Drug stores are winning consumers from supercenters, study finds

Drug Store News (Online)
August 3, 2007
By Adam Kraemer

CHICAGO - A report by Information Resources indicated that drug stores seem to be gaining back lost customers from the supercenters with which they’ve competed for years. The IRI study found that while consumers have steadily decreased their total number of shopping trips during the past five years—in response to high gas prices and a greater ability to get more of what they need in a single stop—drug stores have managed to increase trips. Further, consumers are not only visiting drug stores more often, they are spending more when they are there. The average drug store basket increased by 6.9 percent versus last year. “As the supercenter format matures, competing retailer differentiation strategies have taken hold,” said IRI Chief Marketing Officer Andrew Salzman. “We’re seeing remarkable gains within the drug store channel, as drug store retailers leverage core strengths in health and beauty to bring consumers into their stores and drive incremental purchases. The battle for consumer trips is in full swing as time constrained shoppers look to accomplish more in less time, and drug stores are clearly stepping up to the challenge.”

The report highlights a number of factors behind the success. Drug stores are implementing programs, such as Medicare Part D educational outreach to seniors and expansion of in-store health clinic availability, that are driving store traffic. Leading drug store retailers have also invested in marketing, merchandising and private label development to establish stores as beauty care destinations. “Drug stores’ ability to strengthen their position in health and beauty within this incredibly competitive marketplace illustrates the power of the right assortments and targeted marketing,” added Salzman. “Supercenters remain formidable competitors, but many retailers have now developed effective positioning strategies vis-Ã -vis supercenters that are enabling them to thrive.”

Other findings:

• There were large shifts at the consumer packaged goods category level, where the new cross-channel battles are played out; major swings in the drug store channel share occurred in ready-to-drink tea/coffee, hot cereal, shampoo, hair conditioner and toothpaste, for instance.
• Most major channels, including grocery stores, drug stores and supercenters, earned share increases among their heaviest shoppers that far surpassed their all-household share gains, a testament to including loyalty marketing and relevant assortment efforts, aimed at protecting and growing share among core consumers.
• Small-format, express stores will likely be the “movers and shakers” of the future, filling a market gap that exists today in addressing consumer needs on quick trips for fresh foods and prepared meals.