The other day I was walking along Marylebone High Street, a prime retail position in central London. I noticed a strange thing. On one side of the road a Boots pharmacy had closed down. On the other side of the road, a small independent pharmacy was open and trading.
It was a curious thing to hear Boots’ announcement, on 9 July, to close stores and cut jobs. Strange because I thought during a health pandemic Boots might be the type of business that would succeed, particularly as it sells pharmaceuticals and their stores didn’t close during the peak of the crisis.
Here’s what I think is the problem: the mix of their pharmaceutical vs retail sales. In their 2019 annual report the proportion of their sales is:
Pharmacy – 34.8%
Retail – 65.2%
How often do you go to a Boots store for a pack of 59 pence paracetamol and come out also with a bottle of fragrance? Or some make-up or moisturizer? Personally, I have bought all my electric toothbrushes there because I know they have a great range and sometimes some ‘50% off’ discounts.
At the height of the health pandemic, although a Boots store might have been trading, a customer might have entered to buy some medicine, but certainly not browse the aisles for some retail therapy. Boots have very large floor spaces, all to support their retail sales. But all this was not a surprise to Boots – in 2019 they recognized costs of £70 million for a restructure, in their own words ‘a strategic decision to optimize the store portfolio resulting in consolidations and closure of around 200 stores over the next financial year’. In essence, downsize the stores to account for falling retail sales, most probably due to the switch to online and delivery.
Boots’ decision, in 2019, to restructure was justified during the pandemic. Boots could not just ‘pivot’ their business like many others have. Apart from pivot, here are some tips to ensure you can remain trading strongly in times like these:
Keep your fixed costs down, such as rent;
If you are unsure about a commitment (eg lease), keep the horizon short;
Make sure you are providing a service or good that people need or are willing to pay for;
Ensure there are no physical barriers preventing you from selling the goods or services that attract people to your brand;
Calculate the profitability of certain goods or services, cut them if they are a waste of your time
In summary, focus on what you do and do it well.