Boots and Waitrose Plan Cross-sell Trial

In a recent report, Waitrose stated that, according to pre-trial research, customers “see real logic in the development and expect an offer that is beyond what either brand could deliver alone.”

The placement of Boots health care and well-being products within Waitrose stores would seem to make perfect sense for the supermarket operator, whose core strengths lie in high-quality food retailing. Boots has a vast amount of experience setting up concessions within the stores of third-party retailers (to the tune of more than 3,100 worldwide) like Target, CVS and Canada’s Shoppers Drug Mart.

The initiative will undoubtedly boost Waitrose’s credibility and drive traffic to this area of the store, with the potential for increased sales of Waitrose’s own ranges in lines that are not part of the deal. In a trial of Boots products at selected Sainsbury’s supermarkets earlier in the decade, sales of health and beauty items were reported to be up by around 10 percent.

Aside from the increase in wholesale sales, Boots will undoubtedly benefit from the increased exposure of its products to the attractive demographic that Waitrose’s customer base represents. Boots rejects the idea that the move will undermine its position as a destination store in its own right: rather, it believes it has identified a way of capturing sales from consumers who prefer a one-stop shopping destination and wouldn’t necessarily go too far out of their way to find Boots products.

According to the company, Boots recognizes “that some customers prefer to shop in this way so we would like to work with a partner to trial this offer. We want to be truly accessible and convenient for our customers.”

Drug store turns grocer?
The flip side of the proposed trial will see selected Boots stores selling a limited range of Waitrose-branded food products. The parties are remaining tight-lipped over what kinds of products will be stocked, but it appears that Boots will continue to stock its range of private label and branded convenience food and drink, such as sandwiches, chips and snack bars.

With Boots already in a fairly strong position when it comes to share of the lunchtime and impulse market, it seems likely that Waitrose will be asked to boost Boots’ offering in the area of evening meal solutions. Chilled ready meals, bagged salads and desserts could be high on the agenda.

If this proves to be the case, the initiative will find itself in a bruising encounter with heavyweight players in the convenient evening meals market like Marks & Spencer Simply Food, Tesco Metro/Express and Sainsbury’s Local. Product selection will be absolutely critical to the survival of this side of the initiative, and the parties may choose to focus on a particular niche of the market, like organic or special dietary needs, in order to differentiate the offering.

The trial could be a sign of serious intent on the part of Boots to break into the burgeoning convenience grocery market, which has become the key battleground for major U.K. grocers over the last decade. In the United States, of course, drug stores are an established convenience channel, frequently stocking everything from chilled food to alcohol and tobacco, with around 30 percent of sales derived from such lines.

Information sharing will be key
Boots regards the trials as “an important first step in developing a wider partnership with Waitrose to enhance the customer offering in both businesses.” Evidently, the two parties are keen to strike a mutually beneficial deal, but they will have much to discuss and agree upon ahead of next year’s trials. Product selection and in-store merchandising will be critical, of course, but perhaps more important for the longer term will be the level of exchange of information and category expertise between the two.

Even if the trials do not lead to a long-term partnership, both parties will need to feel they have been left in a better position to decide the direction in which to take their respective food and health and beauty businesses.