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.
Competitive pricing, product differentiation, convenience and new stores ensured that Clicks delivered another resilient and defensive performance in the pandemic-impacted trading environment of the past year, with health and beauty sales increasing by 8.3%.
Covid-19 continued to influence customer purchasing behaviour and shopping patterns as well as impacting the performance of certain product categories within Clicks.
Clicks has played a major role in supporting the national Covid-19 vaccination programme. After a slow start, the roll-out gained momentum and Clicks administered 596 180 vaccinations across 300 sites nationally by year-end. For further detail on the vaccination programme please refer to vaccinating the nation.
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| Health and beauty sales* | % increase | % contribution to sales |
| Pharmacy | 10.2 | 29.5 |
| Front shop health | 14.8 | 27.7 |
| Beauty and personal care | 4.5 | 27.9 |
| General merchandise | 1.0 | 14.9 |
| Total turnover | 8.3 | 100.0 |
| * | Includes Clicks, The Body Shop, GNC and Claire’s. |
“The convenience is illustrated by the fact that 50% of the country’s population now live within 5.5 kilometres of a Clicks pharmacy.”
Sales performance
Customers continued to focus on preventative healthcare to boost their immunity levels in response to Covid-19. The robust growth in the vitamins and supplements category contributed to front shop health sales increasing by 14.8%. Front shop health market share increased from 31.8% to 32.5%.
This was supported by continued good sales in baby products which increased 14.7%. The baby category is strategically important in attracting new customers and grew market share from 18.5% to 19.6%.
Pharmacy reported improved sales growth of 10.2%, bolstered by the national Covid-19 vaccination programme and strong growth in sales of over-the-counter medicines. Performance continued to be adversely impacted by the low incidence of colds and flu owing to social distancing and the wearing of masks for personal protection. Value growth in the pharmacy category was further suppressed by the continued commitment by Clicks to switching patients to lower-priced generic medicines.
Retail pharmacy market share declined slightly from 23.6% to 23.4% 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 4.5% was also impacted by the lack of social engagement, South Africans working from home and the compulsory wearing of masks, with colour cosmetics’ sales 6% lower.
The general merchandise category underperformed, with growth of only 1.0%. This was attributable to the high base effect from the previous year and the poor growth in confectionery, with impulse categories being negatively impacted by the lower frequency of customer store visits.
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| Market share (%) | 2021 | 2020 |
| Health | ||
| Retail pharmacy* | 23.4 | 23.6 |
| Front shop health** | 32.5 | 31.8 |
| Baby** | 19.6 | 18.5 |
| Beauty and personal care | ||
| Skincare** | 40.7 | 40.3 |
| Haircare** | 30.9 | 30.8 |
| Personal care | 18.8 | 18.0 |
| General merchandise | ||
| Small electrical appliances*** | 17.1 | 19.0 |
| * | IQVIA (Private retail pharmacy S1-6; restated). |
| ** | AC Nielsen (restated). |
| *** | GfK. |
Maintaining value
Value is increasingly important to hard-pressed consumers 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 11.7%, accounting for 41.5% (2020: 40.2%) of turnover.
Value is also offered through the generous loyalty benefits of the ClubCard, with R545 million being returned to customers in cashback rewards in the past year and R2.4 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% (2020: 56%) of sales and 69% (2020: 68%) of pharmacy volume.
Extending convenience
Clicks expanded its footprint to 782 with the opening of 39 stores as the brand continues to focus on convenience format stores, which account for 74% of the store portfolio.
The pharmacy network was increased to 621 as a further 36 pharmacies were opened. The convenience of the network is illustrated by the fact that 50% of the country’s population now live within 5.5 kilometres of a Clicks pharmacy.
Customer convenience is being further enhanced by installing digital self-service lockers in stores. This allows repeat prescription service customers to collect their pre-prepared medicine parcels when visiting a store using a secure digital code. Customers no longer wait for medicines to be dispensed and this allows them more time to browse in the front shop. This service is being piloted in a limited number of stores and the scalability of the project is currently being assessed.
The Covid-19 lockdown accelerated the growth in online purchases, with the online store growing by 47% and is the largest and fastest-growing store in the chain. However, as customers have returned to shopping in-store as lockdown restrictions have been relaxed, online growth slowed to 3% in the second half of the year.
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.
While online is expected to continue to gain momentum over the next decade, online currently only accounts for 1.4% 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 with customers and influence their shopping behaviour.
ClubCard was again voted by customers as South Africa’s best programme in the annual South African Loyalty Awards in 2021.
Active membership increased by 600 000 to 9.2 million, despite the reduced footfall in stores during the pandemic, with members accounting for 80.2% (2020: 78.2%) of sales in Clicks.
The Clicks mobile app has been downloaded by 2.3 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 464 000 and the Seniors Club at 1.3 million members.
“The online store extends customer convenience and has enabled Clicks to enter product categories that are sold online only.”
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.
Clicks follows a private label tiering strategy, with the PayLess brand being the entry point, Clicks being the mid-tier brand and Expert the higher tier.
The contribution from private label increased from 23.8% to 24.5% of total sales in Clicks, with front shop sales at 30.1% (2020: 29.2%) and pharmacy 9.7% (2020: 8.6%).
Online is integral to the differentiation strategy. The online store enables Clicks to offer the total range of products to customers, including baby hardware such as prams, car seats and cots. The purchase of baby accessories is expected to move increasingly online as is being experienced in several international markets. In anticipation of this changing consumer behaviour, Clicks is opening standalone Clicks Baby stores as showrooms to stimulate online purchases. The first specialist baby store was opened in the Gateway Shopping Centre in KwaZulu-Natal and the second store opened recently in the Mall of Africa in Gauteng. A further nine stores are planned.
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 R495 million will be invested in the store and pharmacy network as the chain is again targeting to open 25 to 30 new stores and 30 to 35 pharmacies. This is in addition to the 25 pharmacies to be acquired from Pick n Pay. A further 45 stores will be refurbished or expanded and the remaining stores damaged in the civil unrest will be restored.
The contribution of private label, exclusive and franchise brands to front shop sales is targeted to increase to 30.5% in 2022 as Clicks continues to innovate and introduce new products in line with market trends.
ClubCard membership is targeted to grow to 9.5 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 R277 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 2021 and plans for 2022
Deliver a competitive and differentiated front shop product offer
Plans and targets for 2021 |
Achieved in 2021 |
Plans and targets for 2022 |
|
Increase front shop private label and exclusive brand sales to 30.2% |
Front shop private label and exclusive sales 30.1% of total sales |
Increase front shop private label and exclusive brand sales to 30.5% |
Create a great customer experience
Plans and targets for 2021 |
Achieved in 2021 |
Plans and targets for 2022 |
|
Expand private label scheduled generic medicines range to 188 products |
185 private label medicines |
Expand private label medicines range to 205 products |
|
Increase repeat prescription service to 53% of repeat scripts |
51% 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 2021 |
Achieved in 2021 |
Plans and targets for 2022 |
|
Open 25 to 30 new Clicks stores |
Net 39 stores opened |
Open 25 to 30 new Clicks stores |
|
45 stores to be expanded or refurbished |
41 stores expanded or refurbished |
45 stores to be expanded or refurbished |
|
Open 30 to 35 new pharmacies |
Net 36 pharmacies opened |
Open 30 to 35 new pharmacies in addition to the 25 pharmacies acquired from Pick n Pay |
|
Personalisation of the Clicks website and mobile app |
Personalisation journey implemented |
Enhance personalisation of the Clicks website and mobile app |
Drive customer loyalty through personalisation and rewards
Plans and targets for 2021 |
Achieved in 2021 |
Plans and targets for 2022 |
|
Increase membership to 9.0 million |
9.2 million members |
Increase membership to 9.5 million |
|
Grow Baby Club to 505 000 members |
464 000 Baby Club members |
Grow Baby Club to 550 000 members |
|
Grow Seniors Club to 1.35 million members |
1.27 million Seniors Club members |
Grow Seniors Club to 1.35 million members |
|
Enrol 1.25 million customers to virtual ClubCard |
2.3 million customers enrolled to virtual ClubCard |
Enrol 2.7 million customers to virtual ClubCard |
Ensure supply chain excellence
Plans and targets for 2021 |
Achieved in 2021 |
Plans and targets for 2022 |
|
Centurion Distribution Centre phase 2 expansion to be completed in the 2021 financial year once planning approval has been received |
The build was delayed to 2022 due to municipal clearance delays |
Centurion Distribution Centre phase 2 expansion to be completed in the 2022 financial year |
Maintain a motivated and skilled workforce
Plans and targets for 2021 |
Achieved in 2021 |
Plans and targets for 2022 |
|
440 pharmacy assistants to be enrolled |
440 pharmacy assistants enrolled |
440 pharmacy assistants to be enrolled |
|
100 pharmacy bursary students |
100 pharmacy bursary students |
100 pharmacy bursary students |
|
70 pharmacy internships |
62 pharmacy internships |
70 pharmacy internships |
|
10 graduates to be enrolled on graduate development programme |
8 graduates enrolled on graduate development programme |
10 graduates to be enrolled on graduate development programme |