Inside This Issue - News
Regional drug chains manage to hold own
June 29th, 2009
NEW YORK – These are challenging times for regional drug chains. Operating in a market dominated by three megachains and a handful of national discounters and supermarkets, small and regional chains are facing more adversity than ever, company executives say.
According to the National Association of Chain Drug Stores, more than 90% of its members are classified as regional chains, meaning that they operate fewer than 250 pharmacies.
Many of these drug chains — key players in urban and rural markets — are holding their own against the national giants, but there is growing concern in some circles about how long these retailers will be able to continue to thrive.
Younger shoppers don’t have the loyalty to hometown players that their parents and grandparents did, executives at the nation’s regional chains say.
And, they note, with the nation mired in economic malaise, even the most loyal shopper has become willing to abandon the small drug chain if she can find the same products at a lower price elsewhere.
“The local advantage used to be big, but now we have to earn it,” says Mark Griffin, president and chief executive officer of Lewis Drugs, the 32-store chain that has been operating in South Dakota, Iowa and Minnesota for the past 67 years. “Because the population is so transient, there’s not as much loyalty now. New transplants in our markets have never heard of Lewis.”
Shifting demographics are also playing a part in the way shoppers look at homegrown chains. While older consumers who grew up with their local drug store chain still exhibit a great degree of loyalty, the next wave of community pharmacy patrons — shoppers in their 20s and 30s — have grown up in a market dominated by national chains and don’t have the same reverence for the local chain.
“We’re finding that younger shoppers do not seem to have the loyalty to any particular drug store or retailer in general,” Kinney Drugs vice president of marketing Jim Wuest says.
Complicating matters even more are the dramatic shifts in the relationship between the industry’s largest suppliers and the regionals’ merchandising executives.
More and more of the collaborative efforts between retailers and suppliers are focused on catering to a homogeneous national audience and rarely take into account regional differences, those at the regional chains say.
And some note that having regular face-to-face meetings with a supplier’s representative is quickly becoming a thing of the past.
“As the large suppliers enact a strategy of focusing primarily on ‘the big boys,’ we regionals have been relegated to communication by telemarketing — to being second-class citizens in some cases,” says Tony Civello, chairman, president and chief executive officer of Kerr Drug, the 91-store chain that operates across North Carolina.
“With the loss of personal attention and long-term relationships, we have lost a lot of our ability to negotiate. It has negatively affected the way we do business.
“The absence of a dedicated vendor rep is not a good thing.”