Nonfoods Talk: The firing line

Some GM/HBC suppliers are eager to say that they do not target supermarkets as much as other retail outlets. I think they are missing something here.

By Seth Mendelson

I learned a few things at the annual NACDS conference in Palm Beach, Fla. in late April.

# 1. Drugstores are the new convenience stores. This may not be news to anybody, but it is now extremely clear to me that the three big drug chains (Walgreens, CVS and Rite-Aid) have successfully developed merchandising strategies that place a huge emphasis on such convenience items as candy, lottery tickets, milk and other beverages. The strategy appears to be to get as many consumers as possible to consider walking through their doors and these types of items can have a huge impact on store traffic.

Of course this makes total sense. The Big Three now account for about 18,000 storefronts scattered throughout the country and often they are placed within a few blocks of each other. So to make a difference in the consumers’ mind, each has embarked on a strategy to become a one-stop shopping experience. The thinking is that consumers can come for their prescriptions and get a beverage, candy bar or even a donut while they wait.

#2. I remained shocked at how some general merchandise and health and beauty care suppliers view the grocery store, especially when compared to the drugstore industry.

Over and over again, I was told by these suppliers that supermarkets are not in their first line of attack when it comes to getting their products on retail shelves. First, most say, they are going after the drugstore chains, followed by Wal-Mart and Target. Then— reluctantly it appears—these suppliers put supermarkets on their lists.

It is the same arguments I have heard for years. Many suppliers say that supermarkets are simply too difficult to do business with and charge hefty allowances to allow suppliers to get on their shelves. Others claim that supermarkets simply do not do a very good job with HBC items, particularly newer items, and it is not worth the effort.

Supermarkets still control more than 25% of HBC sales in mass market outlets and, according to some sources, are gaining market share as they add more pharmacies and expand their GM/HBC departments. Also, you may want to know, most of the GM/HBC buyers and executives I have spoken with in recent months have made it totally clear that they are more than eager to do business with any supplier that can bring incremental sales and profits to their stores.

So what is the problem here? My guess is that many of these suppliers do not want to venture too far away from what they already know. For some reason, the perception is that the drugstore channel has always been more open to new items and promotions. So suppliers, I assume, figure they might as well go after the lowest hanging fruit.

Of course, they should remember that the average consumer visits the supermarket three to five times a month more often than they go into a drugstore. And, if you want to add more fuel to the fire, they should also be aware of the fact that consumers are much more likely to make an impulse and incremental sale at the supermarket than they are at a drugstore.

#3. It should also be made clear that while NACDS was originally formed as a drugstore-based association, a number of leading supermarket chains have become members in recent years and attend both of the association’s key events—the annual show and the Marketplace show, slated for this month in San Diego.

That’s a very good sign for the grocery industry. Many supermarket retailers have realized the importance of the pharmacy to their overall operation and see NACDS as an organization that can help their navigate these waters.

Seth Mendelson can be reached at 212-979-4879 or at smendelson@groceryheadquarters.com.

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