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Boots' cross-channel strengths becoming clear to Walgreens

Walgreens can learn from Boots' experience in providing order online/collect in-store services, as well as its successes in selling premium beauty brands and lunchtime snacks.

That is the view of Neil Saunders, CEO of retail research group Conlumino, who said this week that it is important Walgreens aims to become as much a destination for higher end, premium branded products in areas such as beauty, as it is a place to go for essentials and everyday items.

Evolving customer fulfilment and delivery options has helped boost sales for Boots in the UK, in recent years, and this is not going unnoticed by new parent company, Walgreens, which completed the acquisition of the UK-based operation at the start of 2015. This week's Q2 trading statement – covering the three months to 29 February 2016 – highlighted the impact Boots' order online/collect in-store service is having on the business.

Comparable pharmacy sales at Walgreens' international business, which mainly comprises Boots global operations, were up by 2.6% year on year in the second quarter, while like-for-like retail sales were up by 2.1%. Walgreens said that Boots UK's growth "reflects strong performances for its Order & Collect service, and for seasonal categories and the company's product brands".

Saunders commented: "Boots in the UK had a successful quarter helped by a focus on Christmas gifting and also the strong performance of the order online & collect from store service.

"Similar to Walgreens in the US, Boots in the UK has an extensive and localised store network which makes it a convenient option when it comes to picking up products purchased online. This, again, is something that the US operation can learn from and develop as the group looks to grow its omnichannel capabilities."

In addition to providing a forum for sharing best practice and new ideas the merger is delivering savings for the group, with synergies in the most recent quarter apparently saving the organisation around $329 million. The group said it remains on target for $1 billion of savings across this quarter.

"The successful integration of Boots Alliance and Walgreens has likely given the group confidence to pursue Rite Aid – the proposed acquisition of which was announced last October and approved by Rite Aid's stockholders in early February," Saunders added.

Walgreens said that the inclusion of Boots Alliance's sales for the full quarter provided a fillip to group revenue growth, which increased by just under 14%. Sales of key seasonal lines like flu, cold and cough medicines were down, but this drop in revenue was offset by a strong prescription performance.

"Although cold remedies pulled down front of store sales, we remain encouraged by the progress Walgreens is making in other parts of its retail offer," noted Saunders.

"As a local retailer with a solid network of well frequented stores, we have long since held the view that Walgreens has a major opportunity to sell more product to existing customers, as well as drawing in a wider audience for products outside of the pharmacy and wellness space."

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