Michael Harvey
Managing director

19 years’ service

Executive director of New Clicks Holdings

Appointed managing director of Clicks in February 2005

Previously marketing director of Clicks; managing director of Discom

 

operational review

Clicks is a specialist health, beauty and lifestyle retailer attracting predominantly female consumers in the middle and upper income markets. The brand offers value for money in convenient and appealing store formats. Clicks has the largest retail pharmacy footprint in the country with over 125 in-store dispensaries.

Review of the year

Clicks continues to reap the benefits of a focused merchandise strategy and produced consistent sales growth through the year, with strong Christmas gifting sales and pleasing dispensary trading over the winter period.

The specialist merchandise categories of health and beauty both showed strong growth. Health, which includes scheduled medicines, grew by 19.0% and beauty by 15.6%.

The general merchandise category grew by 8.0%, which included an improved second half performance and solid growth in confectionery, homewares and electrical.

Total till transactions increased by 5% to R66.8 million as the brand attracted new shoppers, improved the shopping frequency of ClubCard holders and grew the average basket size by 9.5% to R70.

Blueprint, a store renewal programme, was introduced. This includes a new store look and layout which has been designed to reflect Clicks’ increasing specialisation in health and beauty. The design enhances the shopping experience, offers improved visual merchandising and convenience, and encourages impulse purchases.

The second component of Blueprint relates to achieving operational excellence. All processes and standards are being revised, along with the implementation of rigorous performance metrics and measures to improve customer service.

Clicks opened 20 new stores during the year, including the conversion of five Discom stores to the Clicks brand, bringing the national store base to 320.

The Clicks senior management team was strengthened with the external appointments of Du Toit Britz and Jessie Whitehouse to head the finance and human resources portfolios, while Henri van Wijk was appointed head of operations. Tom Villet was appointed head of distribution centres and logistics to align the distribution function with the needs of the trading brand.

The ClubCard loyalty programme remains a key promotional medium for Clicks. The programme has 2.2 million active members and the average basket size for these consumers is R94 compared to R45 for non-card holders.

Clicks extended the loyalty programme by introducing a credit card in partnership with FirstRand Bank in September 2006. The card attracted 29 000 customers in its first year, with total spend of R380 million, including R25 million at Clicks stores.

Despite further delays in the implementation of new dispensing fee regulations, Clicks continues to build a sustainable pharmacy business at the current pricing levels. Clicks has experienced strong dispensary sales growth, with prescription sales up 21.3% and OTC medicines growing by 25.1%.

Clicks opened a further 21 pharmacies during the year and now has 125 in-store pharmacies and 92 clinics.

A centralised patient database was activated to enable customers to access their patient records and details of prescription medication at any Clicks pharmacy countrywide. By year-end over 366 700 customer profiles had been converted.

The shortage of pharmacists remains an industry challenge. This has not only impacted the pace of the dispensary roll-out in Clicks but also increased professional staff costs.

In response to this challenge, Clicks has introduced an ‘employer of choice’ programme to attract and retain professional staff. We also offer an accredited training academy which has trained over 180 pharmacy assistants.

Market research showed 29% of South African consumers rated Clicks as the first choice for health and beauty products. Clicks pharmacies are the preferred choice for prescriptions and OTC products for 17% of consumers. Awareness of pharmacies inside Clicks stores increased from 34% to 40%.

Market share (%) 2007 2006
Retail pharmaceuticals * 9 n/a
Front shop health products ** 37 35
Beauty ** 25 25

* Size of retail pharmaceutical market supplied by IMS   ** AC Nielsen

Strategic focus for 2008

Fifteen new stores, all including dispensaries, will be opened in 2008. Dispensaries are planned for a further 15 to 25 existing stores, depending on the availability of pharmacists and licences. An aggressive store refurbishment programme will also be undertaken and Clicks will have 80 to 100 stores in the new Blueprint format by the end of the 2008 financial year.

Stock management remains a priority. Strategies have been developed to reduce stock levels while improving in-store availability.

Clicks plans to further entrench its health and beauty specialisation by expanding its range of fine fragrances and dermo-skin products to over 100 stores. Clicks has also extended its ethnic hair care range to all stores.

Private label and exclusive brands have attracted increasing demand as they offer better value to customers, while enhancing margins in Clicks. These ranges accounted for 15.1% of sales in the past year and Clicks plans to grow its private label portfolio in the forthcoming year, with a target of 17%.

The momentum built up over the past year is expected to continue and we are focused on delivering on our strategy and growing the business by achieving operational excellence.