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Drug chains play to their strengths

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As the Christmas selling season begins, it’s becoming increasingly apparent that mass retailers are concerned about business. Not that they have nothing to offer their customers; rather, they have little to offer that’s exciting, new, different, compelling, or even mildly ­interesting.

That being the case, retailers are turning to other inducements to attract traffic: price (always a sound fallback position), extended hours (which include opening on Thanksgiving or extending Thanksgiving hours and, more commonly, opening earlier and remaining open later in the days and weeks following that holiday), and using promotional attractions to offset the absence of exciting new products.

The problem with all this is that retailers have begun duplicating each other’s efforts, with the result that retailing, this holiday, could well be afflicted by a sameness, one that defeats the idea of excitement that traditionally surrounds the holiday selling season.

Two weeks before Thanksgiving, stores were already displaying holiday merchandise in an effort to attract consumers who were either too preoccupied or too uninterested to begin shopping this far in advance of the Christmas holiday. Their efforts were hindered by the crazy weather that traditionally accompanies this most important of holidays. As November progressed, unseasonably mild temperatures were, overnight, replaced by unseasonably frigid readings, as a misplaced arctic air mass put most of the country in the deep freeze, which had the effect of keeping apparel sales in the deep freeze as well.

All of which brings up the promotional drug store’s position. The good news is that chain drug retailers are in a different business than other mass retailers as Christmas approaches. Apparel, groceries, electronics, home goods — these are not as critical to success for chain drug retailers as they are to, say, discount or dollar stores. Rather, drug chains remain anchored for sales in health and beauty care, and these categories are apparently holding their own thus far this holiday season.

Prescription drugs are certainly a healthy category, if still influenced by weather and the absence of a particularly strong flu season thus far.

Over-the-counter drugs continue as reliable staples, helped considerably by the presence of a pharmacy nearby. More tellingly, America’s three largest drug chains stand to benefit from a health care orientation that other mass retailers simply cannot duplicate.

Beauty care remains an issue for chain drug retailers, primarily because their competitors have significantly upgraded their offerings. Target, particularly, is now offering beauty assortments on a par with any retailer, while Walmart’s beauty offering is also more compelling than it has been. Contrast those offerings with the chain drug version and there’s no longer much separation, an unpleasant reality given that beauty remains a core chain drug category.

What all this means for America’s drug chains is unclear, except to say that chain drug retailing is beginning to separate itself from its competitors, primarily by playing to its strengths, while much of the competition still searches for its merchandise strengths.

Where traditionally the chain drug industry was seen as vulnerable in that some 70% of its sales come from prescription drugs, that imbalance is now emerging as a significant advantage. Contrast that imbalance with the fact that food and apparel account for well over half of Walmart’s sales and the chain drug pharmacy advantage emerges as one of the important elements that differentiate the chain drug store from other mass retailers.

The point of all this is that whatever pitfalls Christmas holds for the mass retailing community, drug chains appear less vulnerable than other retail segments. Drug chains are grounded in health and beauty merchandise, categories less susceptible to fluctuations in price, weather, store hours, seasonal norms and other nuances which often make or break the holiday for most retailers.

Put another way, all the effort drug chains have invested in rebranding themselves as health care retailers appears to be paying dividends, insofar as those dividends can be viewed as rendering them less vulnerable to variables that influence, for better or worse, every activity that affects the retail community.

In short, Christmas is coming — and chain drug retailing is not all that badly positioned to meet it.


ECRM_06-01-22


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