Drugstores offer far more than pharmacies
Drugstores have taken on the look of large convenience stores.
RALEIGH NEWS & amp; OBSERVER
RALEIGH, N.C. -- CVS, Eckerd and Walgreens might bill themselves as pharmacies, but they don't want shoppers visiting only when they're sick.
Instead, pharmacies look an awful lot like convenience stores, selling everything from milk and eggs to makeup and household cleaning supplies.
The stores are getting bigger, too -- often in the 15,000-square-foot range now -- as pharmacy chains work to keep up with ever-growing competition and increasing pressure to boost sales.
"They're really mini-Wal-Marts," said Todd Hultquist, an independent grocery industry analyst. "The only thing they're not selling is gas now, and it's probably just a matter of time."
The changes are evident if you look at the weekly sales fliers, which heavily advertise the price of a gallon of milk and are a little less pronounced about the going rate for Advil Cold & amp; Sinus.
"We really do actively market the convenience aspect," Walgreens spokeswoman Carol Hively said. "What we found is more people are using prescriptions, and they often call them in on the way home from work. While they're there, they might as well pick up that gallon of milk."
Filling a gap
Pharmacies are smartly filling a gap between megaretailers such as Wal-Mart and the traditional convenience store, said Marshal Cohen, chief retail analyst for the NPD Group.
They also compete with grocery stores, department stores and even electronics stores such as Best Buy on items such as DVDs.
"People love the one-stop shop, and that was really what made Wal-Mart what Wal-Mart was," he said. "But if I run into a Wal-Mart for a gallon of milk, I'm committing to 20 minutes of time. It's just not worth it."
Drugstore chains are increasingly marketing to time-crunched consumers. "I really think it has to do with the work environment," said Ken Patterson, Kerr Drug's director of general merchandise. "The husband and wife both work, and they're doing a lot of smaller trips. People are dropping by the more convenient places for snacks or lunch."
Demand for prescription drugs is also rising, but with more retailers selling medicines, it's getting harder to maintain profit levels. That increases pharmacy retailers' need to find other ways to make money.
At Walgreens, items other than pharmacy products make up 36 percent of sales.
The situation has been further exacerbated as mass merchandisers such as Target and Wal-Mart have moved into the prescription drug arena, offering 4 prescriptions last year and other perks.
"For every dollar the pharmacy loses to the big retailers, the pharmacy is getting a dollar and a half from the big-box retailer when that customer runs in for milk or bread," Cohen said.
Why new grocery items?
And that explains why there's so many new grocery items pouring onto the shelves at drugstores.
"Our commitment to the category has probably doubled over the past few years," Patterson said. Raleigh-based Kerr has increased its selections of snack foods, microwaveable foods and beverages, he said.
"It used to be just little bags of peanuts and little bags of chips," he said. "Now we have an entire assortment of snack crackers, health bars and the microwaveable scenario encompasses a lot of things like Pop Tarts."
Profits from those kinds of items are helping the chains pay for new stores, even as larger retailers and the increase in competitors reduce their pharmacy sales.
It has become common for competing chains to take opposite corners of an intersection and compete head to head.
"You often see gas stations near each other like that," Walgreens spokeswoman Hively said. "The drugstores are looking for exactly the same kind of corner. We want a busy main intersection and the very corner location."
Expect the trend toward bigger stores and more grocery items to continue for pharmacies until it becomes unprofitable, said Cohen, the retail analyst.
"As long as they keep showing they can make money on these bigger platforms, they're going to keep pushing the envelope," he said.