NEW YORK — Topics from battling the economy’s headwinds to implementing the latest technological advances to targeting baby boomers emerged during a wide-ranging discussion of category management conducted here last month for Chain Drug Review.
The magazine brought together retailers and suppliers at New York City’s Carlton Hotel for an in-depth exploration of category management and its implications for the future of merchandising and manufacturing.
The retailers included Robert Santosuosso, vice president of merchandising at Katz Group Canada; Scott Porter, category manager for health and diabetes at Kerr Drug; Jason Corriveau, senior category manager for cosmetics at CVS/pharmacy; and Scott McCulloch, senior director of merchandising and category management at Duane Reade.
Representing the manufacturing community were Grace Tallon, senior vice president of beauty marketing at Kiss Products Inc., Rick McQuarrie, director of sales at Kiss; Mike Merna, director of shopper marketing at Pfizer Consumer Healthcare; Rick Kennedy, senior manager for shopper and category insights at Pfizer; Marv Morrison, vice president of sales at Alcon Laboratories Inc.; Mike McAvoy, head of sales for Alcon; Kate Sollecito, senior brand manager at Ansell Healthcare Ltd.; and Dane Furio, category director for oral care at GlaxoSmithKline PLC.
Moderating the panel discussion were Marc Greenberger and Tim Toohey, managing partners at Market Performance Group, and Chain Drug Review vice president and editorial director Jeffrey Woldt.
ECONOMY
While merchants and manufacturers have apparently gotten through the worst of the economic downturn, “it sure doesn’t feel that way,” said Market Performance Group managing partner Tim Toohey. Persistent 9% unemployment is weighing on consumer confidence, resulting in fewer shopping trips and smaller market baskets.
Duane Reade responded to the recession counterintuitively, said senior director of merchandising and category management Scott McCulloch, by adding stores and remodeling older units. The result has been more convenient, easier-to-shop stores.
The expansion of the consumables business has worked well for CVS/pharmacy, said senior category manager for cosmetics Jason Corriveau. Candy and chocolate are among the chain’s fastest-growing categories, he said, because they are “affordable luxuries” that consumers can buy and consume to feel good during tough times. Nail polish is another fast-growing category that has been positively impacted by economic challenges, as shoppers have shifted out of salons and into retail.
Kerr Drug category manager for health and diabetes Scott Porter said it’s important to focus on value — and from various perspectives. “Shoppers are becoming more and more savvy. Therefore, manufacturers and retailers alike need to provide more value. Price alone is no longer enough. In addition to special packs and bonus sizes, customers consider innovation and quality as value.”
Service is another vital component, said Robert Santosuosso, vice president of merchandising at Katz Group Canada, explaining that consumers will spend more for the value of a high service level. Also supporting Rexall is the proximity of its units to Canadians compared with the distance of still far-flung big boxes.
Another harmful effect of the sluggish economy is the shrinking middle class, which Mike McAvoy, head of sales for Alcon, said has helped sales at dollar stores. Alcon’s business is recession-resistant, he said, because demand for its products is driven by doctors’ recommendations. “There are people that you have coming into your store that are going to buy regardless of where the price is, because their doctors tell them, ‘This is what I want you to use.’ That presents a huge opportunity to take the eye care category in a different direction than it’s going right now.”
When the economy soured value seemed to be mostly about price, added Furio, with people looking for a really good deal. The concept of value has since evolved, he said. “A deal is still critically important — people are going out of their way to get coupons or to get a reduced price. Our findings indicate that almost 40% of adults and approximately 60% of children do not get professional dental care. We’re also finding that more efficacious premium products with multiple benefits are attracting people who are looking to avoid a big bill at the dentist’s office.”
People know they can’t be out of work so they need to take care of their health, noted Mike Merna, director of shopper marketing at Pfizer Consumer Healthcare. “So in some ways you could say that we’ve enjoyed some additional success because of this consumer base that really needs to make sure that they’re not missing a day of work. Providing solutions for them to help them take control of their health is really important.”
Alcon vice president of sales Marv Morrison said consumers had sought out bulk packages of eye care products for the savings per item, but now that money is so tight they’re favoring smaller sizes. “It’s a real interesting trend that’s going on. Assortment is going to be critical.”
The trend has led to a huge increase in the sale of 3-count condoms versus 40 counts, said Kate Sollecito, senior brand manager at Ansell Healthcare Ltd.
At the same time Ansell is seeking to expand the condom category through education about products including vibrating devices and lubricants. “It’s all about sexual wellness and overall health and well-being,” Sollecito said. Drug chains are better positioned to foster the redefinition of the category than mass merchandisers, she said. “People feel more comfortable going to the drug store and getting that kind of information.”
The new view of the category marks a dramatic change from when condoms were locked up, she added. Chain drug stores have excelled at expanding the category. They feel comfortable with the change because it’s about overall wellness. It’s not just prevention; it’s about having the best sex life that you can have — male or female. It’s not just about condoms for us anymore. Duane Reade was one of the first retailers to take our vibrating device — which is very discreetly packaged — and it’s doing well there.”
People are buying artificial nails for the same reason–to save money, said Rick McQuarrie, director of sales at Kiss Products Inc. “Rather than going out and paying $35 at a salon, they’re now going into a drug store and buying Kiss or Broadway Nails. These sales are being driven by innovation. Due to advances in technology, it’s not your mother’s press-on nails anymore. Nails are a very hot category now, which will continue into next year and beyond. It’s about having the innovation that motivates consumers and entices them to make a retail trip into your stores and increase the market basket.”
IN THE AISLES & ON THE SHELF
For GlaxoSmithKline’s (GSK’s) products in oral care and digestives, shelf arrangement is critical to fostering multiple purchases, said Dane Furio, category director for oral care. The right arrangement can help get people to adopt a complete oral care regimen including use of a rinse, toothpaste and floss.
In the artificial nail segment, too many brands can confuse the consumer, said Grace Tallon, senior vice president of beauty marketing at Kiss. Consumer education is a challenge for a pegged product such as Kiss nails, she noted. Some retailers have taken away selling space to put in signage but that means giving up sales and profits from that space. Tallon called for brainstorming with key vendors to discuss signage and education.
TECHNOLOGY & SOCIAL MEDIA
On the technology front, Pfizer Consumer is very engaged in trying to understand how consumers are using digital media to make purchases, Merna added. “We’re looking at how digital media play a role all along the purchase path. What happens in-store is definitely important. Everybody is playing around with QR codes. They certainly need to add value; they can’t just duplicate what’s already in the package.”
Kiss is trying out QR codes, but the consensus at technology conferences is that the codes are being used inappropriately and are “going to die pretty quickly if brands don’t make them meaningful to the consumer,” Tallon said.
Turning to social media, McCulloch said it is striking that over 750 million people are on Facebook and 50% of them log onto their accounts daily. “You can’t ignore that, you’ve got to take advantage of that somehow — and we do. We are on several social media platforms, including Facebook, Twitter and Foursquare. We have a dedicated team that publishes posts and tweets daily in a relevant and creative way. With bloggers being a big part of social media they continue to be an important part of our overall initiatives.”
Furio said some GSK brands have Facebook pages and a presence on Twitter. “The interesting thing about Facebook and all social media is the interaction which you never had before. GSK receives all sorts of feedback, positive and negative. We look for opportunities because it’s a dialogue, not a one-way conversation.”
Social media has definitely affected purchasing decisions, Merna said. All the research points to the importance of reviews in helping shoppers make decisions, less so from friends on Facebook than from trusted sources online, whether bloggers or webMD. “People now want more reviews than they did in the past, meaning that in the old days four or five reviews would be enough to convince them and now it’s twice that amount. They really want that information. So how we leverage that is going to be interesting going forward.
“I find it interesting that there are a lot of myths about technology, and it’s not just the younger people that are using it. The boomers are very engaged with technology, they have more income to actually spend toward it, so it’s a bit ‘age-nostic,’ if you will, depending on what type of tactic you’re taking, but I find it interesting how pervasive it is that we don’t spend as much time online as we are watching TV and half of the people are watching TV and online at the same time. So how do you connect all your communication with that? It’s pretty interesting.”
Tallon said Kiss had great success last year advertising discounts available at coupons.com. This year it just put coupons up on coupons.com with no investment in any media, and some 200,000 prints were downloaded in a month. “It’s definitely a sign the consumer is looking for the deal and she knows where to go. And when we know a retailer is running a special, whether it’s a BOGO 50 or something else, we’ll link it on Facebook with our offer and say, by the way, if you use this you get a better deal. And we’ve seen spikes specific to that retail activity. It makes the whole planning phase for marketing that much more important because you can deliver the value to the consumer as coming from both the manufacturer and the retailer.”
Furio said retail websites typically generate more traffic than the brand sites. “Working with our retail partners to gain visibility on their websites enables us to reach a much larger audience than we would with a branded page alone.”
Tallon said brand sites have lost importance with the advent of Facebook. “Because that’s where people are living now. So now your Facebook page is kind of a quasi website and people are just going to go to your website for really super detailed information or more purchase information. But, yes, the retailer sites are definitely getting the bulk of the traffic, so bringing that experience there would be beneficial for us all.”
McQuarrie said more research needs to be done to understand what a particular shopper is looking for on retail sites. “Is it just store location, price comparison, product features, or is it more? And does it vary by category? Because we all want to put the right information at their fingertips, but not too much, not too little, so what is that right amount?”
Furio added, “Research shows that approximately 94% of shoppers are doing research either online or on their mobile devices before entering the store, so there needs to be more than just information. We know that shopper interaction, regardless of the medium, varies by brand and category. There needs to be something a little more interesting than clicking to find locations and prices.”
“I’m comfortable with brick-and-mortar merchandising,” said Corriveau, but the Web is “another avenue and marketing vehicle that we need to take advantage of.” Consumers are spending more time researching products online, so the path to purchase is evolving.
Merna said one can’t help wondering if there’s a correlation between store trips decreasing and e-commerce increasing. Amazon’s stated intention to be able to offer same-day delivery is especially disconcerting for brick-and-mortar chains, he said. “When you can order your groceries in the morning and have them delivered in the afternoon, it’s a different world. I would be really concerned if I was a retailer competing against that.”
McCulloch said certain categories are more vulnerable to e-commerce than others, citing the success of diapers.com. “That spiked and everyone scrambled, trying to figure out what was going on. You can’t fight it, you’ve got to embrace it and go with it. It’s got to be part of your solution to the customer.”
Merna said the purpose of retail websites is to drive traffic to stores. “It’s less about e-commerce, and that’s reflected in our sales.” Internet sales of most health care products are low, maybe because consumers don’t want to buy them over the Web, “maybe because retailers haven’t really pushed it yet, and we haven’t really pushed it yet. It’s an extension store.”
McCulloch said retailers have to embrace e-commerce, “because it’s not going to go away.” Walgreens’ purchase of drugstore.com reflects that approach, he said.
Merna said he’s heard that excessive growth will result in retail space shrinking in the next five years. An e-commerce platform can offer 300,000 SKUs, compared to a store’s 20,000, noted McCulloch. “So if you think about it that way, you’re really expanding what you’re carrying without having to expand the store.
McAvoy said the beauty of e-commerce is the richness of the database. “It’s being able to go in there and figure out if somebody hasn’t purchased a category in a while, and why not, and how you can entice that person to come back either to the dot-com or to your brick-and-mortar outlet. It’s great to have that relationship and so much data in your hands that you can use to drive new businesses.”
McCulloch said, “The use of technology is here to stay, and we have to embrace it in some form or fashion.”
McQuarrie was struck by digital interaction with shoppers, whether on Facebook, YouTube or other media, and tying that to retailers and their websites. “It’s something that we’ve talked about, but I think we’re just scratching the surface.”
Merna said it’s interesting to watch other channels trying not to lose their edge. Store ambassadors are being placed in aisles, for example, and more iPads are being used by employees to help educate shoppers in stores. “So there are a lot of very interesting things that are just now being tested, where they’re trying to build that intimacy even in a larger space. Time will tell if that will be successful, but we’ve got to applaud the effort.”
Rick Kennedy, senior manager for shopper and category insights at Pfizer, said there is a chance to build market baskets by understanding specific shoppers. “They might spend a little bit more on something they feel will help them in the long run. But it takes a lot of work to understand what will motivate them. We really try to understand how we can help make it relevant to them and so that it’s unique to each retailer, too.”
Asked who the winners will be in the new retail environment, Porter said, “Whoever is quickest to react and adapt to the consumer and understand who their customer is. The channels are definitely blurring. Even with the high cost of gas, consumers are still visiting five or more different retail channels to meet their CPG needs. We retailers are fighting to maintain our traditional customer and compete for that new channel shopper.”
DRUG CHANNEL
The presence of pharmacists makes drug stores a prized source of health care information, said McAvoy. It’s important to reinforce that not only at the shelf but also in the circulars. There’s an opportunity with Alcon products to focus in circulars on how they help contact lens wearers and emphasize their overall health benefits instead of just price. “There’s an opportunity to expand the market basket, but you have to prove to consumers that this product is worth paying more for and trading up to. If they’re buying a lower-end solution and the doctor has asked them to try an Alcon product and they get to the shelf and it’s more expensive, they need to know why. I don’t think it’s always communicated, so it’s a huge opportunity.”
Merna said, “We try not to just sell a product, we try to develop a solution — for example, with pain relief. We put together platforms that have a variety of different pain solutions so that they could include Advil, a Thermacare heat wrap or glucosamine to help you get moving. It’s an overall solution. That’s really how you help to build a basket. The same holds true with nutritionals — it’s not just about selling multivitamins but the supplements that go along with them. That’s our approach. We try not just to be item vendors; it’s more about the overall solution for the category for that shopper.”
Drug chains can foster consumer education with beauty advisers who can “help somebody through that confusing array of new products that’s always showing up every month on the shelf. They really give the drug chain a leg up in helping her through that process.”
Furio agreed that the drug chain “has a unique opportunity. When people shop drug they have a different mind-set. They’re a little more likely to compare products, get educated and take their time. There is an opportunity to do different kinds of things that we may not be able to do in other classes of trade.”
McCulloch said beauty is unique because it’s not a self-service area. “It just can’t be — it’s really about that interaction.’’
NEW FORMATS
Santosuosso discussed the Katz Group’s “healthy living” stores, where the focus is on the individual’s health. “As you walk into the pharmacy there’s actually a healthy living adviser there who greets you and is able to talk to you about some different things before you even get to the section. It’s really a solution based more than anything else on giving the consumers more information, making them feel comfortable and slowing them down a bit so they’re not walking through the store strictly buying whatever they needed going in.”
The model can also work for derm and sun care products, he noted, because both pharmacists and beauty consultants can explain their formulations and benefits. Their combined input “works out pretty well,” he said.
Among the most dramatic changes in stores is the expansion of consumables. McCulloch noted that sushi, bananas, fruit and the juice bar are some of the top-selling products in Duane Reade’s new store at 40 Wall Street in Manhattan. “We are becoming more of a convenience store than just a drug store where you go get your prescriptions, and we’re finding out that’s what the consumers wanted and that’s what they needed. New York is a city of neighborhoods. Some have grocery stores and some have convenience stores, but generally we felt a miss in the grocery arena, especially with specialty foods. We’ve got a section called restaurant row which has some of the best sauces and other products from some New York area restaurants.
“We actually put a growler bar in one of our stores, and it was so successful we’ve expanded to other stores. We hoped that it would do well based on what the community wanted and what people asked for.”
At CVS/pharmacy, the idea of 7,000 homogeneous stores is a nonstarter, said Corriveau. Having grown through acquisition, the retailer is already “a chain of chains,” he said. But the company has also scrutinized the data from over a billion transactions “to understand what consumers want in each store.” The research has resulted in clusters such as the retailer’s urban stores with expanded selections of fresh food and convenience products. “While pharmacy and health care are always going to be our core competency, there is definitely an opportunity to continue to grow in the consumables arena, he said.”
Porter said Kerr Drug has seven stores that focus on clinical services, certified by the American Diabetes Association and approved for reimbursement for clinical services. “Our pharmacies are becoming more and more engaged in helping that consumer who’s not going to the physician’s office, who is self-medicating. “You want to be there to help assist them.
“So we’ve had clinical specialists deployable to our stores for more than a decade. Now we’re initiating a program to get all of our pharmacists out from behind the counter, making them available to share their clinical knowledge with consumers and also to serve as our very best salespersons. So, our goals are to streamline their work flow to give them time to interact, creating a huge win for both consumers and our company. We see this as a big opportunity.”
Suppliers view the evolution of the drug store format as a positive, said Furio. It’s a challenge, however, because shoppers can buy so many kinds of products in so many different channels now as well as online or even over their phones. “It’s more important now than ever to work closely together and leverage the information you have as retailers. You have to target your message now in a way you never had to for years.”
Furio said, “It’s going to have to be about the experience. Since product offering is often similar from one retailer to the next, retailers will have to differentiate themselves by creating a unique shopping experience that builds loyalty to their brand and keeps shoppers coming back. It has to be about more than the product offering.”
For suppliers, Tallon said the environment necessitates customized offerings. “We want to make sure we’re giving the retailer a product that’s going to provide the most productivity. So it truly is a retailer by retailer strategy.”
McAvoy praised drug chains for diversifying their mix while advising them to maintain their heritage as health care providers. “If I’m sick, I’m going to a drug store to talk to a pharmacist. It’s important to keep that health care message top of mind with the customer.”
Market Performance Group managing partner Marc Greenberger said, “You can’t be everything to everybody. Walmart learned that in a brutally difficult way over the last four years.”
Corriveau said suppliers should differentiate their offerings for CVS with distinct strategies for store groupings, such as West Coast outlets, urban formats and multicultural units. “When we have a conversation with suppliers, it shouldn’t always be about more SKUs, it should be about the right SKUs, the right mix.”
It’s also important to focus on top customers; it’s crucial to make the customer the filter for every merchandising decision, Corriveau added.
RETAILER/SUPPLIER RELATIONSHIP
Tallon challenged retailers to communicate their overall corporate strategy in any given category strategy so that suppliers can prepare their sales teams to come to merchandisers “with the things that you’re looking for, things that you might need.”
Corriveau said, “It’s all about collaboration, That’s what defines success in any relationship, it’s the level of collaboration you have. It starts with planning. We’ll go to wherever the supplier is and we’ll spend the day not just with the sales team but with the marketing team as well. And you would present ideas to us, we’ll give you feedback and then a month later we have another meeting. Eventually you lock in on the joint business planning. So you get defined goals, sales, margin, inventory, etc., and then you also have a structured plan. You’re trying to build that growth so that at the end of the day it’s growing not just our business but what’s right for the category and our customers as well.”
For a smaller regional chain such as Kerr an understanding by suppliers of its consumers enables the vendors “to speak to the customer through us,” Porter said. “It goes beyond product assortment. For the drug channel, our margins continue to shrink due to diminishing pharmacy reimbursement. In order to remain viable we need to continually focus on reducing our risk. Successful suppliers help us do this. Retailers and manufacturers need to work together to leverage a brand’s influence and use it to improve the shoppers’ experience in the store. By doing so, we should be able to increase footsteps and grow the size of the basket.”
Furio said retailer-supplier relations are in some ways better than ever. “It feels like maybe 10, 15 years ago it was more about the manufacturer selling to retailers but the tables have turned in a way where retailers are selling their needs to the manufacturer — for example, loyalty card programs, brand offerings, new item launches, etc. But also I think we can leverage each other’s information more than ever. Retailers understand their shoppers far better than we ever will and, as manufacturers, we have an interesting perspective on the retail environment.”
Merna commented, “Retailers are really smart these days. They have more information at their fingertips, they know the shopper, and they’re recruiting better and better talent every year, particularly from a marketing perspective. They have real marketers now that they maybe didn’t have 15 years ago, because they’ve got this brand equity that they need to protect.”
That makes it more important than ever for suppliers to bring their marketing staffs to retailers “to have people talking the same language. It is all about team — selling and collaboration, working together. You can’t get it done with just a salesperson or a merchandiser anymore. It has to be everyone. It’s insight, marketing and category management. It’s one big package.”
McAvoy said the salesperson can be in a “cocoon” and “not necessarily thinking about the bigger picture.”
Tallon called on retailers and suppliers with mutually supportive information to “share it.” Data can tell a supplier that “a particular category performs better in this cluster of stores and may warrant more space. There are so many possibilities with technology that would help all of us understand how the stores perform and what products to put in what store.”
Kennedy said over the past couple of years the retailer community has done a much better job communicating with suppliers. Manufacturers, for their part, have seen the importance of longer-term planning. “Because appearing in October of 2011 talking about 2012, that’s not soon enough.”
It’s also a duty of the supplier, he added, to help the retailer think outside the box. “Maybe nine out of 10 ideas will never materialize, but I think it’s important to have that discussion.”
On the marketing front, Merna said Pfizer’s two-year-old shopper marketing team partners with its shopper insights team “to combine our brand equities with retail equities. That means we talk to the shopper who is unique to that particular retailer. Because every shopper in every retail environment acts differently and is motivated differently. This gives us a way to really talk to them while they’re in shopping mode and customize it and personalize it.”
He said Pfizer is working on a couple of platforms a year ahead in order to test them with shoppers at top retailers, “so it’s vetted through the shoppers, and then we can still work on the creative and then we’ll test again with those shoppers. We really believe in the test-and-learn mentality.”
The strategy includes addressing the intersection of pharmacy and O-T-C needs, noted Kennedy. “They’re definitely treated a little bit differently under certain different regulations, but we’re trying to bring those a little bit closer together.”
Corriveau said CVS likes to see data from manufacturers, particularly from the ExtraCare database. The key is for suppliers to present objective data which can be used in an actionable fashion.
Furio said, “From a manufacturer’s perspective, information that delivers actionable insight is most important. There’s so much information, it’s incredible. But at some point we have to figure what it is you will do with it. We can all sit and look at slide after slide of information on who bought what and when they bought it and what the weather was like, but at some point we need to come up with some type of reaction — what are we’re going to do about that, how is that going to help me run my business?’’
CVS has 11 years of data from the ExtraCare customer rewards program, and its best partners are converting its insights into action, said Corriveau. Once it identifies shoppers of a particular category, he said, the question is how to target them and incent them to buy a complementary item at CVS.
Suppliers also seek input from retailers, Merna said. “We had a retailer at our headquarters and were sharing innovation that we’re going to get out for next year. Our desire would be to share as far in advance as possible if we feel comfortable we had the confidentiality and we could partner on that. I’ve been on many new product launches, and retailer input is invaluable from a size perspective and even for the concept and pricing. So, yes, we have to check in with the retailer and make sure we have the right proposition here. We’re almost always going to get good information to help us out.”
“It is about trust,” he added. “And in some cases it’s about agreements in writing — exclusivity for a certain number of months or whatever. There’s no silver bullet, but it’s something that we’re always thinking about.”
McAvoy said such agreements depend on the manufacturer, too, and the type of technology being discussed. When he worked for Gillette the company was great at bringing in retailers early, well before there was even a product name. “So by the time it got to launch time our work was done and it was just pretty much pushing the button and watching it go. Everything was thought of so far in advance that you didn’t have things falling through the crack at the last minute.”
McCulloch said, “The trust goes both ways.” A supplier can’t just roll out a product and expect it to sell itself, he said. So the vendor needs to share its strategy with retailers in advance. “We have great relationships with our vendors; some include us early on, and we have others that don’t come to us until they’re ready to ship. It really depends on that — not only the relationship between companies but probably more importantly the relationship between individuals within companies. And that doesn’t happen online.”
Regarding private label penetration, Merna said Pfizer welcomes the competition. Store brands challenge national brands to be better, he said. “It’s all about innovation. We just have to build our equity and innovate. It’s not one of those things you can fight, it’s here.”
Consumers want options, according to Morrison.
Toohey said, “There’s a perspective that says you have to have the right balance between branded and private label for the long-term health of the retail environment.”
For dollar stores, putting quality brands on shelves “brings confidence to the consumer who shops there. And it’s really up to the retailers’ judgment as to how to achieve that optimal balance. There certainly are retailers who would readily admit that they got the balance out of whack.”
Said Kennedy, “It goes back to aligning how the new product or innovation is aligned with the retailer’s objective. The need to balance private label growth with branding growth needs to be set up in those initial planning discussions. There has to be an agreement to build a brand first because everything is going to build off of that.
The relationship on both ends is very important, said Corriveau, because retailers may be attuned to trends that suppliers are missing. “It’s really reciprocal. You have the marketing might and all of that in foresight, but the retailer has a lot of that in real time too.
Private brand products have evolved away from being knock-offs, noted McCulloch. Product quality and packaging have turned some private label lines into premium brands, he said.
Tallon said suppliers and retailers should have relationships at multiple levels, including the executive level. Multilevel conversations can cover “how we’re going to do it, when are we going to do it, how we’re going to make it big.”
Greenberger said, “What I’m hearing now is that retailers today are a lot more willing to partner in a collaborative way but manufacturers are the ones who are holding back a little bit here.”
McAvoy said, “I don’t think it’s necessarily holding back because of the retailers. I think that a lot of it is your competition, too. That’s been a lot of the fear with the manufacturers — the last thing you want to do is have your competition find out what you’ve got coming. That’s not a good thing.’’
Regarding the increasing economic fragmentation of the public, Porter said retailers had to segment their mix appropriately, understand who their customer is, speak specifically to them “and not try to be all things to all people.”
Furio said, “One of our goals is to always keep innovating, keep driving category growth and meeting consumers’ needs. That’s the plan. Value means different things to different shoppers.”
Corriveau said retailers can effectively blend high-end and low-end products.
Merna agreed, saying retailers should have entry-level products along with upscale items “to make sure that that value is represented.”
Morrison said in the eye care space, private label products occupy the entry level “and then you move up to the premium products. They’re doing it through a high-low strategy.”
Kennedy said Pfizer is trying to “create proper opening price points with a tailored, specific offering that communicates to that shopper. But right now it’s been somewhat limited in terms of being able to offer two products that might serve the same need, one for low end and one for high end.”
National brand manufacturers are intensifying their efforts to maintain market share. This has forced them to place even more focus on innovation and line extensions to keep the consumer excited and engaged. In rural North Carolina, Porter said, “A customer is willing to sacrifice quality for a price point. They might go with the toothpaste that may not be the highest technology, but it’s 99 cents, and that fits within their paycheck.”
Sollecito said Ansell has introduced a nonlatex condom “and we’ve seen the shoppers are willing to spend more for that product because it’s about the experience and it’s not just about getting the job done. It is about having a more pleasurable experience. We don’t have the private label considerations — really there are none. But we do have the competition to consider, and we’ve really tried to kind of distinguish ourselves, to make ourselves different so that we are offering something unique.”
Furio noted that people like different flavors of Tums in different areas, and GSK will help retailers adjust their mix accordingly. “Matching assortment to shopper type has worked well for us. This is a more efficient way of putting our products on display and making them available to shoppers.”
Morrison said retailers have needed to scale back lens care a little bit and increase the general eye care offering because of the population suffering from dry eyes. “And, for the most part, they’ve done that. And that’s why the growth is coming to categories.”
The flip side, said McAvoy, is that people are wearing lenses longer into middle age. Also ethnic populations are wearing colored lenses for their cosmetic appeal. “Those are all opportunities to do more with solutions.”
Furio suggested that “one of the ways that manufacturers can address the needs of the aging population is to change packaging to make it easier to read.”
To that end Pfizer has started to make some changes in packaging, such as in its vitamins, where it’s calling out the ages for which different products are recommended, said Kennedy.
McCulloch pointed out that drug stores provide a lot of the products and services that the aging population needs.
Porter said that Kerr “definitely skews older. Down in North Carolina that’s our customer. We’re catering to the boomers, as the seniors and boomers are among the most loyal customers and most resistant to change.”
Kennedy said the highlight of the roundtable was “the willingness from the retailer community to collaborate. That’s a very positive feeling.”
Corriveau was struck by the increase in household penetration of dollar stores and the competitive risk they pose to the drug channel.
Tallon said she was intrigued about the possibility of bringing more consumer insights to retailers.
Merna wondered how to communicate value to shoppers outside of price points and coupons. “What can we do differently to make sure we are serving the needs of those value shoppers without just handing them a coupon. I’m going to go back and really think about what we’re putting out there, what are we communicating to that shopper.”
Greenberger said, “All of us in this industry are increasingly more interdependent on each other, both retailers and manufacturers. Now more than ever we have to continue to figure out how to collaborate better, and we need to do it in a way that is more efficient. We’ve got to step up our ability to get things done. We’ve got to put that into our mind-set, and we’ve got to stop with all the pettiness of item and price discussions in order to take it to another level so that we can start really driving the consumer to purchase our products in our stores.
“There’s nothing more than that. If we all keep our eyes on meeting the needs of our consumers and even exceeding their expectations, everyone — retailers and manufacturers alike — will win.’’
