Boots’ success lies in keeping up with change

Alliance Boots’ double-digit growth in sales and trading profit is an achievement chairman and co-owner Stefano Pessina and his team will be proud of. That they managed it while weathering the worst economic crisis in two generations also shows what is still possible when the right building blocks are in place.

The retailer’s full-year figures came less than a week after Pessina and retail chief Alex Gourlay unveiled a painting of Jesse Boot, the Victorian entrepreneur who built the UK chemist, at the National Portrait Gallery.

It sits alongside the likes of Charles Darwin and engineer Robert Stephenson – a reminder of the stature of the Boots brand and its longevity.

The market Alliance Boots operates in has not suffered the scale of disruption that has hit many, more exposed, high street sectors. And there is little doubt that the group’s diversified business helps shield it from the worst effects of retail’s challenges.

But to see Boots’ continued success as a by-product of its circumstances would be to overlook the changes going on at the business. Last week I mentioned the similarities between the problems that plagued Clinton Cards and Game. At the heart of their malaise was the issue of relevance to the consumer and to a changing market.

A strength of Alliance Boots and other successful retailers has been to grasp the scale of the underlying factors that are driving change – such as globalisation and digitalisation – regardless of the severity of the economic conditions. Boots is focusing on both.

Although slow to join the etail party, Boots’ online sales are now growing strongly – click-and-collect accounted for over 45% of online orders in the year. In January the retailer began delivering from an automated logistics facility in Burton-on-Trent – a move Boots believes will allow it to continue to respond to evolving digital demands.

Pessina, meanwhile, has been forthright in his conviction the business will be truly global. Some of the increasing internationalisation will come from wholesale deals but revenues from the international health and beauty division rose 6.9% year on year to £965m, with an increase in its store numbers and expanding product sales in key markets such as the US.

The customers Jesse Boot once served may be unrecognisable to those interacting with Alliance Boots across its channels now, but the retailer’s biggest achievement is to have stayed true to its creator’s entrepreneurial spirit to keep pace with the unprecedented change all around it.