Clicks spreads in-store wings

CE David Kneales is confident about future expansion, saying the retailer's business model — of luring customer traffic with the dispensary, while “front shop sales” drove revenues — has been proven internationally. Clicks' business plan is roughly based on a sales mix of 30% from dispensing and 70% from general sales.

Sales are also largely unaffected by the consumer downturn, as beauty products — one of the main drivers for sales — were largely noncyclical, Kneales said. “We know that the model works. The turnover of stores with pharmacies grew more than twice that of stores without pharmacies,” he said.

And potential for future growth is strong.

The corporate pharmacy penetration in SA is 22% — well below the corporate pharmacy penetration of 62% in the US and 53% in the UK.

Kneales expected the local pharmacy profile to evolve over the next five years to a balance between corporate and independent pharmacies, which leaves the retailer with considerable scope for further roll-out.

Clicks' share of the total prescription market is due about 10%, or half of the corporate prescription market, with its most formidable competitor in the segment being Dischem.

The retailer hopes to eventually have pharmacies in all of its stores, which means scope for the roll-out of 200 pharmacies over the medium to long term.

The opening of the Hyde Park pharmacy is something of a victory. Roll-out had earlier been prevented by an exclusivity clause in the tenant's contract of the only other pharmacy which operates in the mall. The exclusivity arrangement was only recently excised when the tenant's contract was renewed.

Kneales said Clicks faced similar hurdles at some of its other stores, notably at the high end of the market Cavendish Square in Cape Town, where Clicks is prevented from introducing a pharmacy.

Source: Business Day

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