Current economic pressures on chain drug retailers are intensifying — in addition to tremendous cost pressure on inventory, the cost of labor is up. All while labor shortages faced by many in the industry create additional operational challenges. At the same time, the shape of the prescription drug industry is changing, with emerging offerings like Cost Plus Drugs and Amazon Pharmacy that have the potential to erode traditional chain drug profit margins and take away online and in-store traffic. It’s not an easy time to be a chain drug retailer.

Tom Furphy

With significant budget required to support margin and labor pressures, the clear challenge becomes how a chain drug retailer focuses on continually adding customer value while keeping the cost of innovation low. With customers feeling some of the most intensive economic pressure of their lifetimes, it is imperative to bring them innovation that solves needs and saves money at the same time.

Enhancing your connection to shoppers

From a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis perspective, it’s most efficient to begin with identifying where you’re already winning and look to extend that success. Consider that, as a chain drug retailer, you have unique customer relationships that are rooted in solving certain needs for your customers. Whether they rely on you for prescription or over-the-counter meds, personal care, beauty, food or sundries, you are a solution provider to your customers.

Many of your customers have never been more stressed than they are today. They face a constant barrage of troubling news stories at home and globally, while also contending with higher prices everywhere thanks to the steepest inflation in decades. This is a perfect time for you to step up and help them reduce stress and lower expenses by offering ideas for recurring self-care regimens that deliver solutions, while providing a better value and less effort than traditional off-the-shelf purchases.

From a merchandising standpoint, you will want to educate your customers on the benefits of at-home health and self-care routines so they consider you as the best resource for solutions and products that serve their personal objectives. Perhaps your customers are in search of stress relief, a proactive ailment care routine, products that support their sustainability principles, or a complete anti-aging beauty regimen inclusive of vitamins and supplements. You can inspire your customers to discover products and activate routines that align with their personal goals, while you handle keeping your customers regularly stocked. They will be reassured that they’re getting a good price on the products, too, as you can offer modest manufacturer-funded discounts to reward your customers for their loyalty.

How auto-replenishment helps

Adopting an auto-replenishment solution in your e-commerce stack enables this to happen automatically for your customers, with no additional effort from you, while being funded by your brand partners. Everybody wins — your customers receive the products they need at a great price without the burden of remembering to shop, your brand partners strengthen customer loyalty through repeat purchases of their products, and you get the benefit of a recurring revenue stream and increased customer loyalty.

Auto-replenishment, most predominantly brought to market by Replenium, is a SaaS shopping platform that uses machine learning and intuitive customer-facing tools to automate routine and repeat shopping activities. Auto-replenishment saves customers precious time and money, while delivering a transformational recurring-revenue model for retailers and brands. Not to be confused with traditional product subscriptions, auto-replenishment powers the entire shopping basket and adjusts to the dynamic needs of the shopper, which delivers a completely new and sticky experience.

From initial need states to committed relationships

Like any other innovation, customer consideration should remain at the center. An improvement or offering in which customers ultimately do not find value, or those initiatives that have a significant barrier to entry, or a long return on value timeline, will not activate the quick innovation benefits that chain drug stores need today.

Self-care regimens, utilizing products across the store, come to life for your customers when powered by auto-replenishment. For example, a stress management routine may include supplements as well as bath products. Regimens for skin care, immune support, hair care and dozens of others can also be served in this way. A good program takes care of customers while prompting them to add items to their routines.

By helping customers meet their wellness needs through auto-replenishment, with ease and at a savings, retailers also create a natural extension opportunity to serve even more of the customers’ needs in additional product categories. A customer that previously would pick up prescriptions and shop for cosmetics now has a comfortable and proven path to expanding their wellness routines to include supplements, skin care, O-T-C meds — and is likely to eventually add products across the store, such as snacks, office supplies, beverages and more.

Putting their customers’ essential purchases on auto-replenishment and giving them savings for doing so, the program is instantly profitable for retailers who gain revenue and retention. Brands are fans, too. Recently, hundreds of brands from dozens of top manufacturers signed on to support auto-replenishment customer discounts and program support costs at one of the nation’s largest chain drug retailers to encourage and reward customer loyalty. As customers respond to this and the program grows, it will set a new standard for the channel that many leading retailers will look to emulate.

Tom Furphy is chief executive officer and managing director of Consumer Equity Partners.