As consumers resume in-store shopping in drug stores with more frequency after a year of shopping online and in other channels, price strategy can play a big role, said Matthew Pavich, managing director of global strategic consulting at Revionics, an Aptos company, which offers pricing solutions for retailers.
“It’s no secret that online sales grew over the past year, and while that boom in e-commerce benefited a lot of omnichannel retailers, it did primarily reduce traffic and frequency for those retail segments like drug stores, convenience stores and small-format grocers that strategically had benefited from numerous convenient brick-and-mortar locations,” he said.
In the short-term, promotions are the best opportunity to drive traffic back into stores, said Pavich, noting that this is particularly true for promotions specifically structured around driving frequency, such as date-specific promotions — “only on Tuesday,” for example — or promotions such as POS coupons that require a visit back to the store by a certain date.
“On top of this, the right promotional analytics can inform which promotions are more effective and can also help identify items to promote that may be frequency drivers,” he said, citing ready-to-eat or other quick-consumption products as examples. “A strong loyalty program is also critical for traffic and frequency, and there are numerous promotional activities which can strengthen certain loyalty programs.”
In the long-term, using analytics and best pricing practices to deliver a winning competitive strategy can improve a retailer’s price perception, Pavich said, which will lead to more shoppers and frequency over time.
Similar to promotions, the right everyday low price strategies can drive demand into trending categories, such as sustainable brands, which can lead to more frequency as well, he said.
Store brands also can play an important role in driving traffic and sales. “Having a stellar private-label assortment that offers uniqueness to the market and is priced intelligently to drive more demand away from national brands can also lead to more long-term brand loyalty and visits into the store,” Pavich said.
He also emphasized that driving shopper frequency is what he described as an “upper funnel activity” that is primarily influenced by branding, marketing and advertising. Trip frequency can also be increased by such operational adjustments as offering longer hours or making investments into the stores to make shopping more convenient, he said.
“Although pricing mostly impacts lower-funnel conversion in the short-term, using the right pricing analytics and optimization platforms can drive enormous profits for drug stores,” he said. “These profits can then be reinvested into frequency-driving marketing and operational initiatives.”
Once the traffic is already in the store, pricing is the primary driver of conversion and sales. “Pricing remains the single fastest lever to influence demand and financials for any retailer, and the right pricing analytics combined with best practices and optimization can easily translate to more sales volume, higher profits and larger baskets,” Pavich said.
Drug stores need to be especially conscious of the balancing act between frequency and basket size as a lot of the products they offer, such as vitamins and supplements,
have limited opportunities to expand consumption, Pavich said. Customers who buy these items regularly won’t necessarily purchase more of them, for example.
“This makes analytics and data even more important in this segment to ensure that campaigns that drive frequency are additive, and don’t just end up resulting in smaller baskets and no additional sales,” he said.