By Louis Winokur
It’s no secret that competition for shoppers is fierce in the rough and tumble world of retail. Over the past few years, drug stores have suffered the most. From 2014 to 2017, the channel lost 3.6 million households. Fewer buyers mean fewer trips, which results in fewer dollars – over $2.2 billion to be exact1.
Multiple factors are contributing to the declines. The ease of internet shopping is the biggest threat; many people purchase fill-in items online and get their prescriptions from an online pharmacy. In addition, the rise of beauty outlet stores such as Ulta is putting pressure on the beauty aisle.
The explosion of convenience stores has also had an impact. From 1995 to 2018, the number of stores grew by 53% to over 150,000 nationally2. Meanwhile, Walmart and other mass merchandise chains continue to fight for their fair share.
What to do? Throw in the towel?
Not at all. Drug retailers are a resilient bunch and have been finding ways to get shoppers back to the aisles. This includes using new strategies and tactics to take advantage of demographic and cultural shifts. Here’s what they are doing:
- Making it Easy to get Scripts
CVS just announced that it will offer a prescription delivery service where customers can order online and receive their items within one to two days3. Largely viewed as preventive strike against Amazon, this initiative is likely to quickly gain traction and spur sales of other over the counter cough/cold medications. Walgreens currently offers free shipping on prescription orders. They also provide refill reminder emails and text alerts, making it easy to simply click and re-order scripts and keep customers coming back.
- Offering Free Services
Many drug chains offer free flu shots during the cough and cold season. Walgreens is now providing free HIV testing today at a number of locations for National HIV Testing Day4. They also offer safe medication disposal kiosks at 1,000 stores so people can empty their medicine cabinets of expired scripts. Providing benefits like these to the community helps people on fixed incomes or those who are pressed for time. It also creates a feeling of goodwill that has a positive effect on customer loyalty.
- Providing Medical Treatment
The U.S. population is aging. According to the Pew Research Center, 10,000 Baby Boomers reach retirement age every day. That trend will continue until the year 2030.5 Because of this, there is an acute need for doctors, nurse practitioners and physician assistants. CVS has taken steps to fill the gap by opening 1,100 Minute Clinics in CVS and Target Stores.6 Walgreens has done the same, with 400 Take Care Clinics across the country. Walgreens also just announced it will partner with Humana to open two senior care centers in Kansas City7. Easy access to health care means shoppers can save a trip to the doctor and go directly to their local drug store for health and other needs.
- Rethinking Store Layouts
CVS took a courageous step to reposition itself as an advocate for healthy living. Their boldest move – dropping tobacco products in 2014 – was one of the reasons they lost some of their customer base. They made another major shift in 2017 by redesigning beauty sections in 2,000 stores and adding a “trend wall” to highlight new products8. They have also adjusted their product focus away from junk food and towards more healthy items. Walgreens is in the process of pilot-testing merchandising, format and beauty propositions in a number of stores. So far they have rolled out enhanced beauty sections in 2,900 stores9.
Recent fiscal reports indicate these strategies are working. Both CVS and Walgreens posted positive quarterly results, increasing revenues versus the same period one year ago.10,11 CVS has gained buyers in three consecutive quarters12. Walgreens is still fighting to retain buyers13; on the positive side, it has experienced sales growth in health and wellness and beauty categories for six consecutive quarters14.
So what does the future hold for drug retailers? There’s no doubt that the battle for customers will most certainly continue in-store and online. To win, drug retailers will need to blur the line between online and brick and mortar while providing convenience and unique services that are hard to find elsewhere.
1,12,13National Consumer Panel, calendar year & quarterly data 2014 to 2017
2http://www.convenience.org/Research/FactSheets/ScopeofIndustry/Documents/Convenience-Store-Count.pdf and http://www.convenience.org/Research/FactSheets/ScopeofIndustry/Pages/IndustryStoreCount.aspx
8https://cvshealth.com/newsroom/press-releases/cvs-pharmacy-unveils-enhanced-customer-experience-new-store-design and http://fortune.com/2017/05/02/cvs-stores/