Lupin 2024

Drug chains respond to assault on model

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New formats are popping up throughout the chain drug industry, as retailers seek to overcome the sales malaise that has ensnared the industry this year.

To recapture lost momentum, chain drug retailers are testing new store sizes, new merchandise assortments, new product locations within stores and new store concepts, sometimes all at once.

It’s far too soon to tell if any of these new concepts are working, or, for that matter, if they are failing. Perhaps, as some industry people say, the issues are more complex than a new format can alleviate. Perhaps, say a few, they are too complex to respond to any physical change. Perhaps they constitute a momentary downturn, and sales will right themselves before too much more time has elapsed.

No matter. For the moment, sales — and, more significantly, customer traffic — have ­softened. Not all categories have been affected — and, more importantly, different drug chains are facing sales shortages in different categories. But solutions continue to evade even these early attempts at correction — and some negativists are claiming that the traditional drug store sales model may be in jeopardy.

cdr-filler-opinion-750That model is being assaulted by a variety of forces from a variety of retailers. Pharmacy, as most people know by now, has become more competitive, as mass retailers home in on a category that seems, for the moment, fair game for any enlightened retailer.

Beyond that, the entire range of health and beauty aids has become more competitive, with the result that past success no longer indicates future viability.

Even some core categories have shown precipitous sales declines. One obvious example is beauty care, which has become more fragmented as retailers across a broad spectrum have rushed into categories that appear to offer huge potential with minimum risks or investment.

Many of the health care categories are similarly affected, especially those with high brand recognition and identities. Most consumers today are closely familiar with the major brands recommended for treatment of such minor ailments as headaches, cough and cold ailments, and intestinal issues. Knowing the brands, they become easy targets for those retailers intent on turning that knowledge into purchases.

The short-term solution to this problem is to wait and see. Chain drug stores have been the outlets of choice for basic drug store merchandise for generations. During that time, they have repelled all challenges and deflected all challengers. There’s little reason to believe the outcome will be different this time.

On the other hand …

Suppose this time it’s different? Suppose the drug chains are really losing their grip on their basic customer, the woman, homemaker and shopper who has traditionally filled her daily H&BA needs at the local drug store?

That’s another story. Against that possibility, the rush to test alternate formats is not a hasty, ill-considered dash to stem the tide of lost sales. Rather, it is, in the nature of chain drug store retailing, a wise and timely move to counter the softening of sales before the issue becomes one that overtakes the industry, leaving drug chains unprepared to compete with something they never saw coming — or didn’t see in time.

So, as the chain drug industry prepares to gather in Arizona for the 2017 NACDS Annual Meeting, these new formats deserve a closer look, not only for what they are attempting but, more importantly, for how they appear to be working — at least ­initially.


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