Drug channel can offer value-pricing for holiday toys

The holiday season may be hard on toys and gift-related product categories, but it may present opportunities for drug store operators that can effectively address critical trends regarding pricing and product features.

Anita Frazier, NPD Group toy and video games analyst, said drug stores are in a position to leverage their traffic in a season when consumers are open to shopping alternatives, including those that cut such ancillary costs as fuel and restaurant meals.

Given the toy price cutting already emerging from Wal-Mart and others, as well as an NPD study indicating that 26 percent of consumers plan to spend less on toys this year versus 18 percent last year, Frazier noted that drug chains need to press their advantages and respond to market changes to get the most from the current season.

“The implication to retailers is that they are going to have to get aggressive to coax dollars out of reluctant spenders’ wallets,” she said. “It’s going to be a tough season, which requires ever more resourcefulness and ingenuity to compete.”

Walgreens is hitting multiple price points in toy and other gift categories to alleviate cost sensitivities, while encouraging multiple-department shopping.

“We offer a lot of alternatives under $10 or under $15 or under $20 dollars, and we promote gifts across category lines for everybody on the shopping list,” said Tiffani Bruce, a Walgreens spokeswoman. “Even for folks who haven’t shopped us, we usually get last-minute gift purchasers, but I think this year people will be trading down from department stores.”

Rite Aid is providing a mix of reasonably priced toys and gift items that derive additional impact from the current appeal of priced-right technology, as well as licenses and supplier marketing. “Our stores provide a range of reasonably priced items that pack a punch when you put them under the tree: radio-controlled cars, products with Hannah Montana and ‘High School Musical’ plush toys, our As Seen On TV line,” said Eric Harkreader, a Rite Aid spokesman.

Having a range of price points that hit trends offers shoppers a chance to provide multiple gifts and the unwrapping fun of Christmas on a tight budget. It also helps if the gifts can appeal in multiple ways. Pez dispensers, for example, are not only fun to use, but collectible—and for the first time this year, they offer chocolate candy. “People go for Pez collectability. The value never goes down,” said Peter Vandall, Pez vice president of marketing.

Donna Myers, director of business development at merchandising consultants Display Boys, said drug chains also should use merchandising to drive consumers beyond upfront promotional displays and into seasonal and permanent spaces that will encourage consumers to see them as a more of a destination for such items as toys.

“It’s been a big push with us and our clients to make the aisle experience better, and now we can get those aisle skippers down the aisle,” she said.