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CHICAGO -- A profound shift in the competitive landscape is creating new growth opportunities for retailers, especially drug stores, once hammered by their supercenter rivals, according to a new report from Information Resources, Inc. (IRI) here.
"As the supercenter format matures, competing retailer differentiation strategies have taken hold," noted 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."
According to the IRI Times & Trends report, "Channel Migration 2007: A New Cross-Channel Battleground Emerges," while consumers have steadily decreased their total number of shopping trips during the past five years -- consolidating trips 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.
Additionally, consumers aren't just shopping drug stores more often, but they're also spending more while they're there. The average drug store basket grew 6.9 percent from last year -- almost three times the total industry increase across all CPG outlets, IRI said.
The report spotlights several reasons for this performance. For example, health care-based trip-building strategies seem to be working. Such programs as Medicare Part D educational outreach to seniors and expansion of in-store health clinic availability are resulting in higher store traffic. These programs offer distinct new growth opportunities for manufacturers of products related to disease management, including food and beverages, along with prescription and over-the-counter remedies, via tie-in promotions and cross-marketing.
Drug store retailers have also poured money into marketing, merchandising, and private label development to establish their stores as beauty care destinations, IRI said.
The study found that drug stores captured a half-point share gain in total CPG spending this past year, a sizable increase given the fact that drug store total share is just 5.6 percent. This increase was the largest of any channel, including supercenters.
The channel either maintained or grew share across all CPG departments, according to the report, with a two-point share gain in health and beauty care products, mainly at the expense of the mass merchandise and grocery channels. However, drug stores also stole share from supercenters in categories such as internal analgesics and razor blades.
Another reason for drug stores' increasing strength is their growing appeal across consumer segments. The report found that the channel increased share of CPG spending across all major consumer lifestage segments, with the biggest gain among young singles and young couples -- segments in which the channel has historically been less developed.
The study also found that most major channels, including grocery stores, drug stores, and supercenters, experienced share increases among their heaviest shoppers that far surpassed their all-household share gains -- a result of efforts, including loyalty marketing and relevant assortment, aimed at protecting and growing share among core consumers
IRI also said small-format express stores are likely to be popular in the future, filling a market gap that exists today in meeting consumer needs on quick trips for fresh foods and prepared meals.
The findings of this report are based on insights from the IRI Consumer Network panel. For more information on the report, visit http://us.infores.com/page/content_access?t=2&i=35.
IRI provides consumer, shopper, and retail market intelligence and insights for CPG, retail, and health care companies.