 837 stores as it accelerated the store opening programme with 58 new stores. In the past three years, Clicks has opened 136 new stores. The brand continues to focus on convenience format stores which account for 75% of the store portfolio, with the balance being destination stores.

A further 52 pharmacies were opened, extending the national pharmacy presence to 673. The increasing convenience of the network is illustrated by the fact that 50% of the country’s population now live within 5.3 kilometres of a Clicks pharmacy, compared to 5.5 kilometres a year earlier.

The Clicks 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.

While online is expected to continue to gain momentum over the next decade, online sales have stabilised post Covid-19 and accounted for 1.3% of front shop sales in Clicks.

Engaging customers through personalisation

ClubCard is central to the Clicks personalised engagement strategy which enables the brand to use digital technology to personalise communications and offers for customers.

Active membership of the ClubCard programme increased by 500 000 to 9.7 million, with members accounting for 80.2% of sales in Clicks.

The Clicks mobile app has been downloaded by 3 million customers. The app incorporates a virtual ClubCard which allows customers to receive personalised offers, monitor reward points and cash back in real time, submit scripts and order repeat medication.

The ClubCard extends into other key customer markets, with the Baby Club membership at 440 000 and the Seniors Club at 1.4 million members.

Clicks was voted as the ‘coolest health and beauty brand’ in the Sunday Times GenNext awards, reflecting the choices of the next generation of shoppers. Clicks was also recognised in the Kantar BrandZ Top 30 Most Valuable South African Brands for best ‘experience’ and ‘function’, acknowledging Clicks’ superior customer experience and ability to offer a range of well-designed products and services.

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, enhancing margin and increasing consumer choice. The international franchise brands, The Body Shop and GNC, further differentiate the Clicks offer.

The contribution from private label at 24.2% of sales was marginally lower than the prior year owing mainly to the impact of exclusive beauty brands exiting the country. Private label comprises 29.6% of front shop sales and 10.2% of pharmacy sales.

The beauty offering has been further enhanced with the introduction of an elevated look and feel which has been piloted in the beauty halls in four flagship stores. Based on the positive customer response, the new look will be rolled out to further stores in the year ahead.

The standalone Clicks Baby stores are show rooms to stimulate online purchases. The fourth specialist baby store was opened in the Menlyn Park Shopping Centre in Pretoria shortly after the year end. These stores also offer a range of baby hardware, including prams, car seats and cots, and are supported by the online baby offering.

Growth plans for 2023

Clicks is committed to expanding its store footprint and has increased its long-term store opening target from the current 900 to 1 200 stores, with 40 to 50 stores and 40 to 50 pharmacies planned to open each year.

In the 2023 financial year, R477 million is planned for investment in the new stores and pharmacies. A further 60 stores will be refurbished or expanded to ensure the stores remain relevant and appealing, while the remaining four stores damaged in the civil unrest will also be restored.

Capital expenditure of R270 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.

The contribution of private label, exclusive and franchise brands to front shop sales is targeted to increase to 30.0% in 2023 as Clicks continues to innovate and introduce new products in line with market trends.

ClubCard membership is targeted to grow to 10 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.

Clicks performance against objectives