The next few months could prove to be pivotal for the drugstore industry.
As reported, rising gasoline prices have prompted many consumers to shop closer to home, thus favoring neighborhood drugstores. At the same time, drugstore retailers are pumping more money into stores to update decor and selection to entice shoppers. The growth of mini medical clinics, now widespread among most chains, gives consumers more reasons to visit drugstores.
In addition to clinics, retailers are burnishing their images in beauty by adding upscale European lines and more service. The rewards of these efforts are starting to filter to the bottom line. Duane Reade, which is involved in a turnaround program, recently reported record growth in front-end sales. For the quarter ended July 1, Duane Reade’s front-end same-store sales rose 7.3 percent. In addition to the expansion of its upscale skin care selections, Duane Reade executives credit the firm’s loyalty program and updated store decor.
Floating dollars into stores is also expected to enhance sales at Brooks-Eckerd. The Jean Coutu Group announced last week it plans to spend $250 million in the U.S. to add in-store health clinics and more of its Dermo Cosmetics Centers. Brooks-Eckerd is expected to add 11 more Dermo Centers offering upscale skin care, such as Vichy and La Roche-Posay.
CVS also announced positive front-end sales and Walgreens reported impressive July sales. Both chains pointed to encouraging trends at the front end.
Drug chains have taken a backseat in growth in beauty to discounters and even alternative formats such as wholesale clubs. Many drugstore retailers experimented with foot-traffic draws, such as food. But the addition of mini medical clinics appears to finally be the perfect fit with pharmacy and wellness. With drug chains finding an identity, many executives hope the new positioning of pharmacies will have a halo effect on beauty. For some, the direction will continue to be the addition of apothecary-style bath and body products.
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As more retailers seek European and exclusive beauty lines, a new study underscores the importance of several established brand names.
Chains such as Walgreens, CVS and Target are beefing up proprietary lines as a way to offer products the competition doesn’t have. But CoreBrand, an independent global brand strategy and integrated communications firm based in Stamford, Conn., recently found that two leading beauty brands are among the most powerful in the business. Using its Corporate Brand Index, CoreBrand measured the reputation of 1,200 companies across 47 industries.
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Topping the list is L’Oréal USA, a company that really has been a player in the U.S. for less than 25 years. According to CoreBrand, the company has made steady gains in its brand power ranking, increasing 20 percent over the last three years, which lifted its ranking 10 points.
Ranking fourth is another dominant beauty player and a competitor of L’Oréal in many categories: Procter & Gamble. While P&G is a formidable brand in numerous categories, its rank in beauty is rising — up five points in the past three years — because of efforts to tie product brands with the P&G name. “This gain is more impressive than it would first appear because it is often more difficult for industry leaders to increase familiarity and favorability,” the CoreBrand report states. Rounding out the top four spots are Newell Rubbermaid and Clorox company.