Marketplace offers more than exhibitors peddling products. Education sessions are held each day addressing top-line industry issues prior to the start of retailer and supplier meetings. On Tuesday, approximately 50 retailers and manufacturers attended a conference discussing how retailers can increase sales of high-margin impulse purchases by better merchandising the checkout, pharmacy and photo areas of the store. Information was based on a study, Front-End Focus, that examined consumer behavior in 72 drugstores within four major chains. Executives from Time Distribution Services, a division of Time-Warner; MasterFoods USA, a division of Mars. Inc., and the Wm. Wrigley Jr. Co. conducted the study.
Now more than ever, front-end sales are becoming more important for retailers due to the rise in pharmacy sales, which offer low margins. And the ratio of pharmacy sales to front-end sales is tipping further in pharmacy’s favor. For 2004, pharmacy sales were 68 percent of overall drugstore sales compared with 58 percent in 1999. Pharmacy sales profit accounted for 33 percent of overall profit, whereas front-end items, such as general merchandise, snacks and beauty products, accounted for 62 percent of sales profit.
Drugstores, according to the study, have also lost shopper penetration and are realizing flat traffic growth. Other drugstore facts learned at the session discussed consumer habits. About 70 percent of people visit a certain drugstore based solely on convenience, whereas 10 percent visit a drugstore due to its product assortment. About 44 percent of customers bought only their prescriptions and then left the store. Drinks, magazines, gum and snacks are the highest impulse items, compared with cosmetics, which the study found are planned purchases 84 percent of the time. The study also found that one in six shoppers bought something at the checkout.
Only 17 percent of shoppers use a formal shopping list at a drugstore, leaving “many customers open to high stimuli” In turn, drugstores need to realize they can generate incremental sales with impulse purchases at the checkout, a prime location “where all shoppers can be exposed to effective impulse merchandising,” said Mike Fitzgerald of the Wm. Wrigley Jr. Co. “Everything sells better at the checkout.”
Ryan Broderick of MasterFoods USA left attendees with the message that retailers need to manage the checkout as a category and that drugstores in particular should refocus their front ends based on impulse items.