As nonessential stores have reopened, there have been some positive signs of consumer demand in physical formats. Despite this, Coresight Research
is also seeing sustained demand for e-commerce in core drug store categories, and we expect digital demand to remain elevated over the coming months.
Recent uptick in online shopping
Coresight Research’s weekly survey of U.S. consumers has seen recent upticks in buying health products and personal care products online. As of June 24, over one-quarter of U.S. consumers said they are currently buying health products online more than they used to, and one-third said they are currently buying personal care products more online. It is clear that consumers are not flocking back to stores for drug store essentials, and any further resurgence of the coronavirus is likely to support raised levels of online shopping.
Our surveys found elevated demand across age groups. According to our June 24 survey, consumers age 60 and over were the group most likely to be buying health products online more (at 30%) but the least likely to be buying personal care products online more (but at a still substantial 22%).
Long runway for growth
In the first quarter of 2020, online sales at health and personal care retailers grew by 22.9%, according to the Census Bureau; we expect growth to have strengthened in the second quarter in the context of lockdowns. However, e-commerce makes up a tiny share of total sector sales for health and personal care retailers: Even with the 2020 bump, the online channel captured less than 2% of sector sales in the first quarter, we estimate from Census Bureau data. This implies a long runway for growth and indicates that we will not necessarily see a sharp fall back from the recently elevated levels of digital adoption.
Drug store giants CVS Pharmacy and Walgreens both reported strong digital demand early in the crisis. In early April, Walgreens Boots Alliance pointed to “strong growth” in its online pharmacy and reported that over 1 million patients were using its Walgreens Express online prescription-ordering service. Walgreens offered free delivery of prescriptions and online purchases. Reporting on its quarter ended March 31, CVS management remarked that digital prescription refills were up by around 50%, and said that it had seen a double-digit increase in app usage.
We expect these and other companies to report further increases in digital adoption for subsequent quarters, which cover the peak of lockdowns in April and into May. Furthermore, with concerns over new COVID-19 outbreaks likely to continue for some time, we expect consumers to turn to digital channels and services to remove contact and friction in the shopping process. Contact-light retail will be in demand for some time, fueling not only online shopping but the use of apps for preordering products for collection, and for contactless payment, self-scan and self-checkout in store. Retailers must be prepared to serve this demand with a range of cross-channel services and digital tools.
Deborah Weinswig is founder and chief executive officer of Coresight Research.