SWOT analysis: Holland & Barrett's omnichannel experience accelerates

Last month, the health food specialist also revealed plans to extend its click-and-collect nationwide.

Here we assess Holland & Barrett’s current business:

Strengths

Occupies a specialist niche – Holland & Barrett is the only major specialist chain operating within the supplements and health foods market and it has clearly differentiated itself from non-specialists such as the grocers through the breadth of its offer.

The retailer is owned by US-based NBTY, which has annual sales of around £2bn. This provides it with more advantageous buying terms and has also given it access to funds to expand the business and invest in its IT systems.

Profitability – As well as having achieved solid sales growth in recent years, Holland & Barrett is also one of the most profitable retailers in the UK. Its margins benefit from the retailer’s vertical integration, as it produces and repackages a large proportion of its own product offer.

Customer services – The retailer prides itself on the specialist knowledge of its sales staff. Backed by an extensive training programme, new staff are expected to develop into what it calls “wise owls” that are able to advise customers on a wide range of issues and who practice what they preach.

Investment in IT – As part of its efforts to modernise the business, Holland & Barrett has invested considerably in its IT systems in recent years. This has included a new POS till system that is integrated with the the store loyalty card and gives the retailer much more insight into its customers. Oracle is a major supplier to the business.

Weaknesses

Ecommerce – Holland & Barrett has failed to fully exploit the online channel, but has confirmed plans to roll-out its click-and-collect service across its entire UK store estate.

By June, the service had been introduced to around 40% of its stores. Online revenues account for a much lower proportion of overall sales than at many other retailers at less than 7% in 2014/15.

Old-fashioned image – Despite having undergone a transformation in recent years, Holland & Barrett is still perceived to have a somewhat old-fashioned image and has stepped up its marketing activity to address this.

Opportunities

International expansion – There is still perceived to be considerable potential to expand the Holland & Barrett brand into new markets. This has been highlighted by NBTY’s decisions to rebrand its stores in the Netherlands and Belgium as Holland & Barrett and change the name of the former NBTY Europe division to Holland & Barrett International. It is now focusing on a move into the Scandinavian markets. Europe is very much the focus for international development from 2016 following NBTY’s sale of its 380-strong Vitamin World retail business in the US at the beginning of the year.

Free From market – Holland & Barrett is aiming to become the UK’s largest retailer of Free From products through the introduction of a new More store format, which will be targeting consumers with food allergies and intolerances. With its heritage and market positioning, this is a natural market for the retailer to take the lead in.

Improvements to existing stores – There is also much more potential to improve its product offer within its existing stores, for instance through the further rollout of fresh food counters that will help it to broaden its target market. The retailer has also ventured into new product areas such as cosmetics and beauty products in order to appeal to a younger customer.

Click-and-collect and order in-store – The retailer was late into click-and-collect, only initiating trials at the end of 2014. Once the nationwide roll-out is complete, the retailer has indicated it will make a start on in-store ordering as “the final part of the omnichannel experience” according to director of projects, Ray Aldis.

Threats

Underperformance of parent company – Parent company NBTY has underperformed in recent years as trading in its domestic market has been adversely affected by negative publicity. It has sold off its 380-strong Vitamin World business in the US in 2016, which should help protect investment funds at Holland & Barrett, but has significantly impacted the scale of the business.

Competition – Battles in the health foods and supplements market have intensified in recent years, particularly from online-based specialists that are able to offer sharp prices and the convenience of home deliveries. It will be critical for Holland & Barrett to step up its focus on its multichannel business.

• This is an excerpt from Holland & Barrett’s profile on Retail Week Prospect, an intelligence service offering insight and analysis on the UK’s most innovative retailers.