A small group of chain drug industry veterans met recently in Cleveland to discuss the lamentable state of innovative and creative merchandising in chain drug retailing these days.
The group, consisting of some dozen retailers, suppliers and association executives, concluded that a variety of factors — most notably industry consolidation and the tendency among retailers to formularize product and category decision-making — inhibited risk-taking and dramatically advanced the odds against the successful introduction of innovative new products at retail.
“Product selection has become too risky a proposition to be left in the hands of buyers or category managers,” one attendee said in a statement that reflected the thinking of the group. “It’s far safer to let statistics determine the fate of new items, even those of undisputed innovation.”
The group, speaking informally and off the record, did suggest a solution, or at the least, a method of simplifying the distribution of new products and categories to chain drug retailers. Specifically, the idea focused on streamlining the introduction into the United States of products formulated, created or developed outside this country’s borders. The proposed program, which would be implemented with the cooperation of senior chain drug retailers, a leading industry association and several industry consultants, hinges on developing a process wherein foreign products can be sanctioned for distribution in the U.S. by guiding product developers through a series of steps designed to speed and simplify the process.
Along the way, manufacturers and distributors would be exposed to America’s chain drug community, with the idea of vetting the most promising new products in advance of their formal introduction in this country. In this way, the group believes, distribution of these products at retail would become easier, while chain drug retailers would become more inclined to accept them.
In a wide-ranging discussion that filled half of a business day, the industry group spent much time bemoaning the sad state of innovative thinking in the chain drug industry of 2015. The participants specifically cited the size of America’s leading drug chains as inhibiting bold thinking in the acquisition and merchandising of new products. They cited the suppliers’ difficulty of cutting into or replacing planograms dominated by major suppliers as thwarting many attempts to introduce new items and categories, a roadblock that also tends to discourage the introduction of new categories, many of which didn’t exist as recently as five years ago.
Even the retailers in the group offered their view that retail companies operating in today’s hypercompetitive environment are more reluctant to risk the uncertainties of a new product than they were in a previous era, one in which regional drug chains encouraged — even demanded — the introduction of potentially successful new products.
In the end, the group, though stimulated by the prospect of devising a system to speed new items to market, left the meeting with the unanimous view that chain drug retailing had lost much of its entrepreneurial willingness to bring exciting merchandising ideas to their stores, preferring instead to rely on a formula based largely on their proven success in selling proven products to customers who had become accustomed to buying them.
Most of the group’s members, having spent a lifetime in chain drug retailing, clearly criticized an industry they believe has become too complacent and too reliant on a sales formula that was more-securely anchored to the past than to the future.
As one member of the group put it: “The industry and its various retailers have too much to lose today in the failure of a new product to perform. Equally obvious, it has become too difficult and time-consuming to evaluate new products — and too important a task to place into the hands of a buyer or category manager. So it’s all done by committee today, and the committees play it safe by relying too heavily on previously compiled data. Too often that data tells them to stick with what’s working and forgo a new product or category that would make it work even more effectively.”
At meeting’s end, the group determined to gather again in New York City next month to present their views to a group of senior retail executives and solicit their response. Should the retail group approve of the program, said one member, “we’ll begin to plan how to roll it out.”
In the best of all words, that rollout could result in the appearance of some innovative new products on chain drug store shelves within the next two years.