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Boots is in a fix, and no mistake. One of the most trusted brands on the British high street is suffering the most turbulent period in its long history, beset by strategic U-turns, cost-cutting reviews, store closures and widespread redundancies.

The company's Nottingham headquarters is not a happy place to be.

Much of the problem stems from an over-ambitious diversification strategy employed by outgoing chief executive Steve Russell. His was a vision of an all-powerful retail brand that would fuse the health and beauty and lifestyle needs of modern consumers.

The strategy was duly delivered in the form of stand-alone Pure Beauty stores and a Wellbeing-branded offer including dentistry, chiropody and complementary health remedies.

But analysts agree that Boots took its eye off the ball and allowed its existing stores to become outdated, while competition from the grocery multiples eroded its market share. Even a joint venture trial with Sainsbury's, later disbanded, failed to stem a tide of customer dissatisfaction.

This is likely to mean the loss of as many as one-third of Boots' retail marketing jobs as part of cost savings that will eventually total £100m across the business.

So now it is back to basics. Wellbeing has been closed, Pure Beauty's expansion has been halted, and the focus is returning to the fundamental needs of the Boots customer: reliable service, trusted advice and innovative own-brand products.

With Asda chief operating officer and former marketing director Richard Baker being strongly tipped to replace Russell, and a streamlined marketing function being created by Ann Francke, there is a much-needed impression of a new era dawning.

But what can Boots do to return to its former glory and keep the supermarkets at bay? We asked Pete Champion, director of retail and branding specialist F1RST, and Mark Wickens, chairman and creative partner at Brandhouse, who has worked on M&S, Bhs and Littlewoods.

VITAL SIGNS
Health and beauty market share (%)
                2002      2001     2000     1999
               (est)
Boots            26.2      26.1     26.1     26.0
Tesco            14.3      13.7     13.0     12.3
Asda              7.6       7.0      6.6      6.4
Superdrug         7.0       7.0      6.8      6.5
Sainsbury's       7.0       7.0      7.1      7.1
Source: Verdict Analysis

DIAGNOSIS

Pete Champion

Was this the moment Boots lost its nerve and made the wrong decision at a crucial stage in its business?

In ten years' time, will people look back and criticise Boots' decision to back away from its wellbeing and health services to focus on its core pharmacy and product offer?

Perhaps its foray into health and wellbeing was undermined by its branding, rather than the idea itself being weak. Innovation is rarely easy. It will be unfortunate if Boots retrenches completely to its core offerings.

Pharmacy deregulation, supermarkets expanding their personal care ranges and digital photography all mean Boots will be under increasing pressure in its core areas. Further, shopping patterns and buying habits are changing.

Supermarket and 'on-the-go' retailing will continue to steal business from the high street. Competition will become more price-focused and margins will be reduced. Can Boots rely on these traditional sectors in the future?

Trailblazers make mistakes, but market leaders do not stop innovating.

For Boots to allow this potentially high-margin business to be lost is a mistake when its main alternative seems under significant threat.

Mark Wickens

Boots is not well. The multiples have nibbled at its products and prices, and a poorly executed commercial strategy resulted in a loss of focus and confusion in its brand.

The Boots name - and all it stands for - should provide a compelling reason to buy beyond price, but its price problem implies a more fundamental brand focus problem, exemplified by its strategy of treating its wellbeing services as a separate arm.

People trust Boots to be 'the nation's chemist' because it delivers this with the utmost authority and professional integrity.

But its failure to transfer its healthcare authority into other services has resulted in consumers seeing Boots behaving too much like a retailer, and not enough like a healthcare expert. And they buy from retailers largely on price.

Wellbeing is not the wrong business for Boots to be in, but it's a bigger concept than healthcare that hasn't yet reached the consumer. People don't go shopping for wellbeing; they want specific solutions to specific problems.

Boots must create a positive emotional consumer connection across all its offers in an intimate and authoritative retail environment.

TREATMENT

- Innovate and recreate leadership status within core areas.

- Find new profit streams and develop a profitable way of scaling up wellbeing services to become the business' future mainstay.

- Rediscover power of creating wonderful brands in a service and retail context as much as product.

- In short, think Sex In The City, not Midsomer Murders.

- Define the core thought by which Boots can deliver expertise in 'wellbeing' that can't be replicated by the multiples or specialists.

- Support this position through key expertise pillar brands that deliver real authority in a few areas.

- Create a more intimate and authoritative retail brand experience, recognising the need for differing levels of privacy and openness in different areas of the store.