US Drugstores Need to Build Bigger Baskets
June 13 2003
In the face of fierce competition from value retailers, drugstores need to get customers to buy more at the front-end [as opposed to the pharmacy] on each visit, according to a paper at the 2003 NACDS Marketplace Conference in San Diego this week, supported by research from Information Resources Inc.
IRI's North America Group President Ed Kuehnle and David Pinto, Editor of Chain Drug Review, presented delegates at the NACDS (National Association of Chain Drug Stores) Conference with the findings from a joint study entitled 'Understanding the Drugstore Consumer: Driving Front-End Sales'.
According to Kuehnle, drugstores have been successful in holding onto market share, but value retailers such as club, dollar and supercenters are encroaching rapidly. 'While competitive pressure is increasing, drugstores have clear strengths versus competing channels including convenient location and quick, easy trips'.
Key strategies identified by the research centre around the idea of turning convenience trips into larger shopping trips - but how to do this without losing the convenience? The main ideas are:
- Position Drugstores as Solutions Providers
Most consumers visit drugstores with a specific mission - fill a prescription, purchase shampoo, buy a greeting card. Consumers visit drugstores because they are convenient. However, they think of drugstores very differently to convenience stores.
- Integrate the Pharmacy and Front-End More Effectively
Deeper understanding of specific ailment segments is critical. Significant opportunity exists for drugstores to address consumers' needs with regard to a variety of categories, particularly 'total wellness' which encompasses prescriptions, OTC, and food
- Increase Total Basket Size: Protect and Grow Top Shoppers
Not surprisingly, heavy front-end shoppers remain the most valuable to drugstores. As a general rule, 20% of customers contribute 80% of sales; however, in many drug categories, a significantly smaller proportion of consumers account for the vast majority of sales. Growing business within this segment is the best way to grow market basket size.
- Convert Product Pick-up to Shopping
A high proportion of drugstore consumers go into the store, find the product they need and leave. Drugstores have the chance to expand these trips via modified store layout, sale signage, and product mix'.
IRI survey data suggests that drugstores have enjoyed stronger performance than the industry as a whole (including supermarkets and mass merchandisers, excluding Wal-Mart). Based on a survey of IRI's RxPulse(r) Patient Panelists, a full 40% of consumers visit because the drugstore is their preferred location for purchasing specific front-end products such as greeting cards, hair care, or skin care - almost as many as come in to fill a prescription (42%).
'Drug retailers, as well as manufacturers, have a tremendous opportunity to broaden their role in consumers' shopping choices by focusing on all elements of consumers' evolving lifestyles, particularly emerging wellness regimens', said Pinto. 'This research addresses many of the burning issues retailers face in building front-end sales, delivering compelling new ways of looking at consumer marketing, merchandising, product variety, and store layouts'.
The study utilized information gathered from a variety of sources including retail tracking data, household panel, mail survey and post-shopping consumer survey data, plus Sorensen Associate's through-store PathTracker(r) Analysis. Detailed study findings will be presented in a series of feature articles in Chain Drug Review (
www.chaindrugreview.com ) beginning later this summer. More information about IRI is available at
www.infores.com
All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.
