Pre-tax profit at Superdrug was up 16% last year off the back of £1.24 billion revenues. Retail Connections has picked out some of the key drivers of its success.
Health & beauty retailer Superdrug has reported a strong performance for 2017, driven by sales growth in all categories, an increase in its service proposition, and other customer-focused initiatives.
In filed accounts at Companies House for the 52 weeks ended 30 December 2017, the business detailed a pre-tax profit of £92.9 million, which was up 16% year on year, and revenue of £1.24 billion – itself a jump of 2.3%.
Like-for-like store sales were up by 2.5%, while 22 new UK stores opened in the period to further drive growth. Cosmetics, skincare, health & wellbeing, and pharmacy all saw an upturn in sales, while Superdrug.com reported a revenue hike of 30%.
Retail Connections has picked out five characteristics driving Superdrug’s growth, as many of its fellow UK high street mainstays – such as House of Fraser, Debenhams and Marks & Spencer – conversely start their store closure programmes and face a major battle for sales growth.
The right product mix
Put simply, Superdrug continues to roll out a product mix that suits its target customers.
It cited the introduction of new cosmetics ranges such as Revolution, a brand inspired by social media, as a key factor in its growth in this sector. Skincare sales were up by 10% year on year, with face mask ranges said to have appealed to the selfie generation.
2017 was the first year Superdrug sponsored ITV hit, Love Island, which reportedly boosted revenue in key areas including bronzing, makeup and hair styling, and the retailer’s commercial support for this increasingly popular and talked about show continues in 2018.
A successful loyalty card
When Superdrug launched its loyalty card back in 2011, analysts questioned how it would fair in relation to the seemingly all-conquering Boots Advantage Card. As it turns out, there’s room for more than one health & beauty loyalty card in people’s purses and wallets.
The membership programme continues to grow, with the proportion of sales from members up on the previous year, according to Superdrug. Double points offers are provided throughout the year, and members receive improved marketing communication and special deals not available to the wider customer base.
The retailer said the programme has increased in size by 25% over the last year, with nearly 12 million registered customers confirmed at the end of 2017.
Bridging the gap to services, loyalty members will also be offered the chance to sign up for a SIM-only mobile phone network, Superdrug Mobile, which holds no contract. Those who do take Superdrug up on the offer, which is run in partnership with Three, will apparently benefit from other special deals throughout the year.
Mobile is just one of a growing range of service-led propositions offered at Superdrug, which now claims to be the largest brow bar and nail bar operator in the UK.
Some 26 new Brow Bars and 27 new Nail Bars were added to stores in 2017, bringing the total number of these additional customer services to 284 and 56 respectively. Ten stores now provide ear piercing and seven stores offering waxing, too, as the retailer positions itself as a one-stop beauty shop for its target market.
Retail technology capability
Superdrug said its online development has been aided by improved website functionality, which includes a new mobile app, and increased delivery options for customers. The app was extended to shoppers in Sweden, Finland and Denmark, towards the end of last year.
Capital expenditure totalled £31 million in 2017, with the main investment on new store growth and refurbishments, but there was an uplift in spending on digital IT capability.
A forward-thinking parent company
The report of further retail technology spend comes as parent company AS Watson continues to ramp up its investment in IT.
For example, the group has changed the way it recruits and communicates with colleagues across the business, including using mobile apps for training to replace traditional learning. Across the organisation’s territories, each business’s social media platforms are run and managed by young colleagues, with the company saying it enables Superdrug staff to talk to customers – their peers – in a relatable way.
In December, AS Watson – which also owns Savers and The Perfume Shop – unveiled its first ever Technology Partnership Programme, with the aim of developing long-term tech supplier partnerships. The aim is to move away from short-term supplier partnerships that lack transparency, it said.
The first batch of tech partners chosen by AS Watson were Microsoft, EPAM, Ovolab, Rubikloud, Mtel and UST Global, covering eCommerce, store systems, data science, artificial intelligence, and data visualisation, and services. Additional companies in other fields will be asked to join the programme over time.
At the opening of a tech-heavy concept store in Hong Kong earlier this year, which includes the deployment of various mobile payment and scan & go technologies, AS Watson revealed that it wants to open 1,300 stores over the next year. Such a plan translates to one new store opened every seven hours.
It’s a standout target in a market not necessarily friendly to retailers with large store portfolios, but AS Watson – and evidently, Superdrug – believes such a move is catering for customer demand.
Peter Macnab, CEO of AS Watson health & beauty UK, which parents Superdrug, said: “This year we will continue to focus on offering customers the service and products they want, including our new Superdrug Mobile.
“Our strategy this year is to ensure we are offering customers everyday accessible health & beauty, giving them the beauty and health services they need in a vibrant and friendly store environment.”
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