Chief Executive Officer of listed retailer Clicks, David Kneale, hopes to take the group’s healthcare, wellness and pharmacy offering to more sites across southern Africa as part of his ambition to continue the brand’s expansion to 900 stores, all with an in-house pharmacy.
Kneale told a recent Gordon Institute of Business Science (GIBS) forum that Clicks’ in-store dispensaries could assist with the distribution, and eventually the prescription, of medication to public healthcare patients, alleviating pressure on government clinics and doctors.
Public and private healthcare
The 50-year old Clicks brand is a retail-led healthcare group, which includes brands such as GNC, The Body Shop, Claire's and Musica. Kneale, who has worked in retail for 42 years, was appointed chief executive officer of Clicks in 2006. He was previously chief commercial officer of health and beauty retailer; Boots Group plc in the United Kingdom.
Clicks is the largest retail pharmacy chain in South Africa, and has supply chain capability through it division United Pharmaceutical Distributors (UPD), the country’s leading full-range national pharmaceutical wholesaler.
“There is significant inequity in South Africa’s healthcare system,” Kneale said. 16% of population has access to world class private health care, while the other 84% relies entirely on the state, which is overburdened and under resourced.
“The question is how does government utilise more of the world class healthcare system, rather than trying to do it all themselves,” he asked.
Through a partnership with Clicks and the Department of Health, state patients are able to collect chronic medication from 200 Clicks locations countrywide, a total of 100 000 parcels per month. “We are open to the state using our facilities for patients to collect medication, which would take the pressure off clinics and genuinely utilise the private sector,” Kneale said.
“We want to see a bigger role for the pharmacy profession in healthcare,” he added, explaining that the number of new pharmacists qualifying every year is just above the replacement rate. He proposed further qualifications for pharmacists, which would enable them to prescribe essential drugs to in-store patients, removing the need for many patients to visit a clinic or doctor.
Kneale said the group was committed to working with all stakeholders to discover what could be done to enhance the pharmacy profession and increase the availability of health care professionals.
While it had taken “some time” to establish Clicks as a pharmacy brand in consumer’s minds, Dischem and Clicks now have a combined 40% of the local pharmacy market. “Independent pharmacies are morphing into the corporate sector, which is a function of the law having changed (in 2003).” Kneale said independent pharmacies wouldn’t disappear, but would probably end up with approximately 20% of market share, in line with global trends.
Clicks group strategy and current retail trends
South Africa’s health and beauty retail environment is a unique mix of developed and emerging market, Kneale said. The country’s middle class has continued to grow, and the rate of urbanisation is expected to reach 70% by 2030. “These factors all help formal retail as it becomes entrenched across income groups. Despite the difficult economy, the beauty market remains resilient, and health is a basic human need.”
70% of the group’s shares are held by international investors. The chain offers world class operating margins with capacity for organic growth, Kneale said. Investors view South Africa more positively compared to its emerging market peers in terms of governance and prospects, he added.
In order to succeed in the current retail environment, Kneale emphasised the need for a clear strategic vision, articulated in a straightforward manner throughout the organisation, without losing meaning along the way.
“Detail matters in retail. You have to be into the detail each and every day,” Kneale added.
Thirdly, it is essential to continue to learning and adapting: “We have tried to inculcate a culture of delivery and continuous improvement at Clicks, we can always do it better and you have to be prepared to adapt as things change.”
“Retail is 10% strategy and 90% execution. If you sweat the strategy too long and hard, you won’t get the execution right,” Kneale said.
Clicks has always positioned itself as a value retailer, negotiating hard with its suppliers. The development of a strong private label business, which is margin enhancing, and exclusive brands are also “enormously important as strategic differentiators,” he said.
21% of Click’s current sales are from its private label products, with a long-term goal to increase this to 30%.
Kneale explained the group was continuing to invest money in its online platform, including an app and ‘click and collect’ online convenience offering. There is significant scope for improvement on the Clicks mobile app, which would have to “add value in order to retain its place on people’s front screen.”
Kneale said in the near future, retailers would have to deliver convenience and value to consumers, as well as talking to them personally.
The Clicks Club Card loyalty programme, which is 20 years old and has 7,5 million active members, was an example of effective customer engagement, Kneale said. “The ability to engage gives us competitive advantage, and this is the real opportunity we can get from digital, big data and AI systems – the ability to personalise communications.”