IRI's "Channel Migration 2007"

Aug. 2, 2007 -- For years, drugstores have struggled to protect and grow front-end sales in the face of intense price competition from supercenters. Those years of struggle may be over, according to the just published Times & Trends report by Information Resources, Inc., "Channel Migration 2007: A New Cross-Channel Battleground Emerges." The new report reveals a significant transformation in the competitive landscape that is opening new doors for retailers previously stifled by supercenter competition and new growth opportunities for consumer packaged goods (CPG) and healthcare manufacturers."As the supercenter format matures, competing retailer differentiation strategies have taken hold," said IRI Chief Marketing Officer Andrew Salzman. "We’re seeing remarkable gains within the drugstore channel, as drugstore retailers leverage core strengths in health and beauty to bring consumers into their stores and drive incremental purchases. The battle for consumer trips is in full swing as time constrained shoppers look to accomplish more in less time, and drugstores are clearly stepping up to the challenge."Consumers Shifting Their Shopping PatternsThe IRI study found that, while consumers have steadily decreased their total number of shopping trips during the past five years -- consolidating trips in response to high gas prices and a greater ability to get more of what they need in a single stop -- drugstores have managed to increase trips. Further, consumers are not only visiting drugstores more often, they are spending more when they are there. The average drugstore basket significantly increased by 6.9% versus last year, which is nearly three times the total industry increase across all CPG outlets. What are drugstores doing right? The report highlights a number of factors driving drugstore success. For instance, healthcare-based trip-building strategies appear to be working. Drugstores are implementing programs, such as Medicare Part D educational outreach to seniors and expansion of in-store health clinic availability, that are driving store traffic. These programs offer distinct new growth opportunities for manufacturers of products with disease management benefits, including food and beverages as well as prescription and over-the-counter remedies, through tie-in promotions and cross-marketing.Leading drugstore retailers have also invested in marketing, merchandising and private label development to establish stores as beauty care destinations. Gains Across Categories and Consumer SegmentsThe study shows that drugstores captured a half-point share gain in total CPG spending this past year -- a sizable increase considering the fact that drugstore total share is only 5.6%. This was the largest increase of any channel, including supercenters.According to the report, the channel either maintained or increased share across all CPG departments, with a full two-point share gain in health and beauty care products, largely at the expense of the mass merchandise and grocery channels. However, drugstores also pulled share from supercenters in select categories, such as internal analgesics and razor blades. "Drugstores' ability to strengthen their position in health and beauty within this incredibly competitive marketplace illustrates the power of the right assortments and targeted marketing," added Salzman. "Supercenters remain formidable competitors, but many retailers have now developed effective positioning strategies vis-a-vis supercenters that are enabling them to thrive."Drugstores' success can also be attributed to growing appeal across consumer segments. The report reflects that the channel increased share of CPG spending across all major consumer lifestage segments, with the largest gain among young singles and young couples -- segments in which the channel has historically been less developed.Other Study FindingsThe IRI study explores channel migration trends across major CPG channels in aggregate and across categories and consumer segments. Other key findings include:The dollar flow from grocery stores to supercenters evident during the past several years has moderated considerably; supercenters only gained 0.2 share points this past year, as grocers lost 0.2 share points.While total CPG share shifts were modest compared with historical averages, there were large shifts at the category level, where the new cross-channel battles are played out. Major swings in channel share occurred in ready-to-drink tea/coffee, hot cereal, shampoo, hair conditioner and toothpaste, for instance.Most major channels, including grocery stores, drugstores and supercenters, earned share increases among their heaviest shoppers that far surpassed their all-household share gains -- a testament to efforts, including loyalty marketing and relevant assortment, aimed at protecting and growing share among core consumers.Value channels, including supercenters, club stores and dollar stores, lost household penetration as consumers increasingly seek out shopping experiences that meet a range of needs beyond price. Small-format express stores will likely be the "movers and shakers" of the future, filling a market gap that exists today in addressing consumer needs on quick trips for fresh foods and prepared meals.About the ReportThe report is available from IRI, the leading global provider of consumer, shopper, and retail market intelligence and insights for the consumer packaged goods (CPG), retail and healthcare industries. The findings of this report are based on insights from the IRI Consumer Network panel.

P2PI MEMBERS

JOIN P2PI

You May Also Like

Consumers Continue Making Consumption Trade-Offs in May

P2PI Research: The Evolution of the BevAlc Shopper Journey