Alliance Boots’ strategic partnership with US pharmacy giant Walgreens is likely to herald a period of fundamental change for the retailer as it takes significant steps into the huge North American market.
With the US retail market so saturated it’s now relatively unusual to hear of UK brands taking steps there. But, says retail analyst Matthew Stych at Planet Retail, the market is an attractive one for the health and beauty retailer to enter.
The deal will result in Walgreens stocking some of Boots’ private label health and beauty products, which US consumers are reportedly keen to get their hands on - lines including its No 7 products are likely to prove popular.
US demographics make it attractive as well, Stych says. Not only is the population large, but it’s ageing – there are plenty of older people keen that need the services of chemists. At the same time there’s a growing younger population - also a key demographic for Boots because of demand for babycare lines - fuelled by immigration.
President Obama’s healthcare reforms will make it easier for people in lower income brackets to have access to healthcare, and pharmacy retailers will play a role in that – some services could be provided through pharmacists.
Plus compared to other countries, the US market is more open in many ways to Boots and its ilk. Stych says: “In Europe it is not possible for retailers own a chain of pharmacy stores, because a pharmacist has to own the store.”
The major US players in the pharmacy category are Walgreens, CVS and Rite Aid, and the market differs slightly to the UK – while Boots is a well-known health and beauty specialist, its US counterparts are more geared towards general merchandise, including toys and homewares.
While the link-up will take Alliance Boots a step closer to realising global potetneial, Stych pthinks it is unlikely that there will be Boots stores in the US or Walgreens stores in the UK. Neither brand has the strength in the other’s market that they do domestically.
The difficult decisions for the enlarged business will come if and when there is further international expansion and a decision must be made about which brand suits each country.
Alliance Boots in game-changing tie up with US giant Walgreens
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Alliance Boots: The attractions of the US pharmacy market