Introduction
Drugstore retailers are facing an immense challenge: how to revitalize front-end sales in an environment in which consumers have more shopping alternatives than ever before.

With dollar growth rates of only 3.3% in total (and significantly less on a comparable store basis), front-end categories are performing below industry expectations. Many fear that the situation will become even more dire as the expansion of "value" retailers (supercenters, club, dollar) who offer low prices on name brands, continues unchecked.

To gain a better understanding of how retailers and manufacturers are responding to this challenge, Information Resources, Inc (IRI) and Chain Drug Review conducted an industry roundtable discussion, which revealed four major focus areas:

• Identify the most compelling positioning with consumers
• Integrate the pharmacy and front-end more effectively
• Increase total basket size
• Understand and influence in-store shopping behavior

IRI and Chain Drug Review then partnered in conducting a comprehensive, multi-part study of consumer attitudes and shopping behavior within drugstores and across competing channels to identify opportunities to protect and grow front-end sales in each of these four areas.

Data Sources

• InfoScan® Reviews: Sales Trends
• IRI Consumer Network®: Shopping Behavior Across Channels
• IRI RxPulse®: Rx , OTC and CPG Integrated Panel
• IRI MedProfiler® II: Attitudes & Behavior by Ailment Segment
• Sorensen Associates Exit Interviews: Store Experience
• Sorensen Associates PathTracker® Analysis: In-Store Behavior

Key Findings Summary

Key Findings

Drugstore Positioning: Solutions Providers
While 42% of consumers indicate that the primary reason they visit a drugstore is to pick up a prescription, a full 40% view the drugstore as their preferred location for a specific product (eg. hair care, skin care, greeting cards.) Drugstores deliver solutions addressing specific consumer needs.

Clearly, consumers have many alternative purchase locations for these products…..Why do they select the drug channel? Convenience is the overwhelming driver. However, drugstores are not viewed as convenience stores: Only one-quarter view drugstores as a "good place to grab a quick snack or beverage."

Source: Mail Survey of IRI RxPulse® Panelists

Integrating the Pharmacy and Front-End: Wellness Marketing
Wellness goes far beyond prescription and over-the-counter medications. It includes vitamins and supplements, food and beverages and exercise. Both retailers and manufacturers have an opportunity to broaden their role in consumers’ lives by building marketing and merchandising programs around total wellness needs.

IRI research shows that specific ailment segments, such as individuals with diabetes, osteoporosis or heartburn, spend significantly more in drugstores than the average consumer. As penetration of each ailment segment varies significantly across chains, retailers must first determine which segments offer high potential for their chain. Retailers can then determine what consumers in each high-potential ailment segment are purchasing and can develop a targeted wellness marketing program for each segment.

Increasing Basket Size: Protect & Grow Top Shoppers
As summarized in the chart below, a drugstore’s top shoppers -- the top one-third of customers based on front-end spending -- are immensely valuable to drugstore retailers. Many are in the store weekly, and most shop the store, rather than simply visiting one department.

To date, drugstores have been successful in maintaining share of top shopper spending, while lighter shoppers have shifted some spending to value channels.

Growing share among these top shoppers will be a significantly easier task than growing share among lighter shoppers– a majority of whom view drugstores as "expensive."

Retailers should invest in identifying what top shoppers are purchasing at their store as well as competing channels and develop marketing and merchandising initiatives designed to increasing top shoppers’ basket ring.

Sources: Mail Survey of IRI RxPulse® Panelists; IRI RxPulse® Custom Analysis, 26 weeks ending 3/16/03

In-Store Experience: Layout and Merchandising
Where are the heaviest traffic patterns in your store? Are you maximizing the shelf space along these primary paths? While roughly half of consumers (55%) on a recent drugstore trip indicated they purchased only what they had intended, the balance admitted that other products also caught their eye. Placing timely impulse items and secondary displays within these major traffic areas is likely to drive incremental sales.

Retailers also have an opportunity to better leverage "pull" marketing within drugstores to encourage more shopping throughout the store. For instance, drugstore retailers may consider borrowing some marketing elements from dollar stores, who have been successful in generating excitement with a dynamic product mix and unique deals: 80% of dollar store shoppers, versus only 40% of drugstore shoppers "like to walk up and down the aisles."

Sources: Mail Survey of IRI RxPulse® Panelists

Action Items
This study highlighted numerous opportunities for drugstore retailers and manufacturers to consider in efforts to grow front-end sales:

How to Learn More

Full Study Findings
For a full presentation of Understanding the Drugstore Consumer: Driving Front-End Sales, which contains a detailed analysis of sales trends in drugstores and competing channels, heavy vs. light drugstore and Rx shoppers, spending by ailment segment, and in-store shopping behavior, please contact your IRI client service representative. If you have questions regarding this document, please contact John McIndoe (john.mcindoe@infores.com).

IRI Products and Services
IRI offers several products and services that help retailers and manufacturers identify specific opportunities to increase front-end sales:

Consumer Network®: IRI’s consumer panel-based tracking system, consisting of over 70,000 US households and covering all major CPG channels, including supermarkets, drugstores, mass merchandisers, supercenters, dollar stores, club stores, and others

RxPulse®: Provides business insights into actual Rx and OTC purchase behavior, attitudes and preferences, based upon a panel of over 37,000 individuals; includes extensive treatment summaries, patient profiles by therapy area, concomitant use and brand switching

MedProfiler® II: A customizable package of analyses to help marketers better understand the purchase behavior of households segmented by certain medical conditions

AttitudeLink®: Links attitudinal survey responses among IRI’s Consumer Network® and RxPulse panelists with actual purchase behavior

Shopping Basket Analysis: Leverages purchase data collected via IRI’s Consumer Network® and RxPulse panels to identify the categories and brands in the shopping baskets of specific consumer segments, including high expenditure households

About IRI
Information Resources, Inc. (NASDAQ: IRIC) is a leading provider of UPC scanner- and panel-based business solutions to the consumer packaged goods and healthcare industries, offering services in the U.S., Europe and other international markets.

The Company supplies CPG and pharmaceutical manufacturers, retailers, and brokers with information and analysis critical to their sales, marketing, and supply chain operations. IRI provides services designed to deliver value through an enhanced understanding of the consumer to a majority of the Fortune 500 companies in the CPG industry. More information is available at www.infores.com.