World economies are crashing. People aren’t traveling, and dealerships are practically giving away cars to bring in sales. These are the days of our lives. But people are still washing their hair, brushing their teeth, and taking showers, which means people are still shopping—but where? According to NACDS’s last publication of Advanced Monthly Retail Sales, traditional drugstores showed 2.2% growth this March over figures from the year before while sales in the overall retail sector were down 10.1%. Looks like we found our answer.
Although that growth is lower than it has been in previous years, it’s still a positive sign. It’s also an indication that when it comes to shopping, drugstores know what products consumers need to buy, and consumers know where to go to find what they need.
“Traditional drugstores, supermarkets, or mass merchants are selling things that most people consider to be necessities,” said Laura Miller, senior economist for NACDS. “You can cut back on lots of things but typically not shampoo, soap, or toothpaste.”
According to Walgreens’ Catherine Lindner, vice president of retail marketing, it’s not that shoppers are cutting out discretionary spending completely. Rather, it’s that most drugstores keep their discretionary spends in a price range consumers are comfortable with even in the depths of a recession.
“Consumers are still getting little treats, and we hear from consumers all the time that they may not be able to buy a new dress, but they can afford to buy a $6.99 lipstick or a new nail polish,” said Lindner.
According to Miller, what consumers initially cut back on when looking to tighten their budgets are the big-ticket items such as motor vehicles, furniture, or appliances. So if your store only offers discretionary items, you’re most likely being hit the hardest in a time when “back to basics” is no longer a catch phrase but a way of life.
Stand and deliver
Offering the essentials is important to pulling customers in, but how do you differentiate your store from all of the others that are most likely threatening to take away your marketshare? It’s simple: customer service.
Although the answer is simple, the approach is not. Does this mean shaking the hand of each customer that walks in? Not necessarily, but according to Jim Devine, president of Chain Drug Marketing Association (CDMA), an information sharing and buying group for small and independent retailers, knowing your customers is a good way to differentiate your single-site store from the industry giants. Twice a year, CDMA hosts a trade show (a virtual show in the fall and a live show in the spring) to bring together regional drug chains and drug wholesalers, independent pharmacies, specialty distributors, and buying groups to help members become more profitable and efficient. “We stress customer service because that’s the differentiation point between our typical member and a Walmart,” said Devine.
“If they can create that friendly atmosphere and a fair price, not maybe the lowest but a fair price, that’s where they’re beating the specialties and the Walmarts of the world,” he continued.
Private label goods are also hot-ticket items because although people can’t stop buying shampoo or pain medication, they don’t want to spend top dollar on them. But for smaller retailers and drugstores, buying private label items in bulk is less of an option as the credit crunch has taken effect. This is where purchasing groups like CDMA come into play.
CDMA developed a relationship with eight of the regional drug wholesalers serving smaller independents. “The main string that attaches us to these regional wholesalers is the CDMA private label program called Quality Choice,” said Devine. “With Quality Choice, we’re offering about 950 different SKUs that they can use as their private label for their independents that will compete with the larger wholesalers.”
The proper placement
Although there is something to be said for focusing on the essentials and ensuring customers are greeted with a friendly and well-educated staff, ease of shopping is equally important as businesspeople transition from work to home in the blink of an eye. But unlike Superman, they don’t have the ability to turn back time, so making each moment of their shopping experience efficient is a good way to ensure they’ll come back to you when they’re in that next time-crunch.
One way Walgreens is combining the focus on essentials with ease of shopping is its new Affordable Essentials program, which focuses on what consumers need to run their households. The program is part of a new store format the company is planning to implement throughout the rest of the year, paring down its product selection; highlighting essentials such as detergent, mouthwash, and skincare products; and emphasizing promotional items while grouping them together to make it easier for customers to find what they’re looking for. “We spend a lot of time focusing on consumers,” said Lindner. “They are at the heart of everything we do, and the moves we’re making are reflective of what consumers tells us they want in a Walgreens. We’re trying to make sure we have the items positioned in such a way that creates a solution for them at a great value.”
NACDS’s Miller said this kind of focus is something all retailers need to do to make sure they’re not losing touch with consumers. “Retailers need to focus on remaining competitive and having good offers on things that people perceive as essential,” she said.
“I’m talking about making sure that your business has the right product lines to keep customers coming in, that you work on retaining your customers and growing your customer base, and that you realize that all the stuff in your store can be bought at another store, so you do the best you can to attract customers with value for your money,” she continued.Front-end solution
CDMA is promoting a similar program called Everyday Essentials, which will consist of roughly 3,000 products that are both in high demand and difficult for smaller chains and independents to source, such as sewing materials, shoe care items, and hair care products. With its purchasing power and its 40,000-square-foot warehouse, the organization can provide its members the essentials in minimum quantities at the same low prices as the larger chains.“Our members aren’t making as much margin in pharmacy as they used to, so they’re looking for alternate ways to make that margin at the front end of the store,” said Devine. “We can call ourselves the front-end solution for our members because we’re putting out things that some of our members might never have thought to buy.”
The appeal of drugstores goes beyond the product offering, however. It also comes down to availability. Most drugstores are located in the heart of each community, at the crossroads of people’s busy lives.
“It’s not just that we offer the products you need,” said Walgreens’ Lindner. “It’s that we are a resource right in everyone’s neighborhood. At Main and Main, you’re going
to find us.”
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