Fung Global Retail & Technology attended the National Association of Chain Drug Store (NACDS) Total Store Expo (TSE) in Boston which ran from Saturday, August 6, to Tuesday, August 9. The annual trade show, the industry’s largest gathering, brought together 5,600 retailers and suppliers for four days of interactive discussions, presentations and exhibits. The event also connects a wide-range of retailers, not only drug store retailers.
We identified eight major themes in the chain drug store space. Below we outline these themes and provide details from the show.
1) Personalization: CVS Focused on Personalizing the Customer Experience
Personalization has always been important in retail, but for drug stores and pharmacies it is particularly relevant because they must constantly and consistently address individual needs, more so than in other areas of retail; it impacts health outcomes. CVS and Walgreens have mobile apps that provide personalization to the consumer at all times.
The three most common issues with prescription medications are overuse, underuse and misuse. Pharmacies often do not have the bandwidth to reach the entire customer base, so they rely on RxAnte’s predictive models to determine the population that will require intervention. Pharmacies can provide customers with more intimate experiences and loyalty.
2) Loyalty Programs: Drug Stores Uniquely Positioned
Because customers often return to the same pharmacies to fill their prescriptions, drug stores are in a unique position to capture customer loyalty. Walgreens, at the forefront of customer loyalty, is the first drug store to introduce digital coupons that can be clipped and redeemed in the store or digitally.
Meijer’s loyalty program, mPerks, allows personalization along with other features to deepen customer engagement. Through the program, Meijer designs different offers and discounts on certain brands and products based on the customer and it also serves as a digital wallet. We believe pharmacies will continue to invest heavily in loyalty programs to improve customer retention.
3) Omni-channel: A Seamless Customer Experience
The key to omni-channel sales is convenience for the customer. Walgreens has a strong omni-channel presence between its mobile app and telehealth options. The app allows customers to refill prescriptions. Bridging online and in-store shopping, Walgreens plans to launch a ship-to-store feature that will allow customers to ship products to any store, for free. The company has also partnered with Postmates which allows customers who order through the Postmates app to receive delivery within 30 minutes.
Retailers are increasingly focused on curbside pickup and we believe that they will be rolling this out throughout 2016 in an effort to increase convenience.
Omni-channel has been a focus for retailers for years, however, we believe only now are retailers starting to leverage the true nature of their digital and brick and mortar infrastructures to drive growth and improve customer experience.
4) Focus on Health: Significant Opportunity as US Population Increasingly Focused on Health and Wellness
Drug store retailers are focusing on health and wellness and the active lifestyle, especially Shopko. They claim their success here is due to the aging American population. Around 10,000 Americans turn 65 every day and 12,000 people become eligible for Medicare every day.
CVS is trying to empower customers to live a healthier life by making the right decisions about the products they buy and provide expert customer assistance.
To give the best care at home, Meijer is working with hospital outpatient pharmacies to help ensure patients continue to prioritize their health. We believe the focus on health will continue because the Silvers economy is growing, and Millennials and Gen Z are more health conscious and looking for healthier options.
5) Beauty: A Key Component of the Drug Store Experience
Drug stores are racing to become leading health and beauty destinations. Beauty is an important aspect of drug stores and many drug stores are growing this segment by incorporating it into their loyalty programs and private labels. Personalization and the in-store experience are key aspects of selling beauty products in drug stores.
Walgreens introduced new products, updated the beauty areas in its stores and created a new customer care model, which includes outfitting beauty sales representatives with tablets. Its beauty club—coming soon— will offer additional benefits and exclusive perks to members. There is also a big push for healthy, more natural beauty products to be available in drug stores.
6) In-store Experience: Technology to Drive Changes in Stores
Despite pushing digital integrations, drug store companies want the physical store to serve as the hub. As such, stores are integrating personalization; in-store personalized recommendations, omni-channel; buy-online, pick-up in-store and mobile apps.
Meijer is working on improving the customer experience by speeding up the checkout process by integrating mobile apps and mobile payment. Shopko’s stores operate as a “destination” and offer comprehensive products and services covering all major categories of goods. Walgreens foresees high-tech innovations, such as beacons and digital displays, will reinvent the store experience.
We believe retailers will continue to focus on improving the in-store experience to not only simplify and enhance the customer journey in the store, but also to create differentiation from online retailers.
7) Digital Marketing: Projected To Be Half of Advertising Spending by 2020
In the “Winning With Digital Insight” session, Wayne Duan, Director of Digital Commerce at Walgreens, and Soyoung Kwon and Todd Huseby, Partners at A.T. Kearney, dove into the key challenges of digital marketing. With $100 billion projected to be spent on advertising by 2020—50% of which will be spent on digital—retailers must determine how digital marketing fits into their strategies and how they can measure the true impact.
8) Marketplaces: Increased Transparency to Drive Increased Visibility for Consumers
Marketplaces are the fastest growing channel and the preferred channel for consumers.
We believe the concept of Marketplaces will continue to grow as consumers adopt them as their go-to place to begin their online shopping. In addition, we believe Marketplaces will become more transparent. We would not be surprised to see more drugstores moving to a marketplace model.
Read our full reports from the event here and here.
To read our preview of the event featuring 8 startups participating in Vision 2027 click here.
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