First, we should all understand that while it may seem as if the bottom dropped out right after Christmas, in fact that is not the case. Over the last two decades, there has been a steady decline in the number of Americans who regularly shop drug stores.
Based on our How America Shops research (national quantified surveys we have conducted for 25 years), we first saw signs of the decline of the drug store shopper in the late 1990s. In 1996, eight in 10 American women (the core drug store shoppers) said they shopped their local drug store regularly, every three months.
But over 20 years, that number, what we call “share of shopper,” has dropped slowly but consistently to two-thirds of women in 2016.
This begs the question, What the heck happened? How did this slide occur (or go unnoticed for so long) in spite of all the macro health trends in the channel’s favor, and all the work chain drug retailers and their manufacturer partners have done to ensure the drug store experience remains relevant?
Among many things, drug store retailers have put considerable effort into making their stores more convenient to satisfy the needs of so-called time-starved shoppers. They added stores on every street corner, drive-through pharmacy windows, acute care clinics staffed by nurse practitioners, online prescription reordering, and on-the-go food and beverages. (Did I forget anything?)
They expanded health offerings — with new categories like probiotics and medical devices — and services, such as immunizations. They improved their beauty presentation, expanded private label programs, added online shopping. (Did I forget anything?)
So what happened? The answer is both simple and complicated. Lots of things happened: some obvious, some not so. In my mind, the least obvious, but most impactful, was that the expansion in drug store real estate over the last decade actually masked the declining shopper base. But there were other factors too.
There was the heavy focus on a convenience strategy (hence, all the new real estate). Drug store retailers were right to recognize they had an opportunity to deliver on convenience. However, as they focused more and more on being the convenient store for health and lots of other things, shoppers changed their view of convenience.
For many it is now about the value of their time, not just the actual time spent. As much as a store nearby is handy, if once in that store shoppers still have to wait on a line to get their prescription, wait for the nurse practitioner, wait for someone to unlock the fragrance case or wait to check out, then it’s not convenient. Being next door to the office or down the street from home only gets you part of the way there.
If a drive-through window only allows shoppers to pick up prescriptions when they have other needs for a sick child or family member, that’s not really convenient. It’s just aggravating. Having the option to shop online is essential, but when it takes five days to receive your order, or there are shipping charges that are so complicated it takes a Nobel Prize-winning mathematician to figure them out, that’s not just inconvenient, that’s a deal breaker.
Meantime, lots of other retailers deliver convenience. And no, I don’t just mean Amazon. Big boxes have added smaller formats with pharmacies and health and beauty aids (like Walmart’s Neighborhood Market and Target’s small formats) or easier-to-access pharmacies (like Costco where the pharmacy is right at the front of the store). Grocery retailers have taken a convenient and holistic approach to health, leveraging healthy food and adding dietitians, along with their pharmacservices. Dollar stores have expanded their mix of O-T-C and beauty products for low- and middle-income shoppers.
In the end, drug stores did not deliver convenience across every aspect of their experience, and so little by little they began to lose shoppers.
Then there are merchandise issues. Beauty for one. Most of the major drug chains and their manufacturer partners have worked hard to improve the beauty experience. But the people who shop drug stores most (and are a major asset) are older. The enhanced beauty departments are designed to bring younger beauty shoppers into the store, shoppers (Millennials) increasingly devoted to specialty stores like Ulta and Sephora for the experience or to mass merchandisers because they are convenient (not just because of the price, but because they are already there buying groceries), or online. So the beauty execution may look a lot better, but it misses the mark because it’s not designed to address the needs of the shopper who is in the store most often.
Then there’s O-T-C health. Again, a tremendous opportunity but one that has been diluted because of how hard it is for shoppers to find what they want amid the aisles of national and store brands. Lots of product but few solutions in categories that increasingly require advice.
In the end, shoppers still come to the drug store for the one or two things they have always come for, and leave the rest. Or just don’t come as often because they have many more options. All this finally revealed itself at the beginning of this year.
Last fall we were not surprised when shoppers in our How America Shops survey rated drug stores as mediocre (this, in spite of the fact that pharmacists remain one of the higher-rated professionals in the U.S.). Shoppers said drug stores were only average on delivering an experience worth the price, and only average on being transparent (open and honest), and only half of shoppers said their store “cared about them.”
This is a story of loss and longing. Longing for that safe, trusted health haven that American shoppers still value. And an amazing opportunity if not lost, then at risk of being squandered at a time when one of the few real growth areas in the U.S. is in health and wellness.
But all is not lost. There is so much innovation and so much need in the delivery of health care today. Americans are living longer with greater health concerns for themselves or for those they must care for. Younger Americans are more preventive, more involved in taking care of their own health, with different and diverse health needs, from stress relief to energy. This was all evident in our recent How America Shops survey “Redefining Wellness for All.”
There’s so much opportunity for drug store retailers in all this. And yet, for now, innovation is coming from other places: Uber for Health is testing home delivery of flu shots (given by a nurse practitioner, not the Uber driver); customized nutritional solutions are available from services like Wellpath and stores like Naturapathica; fitness retailers are adding healthy eating options in their stores, like Lorna Jane’s Nourish Café; ingestible healthy beauty products are growing, as are beauty services like GlamSquad and Dry Bar.
I now eagerly, desperately, wait to see who will deconstruct the age-old concept of retail heath care that remains today, one that most of us grew up with, and build a health care experience that American shoppers really want.
And here’s the final call to action for drug store retailers and those who sell through them: You need to move quickly. Your newest competition, highly aggressive hospital networks, are quickly expanding their urgent care facilities on every street corner. Could the addition of retail pharmacy be far behind?
Wendy Liebmann is chief executive officer and chief shopper of WSL Strategic Retail, a New York City-based global retail and shopper insights consultancy, and publisher of How America Shops. She can be contacted at firstname.lastname@example.org.