Pharmacy Retail Trends in US: A Comprehensive Overview

2. A Bitter RevenueBill to Swallow • According to US Census Bureau data, total US pharmacy and drug store sales for 2016 were $272.435 billion, a 3.4% increase over 2015. For the first 8 months of 2017, however, total sales decreased 0.9%, to $180.089 billion. • During November 2016, same-store sales for Walgreens increased 1.9%, but decreased for the other major chains, CVS, 0.3%; Rite Aid, 3.9%; and Fred’s Pharmacy 4.0%. • For pharmacy sales, same-store sales increased 2.0% at Walgreens and 1.9% at CVS, but decreased 4.1% at Rite Aid. As of late October 2017, rumors were circulating that CVS was in talks to acquire health insurance company Aetna for more than $66 billion.

3. Drug-Store Dominators • Walgreens suspended its acquisition of Rite Aid, opting instead to buy 2,186 Rite Aid stores, or approximately half of its locations as well as three distribution centers. Approximately 600 Rite Aid stores will be closed within a mile of another location. • For its fourth quarter ended August 31, 2017, Walgreens’ revenue increased 5.3%, to $30.15 billion. Same-store sales increased 3%. Pharmacy sales increased 7.5% and same-store sales increased 3.1%. • CVS’ Q2 2017 revenue increased 4.5%, to $45.7 billion, mostly due to pharmacy benefit management, which accounted for two-thirds of its revenue. Retail revenue decreased 2.2% to $19.6 billion. Retail sales were impacted by less customer traffic.

4. Responding to Consumers’ Healthier Attitudes • During December 2016, CVS announced its new store design, focused on health, healthy food and enhanced beauty sections, with 100 feet of new merchandise in these areas and “discovery zones” to make finding new products easier. • As of April 2017, this new format was in more than 800 stores, with another 70 new and existing stores planned. For those using the new design, the run rate of consumables has improved, increasing 9%; beauty increased 4% and health increased 2%. • A Nielsen survey found that 48 million Americans have an ailment sufferer who manages the condition through diet. Food products with low glycemic claims were 0.4% of overall sales, but total revenue from them increased 30%.

5. Merchandise Metrics • During 2016, the fastest consumer packaged goods (CPG) categories with sales of more than $1 billion that are commonly sold in drug stores were cosmetics and accessories, +18.9%; nasal products, +12.0%; and weight control, +9.5%. • Research published in the August 2017 issue of Drug Store News reported that sales of cold/allergy/sinus liquids increased 7% in the drug channel, driven mostly by Reckitt Benckiser, which had a 16% YOY increase. • In the more than $50-million category, the fastest-growing CPG categories were shampoo and conditioner combo packs, +43.4%; other refrigerated fruit juice, +23.7%; other shelf-stable bottled fruit juice, +22.7%; and laundry detergent, +20.9%.

6. “Cleaning Up” in the Beauty Aisle • An increasing trend is K-beauty, beauty items from South Korea. South Korea, with $2.4 billion in beauty products, is now the 4th largest exporter of beauty products in the world. Cosmetics for African-American women with varied skin tones are underrepresented. • Sales of natural beauty products increased 9.2% during 2016, and this category represents 12% of the total cosmetics and toiletries market in the US. The most important characteristic is all-natural ingredients, then plant-derived ingredients. • Shampoo, at $2.968 billion, was the top product in the hair-care category; in cosmetics, eye makeup was #1, at $2.127 billion, followed by face makeup at $2.046 billion.

7. The Complement of Supplements • Worldwide, the largest channels for over-the-counter (OTC) health products were pharmacies, 28%; drug stores, 19%; grocery stores, 18%; direct selling, 12%; and online, 9%. Internet sales, however, increased 15% during 2016, compared to 2015. • Key drivers of vitamin and supplement sales are an increase in self-medication as healthcare costs increase, greater public awareness, disposable income, an increasing older population and the convenience of switching from prescription to OTC. • Two-thirds of Americans take supplements, a 7% increase from 2013. Supplement use is increasing, vitamins/minerals, 57% compared to 51%; and specialty supplements, 30% compared to 25%, although herbal supplement use has remained the same at 17%.

8. Advertising Strategies • Emphasize your variety of conveniently accessible healthy snacks to appeal to Millennials. • Showcase natural beauty and personal care products to capitalize on this trend. • Show pharmacists consulting with customers and counseling them about vitamins and other supplements to build trust and reduce confusion in the market.

9. New Media Strategies • In the beauty section, include shelf signs highlighting products that were chosen by beauty bloggers, celebrity makeup artists and other online influencers. Include a live link that can be scanned with a smartphone to their blogs, social media pages, etc. • Create targeted email newsletters for customers with chronic conditions, so they can select content based on their health problem. Include tips and information for managing their condition, highlighting relevant products. • Invite customers to share their individual beauty tips in videos and how specific products have enhanced their look. Award prizes to those videos that receive the most likes, shares, etc.