Reviving in-store traffic: How the drug channel is keeping its stores relevant

The drug store channel is waging a long-term battle to ensure that their brick-and-mortar footprint remains relevant. What will that look like in a post-pandemic world?

For a large number of retailers, 2020 was the nail in their brick-and-mortar coffins. The growth of e-commerce and other factors had been eroding sales from some stores for several years, but last year’s rapid transition to online shopping — or not shopping at all for some products — forced many to close their doors for good.

In the drug channel, traffic and sales eroded to some degree after an initial surge last spring, and it remains to be seen how much of that lost volume will return.

Many consumers who defected from the physical drug store channel during the past year apparently consolidated their shopping trips in other channels, including traditional supermarkets, or shopped online instead. Even those customers who remained loyal to their local pharmacies often opted for the quicker, safer, click-and-collect and curbside pickup options, which minimized their potential for in-store impulse buying.

Some front-of-store categories, such as beauty care, saw significant sales declines, as homebound consumers spent less on such items. And widespread mask wearing and social distancing, intended to slow the spread of the coronavirus, had the side effect of also keeping the flu at bay during the past year, which sharply curbed sales of the OTC products that consumers traditionally buy throughout the fall and winter.

a person standing in front of a computer

Vaccinations Drive Traffic
Drug store retailers that have been offering in-store vaccine programs have found that they can be an effective tool for driving traffic into their stores, but retailers will need to do much more to attract and retain these customers for the long-term.

“Drug retailers are on the record stating that they believe that the majority of shoppers coming into their stores for vaccinations are new shoppers,” said Ben Antenore, analyst at research and consulting firm Kantar. “The big question is can they build a relationship with these people, and then activate them later on down the road?”

Yet while these new shoppers represent a near-term opportunity for drug stores to add new customers, and perhaps drive some immediate sales with coupons and merchandising in the vaccination area, retailers will need to focus on driving more sales from their existing shoppers in the long-term, he said.

“Some of their most loyal shoppers have, for the moment, really reduced their shopping in the channel,” Antenore said. “Going forward, it will be about reactivating those shoppers because they have definitely reduced the number of trips they take in any given month.”

Much of that effort will revolve around leveraging the loyalty and digital capabilities that drug store operators have built up during the past year, he said.

Maly Bernstein, vice president of e-commerce P&L and omnichannel strategy at CVS Health, said the chain has seen increases in traffic from its vaccine administration efforts. “They are coming to CVS due to our core pillars of being convenient, accessible and providing value,” she said.

Customers have stayed connected with CVS throughout the pandemic in part through the chain’s main loyalty program, ExtraCare, and its subscription loyalty program, CarePass, Bernstein said. “We are customer obsessed, and focus on surprising and delighting with new products like our new purpose-driven Live Better line of trusted wellness products and, most recently, the ability to purchase over-the-counter COVID-19 test kits,” she said.

In-store services, such as those available at CVS’ HealthHUB locations, offering treatment for common illnesses, health screenings and care for chronic health conditions, also will play a role in driving traffic going forward, Bernstein said.

Health-and-Wellness Destinations
Drug stores seeking to revive foot traffic into their stores should lean into their strengths as accessible, convenient, health-and-wellness destinations, said Naomi Duvall, vice president of consumer health and manufacturer services at Cardinal Health. “Think of ways to ensure your customers know that they can count on you for their healthcare and family care  basics, but also new wellness, self-care, and prevention products and services,” she said.

Duvall cited a March 24, 2021 McKinsey survey indicating that customers expect to splurge in the near term and may want to treat themselves during this time. “Beauty products in particular are a category of interest for pandemic-fatigued customers who plan to spend more,” she said.

As customers begin to increase their visits to brick-and-mortar stores, Duvall said retailers can leverage opportunities to “reignite and stimulate shopper engagement. The store perimeter, entrance, endcaps and checkouts will be key areas in the store to surprise, delight and reintroduce fun back into consumer routines,” she said. “Now more than ever, there is an entertainment, novelty aspect of shopping that can differentiate a needs-based trip for essential items into an experience or treasure hunt.”

“The physical experience is just so key to the drug channel. This will never be a channel that will be online dominant. It’s just not an experience that shoppers associate with the drug channel.”
—Ben Antenore, analyst, Kantar

Creating an In-store Experience
Gabe Trahan, senior director of store operations and marketing at the National Community Pharmacists Association, said retailers need to understand the mindset of their customers in order to drive traffic to their stores. “First and foremost, prioritize having a sparkling clean store, both inside and out,” he said, suggesting that retailers create a video of staff cleaning the store entrance and posting it on social media.

“Along with cleanliness, the want for personal space is not going away soon,” Trahan said. “Police all your aisles so there is a clear path of 4 ft. to 5 ft. This means you may have to remove floor displays.”

The area between the pharmacy bench and the first over-the-counter fixture needs to be at least 6 ft. apart, he said, and if the pharmacy is busy — more than 200 prescriptions per day — even more space may be required.

“This means you may have to remove a section of a fixture or replace an endcap with a banner that promotes your services,” Trahan said.

Asked how retailers can drive bigger baskets during in-store visits, Trahan said, “Well, have plenty of clean baskets available.”

“Customers stop shopping when their hands are full,” he said.

Other advice Trahan offered included:

  • Prepare to cross-merchandise immune boosters, impulse items and high-end merchandise with signage; and
  • Understand the value of the most-viewed areas of the store — the first endcap customers see to their right when entering a store, all endcaps facing the prescription department and the shelving in front of the prescription bench.

Dara St. Louis, senior vice president and founding partner of Toronto-based Reach3 Insights, which conducts consumer research on behalf of brands, said that shoppers still are concerned about their health and safety when they visit physical stores. “One of the biggest things that drug stores can do is just show that they’re prioritizing the health and safety of their customers and their employees,” she said.

Her company’s research shows that shoppers still want to keep their shopping trips as brief as possible out of concern for their health, St. Louis said. “Less often are people going in just to browse around,” she said. “They want to get in and out quickly, but they still want to have that connection to the pharmacist, and to feel like they are shopping in a safe store.”

Connecting Online and in Store
Kantar’s Antenore said he expects drug retailers to leverage their loyalty programs to help drive sales both in store and online. “We know that with the length and duration of COVID that new consumer habits were formed,” he said. “So not only will it be about reminding drug shoppers of why they shop the channel and why they enjoy it, but it’s also about addressing those new habits and really responding to them.”

Many consumers have switched to mail-order prescription fulfillment from the major drug store chains during the past year, for example. “It’s going to be tricky to get those people to shift back, but that’s going to be an incredibly important challenge and consideration for major drug retailers,” Antenore said. “They need the kind of traffic that comes from the Rx trip.”

One option could be offering a personalized discount linked to in-store prescription fulfillment, he said.

a woman talking on a cell phone

Overall, drug retailers will need to walk a fine line between improving the online experience for consumers, whose expectations have risen in the past year, and driving in-store shopping occasions. “The physical experience is just so key to the drug channel,” Antenore said. “This will never be a channel that will be online dominant. It’s just not an experience that shoppers associate with the drug channel.”

In Walgreens Boots Alliance’s recent second-quarter conference call with analysts, newly installed CEO Rosalind Brewer said that one of the lessons she learned during her previous tenure at Starbucks was that it’s important to maintain high levels of in-store service, even as companies embrace their digital connections with consumers.

“A digital platform can’t stand alone,” she said. “You have to have a human connection as well.”

On the job for less than three weeks when she spoke on the earnings call, she said she has been encouraged by Walgreens’ in-store service both in the pharmacy department and in the front of the store during her initial store visits.

“I think we’ve got a great opportunity here, just as Starbucks did, to combine a human connection with a digital connection,” Brewer said.

Also during the call, Alex Gourlay, co-COO at Walgreens Boots Alliance, said the company’s new loyalty program should help drive more front-of-store sales. The MyWalgreens platform, which launched last November, provides members with new benefits and personalized offers.

“As the pandemic progresses, we are really focused on giving our customers access to retail products, when and where they want them, through a combination of physical stores and digital platforms, with customers having a choice of store, home delivery, curbside or drive-thru pickup,” he said, noting that the retailer has become “one of the most convenient and quickest omnichannel retail options available in the U.S.”

The average pickup order is not completed in just 20 minutes, he said.

Offering Personalized Deals and Convenience
CVS Pharmacy also strives to offer a customer-centric omnichannel experience and has been working to better connect the online and in-store realms for its customers. “For example, customers can make their in-store experience easier by checking the digital ad in the app or online to view and send manufacturer coupons, as well as personalized deals to their ExtraCare card,” Bernstein said. “Once in the store, customers may use the app to scan a product’s barcode to see which coupons and deals are available for their item of choice.”

Customers also can digitally check store inventory to “know before they go,” which creates a more predictable shopping experience in store, Bernstein said. Additionally, they can review product information, including ratings and reviews from other customers to make informed choices when shopping in store. “Our omnichannel solutions leverage all our assets to enrich the experience throughout all channels,” she said.

Brick-and-mortar stores will continue to be a key element of the industry’s omnichannel strategy,” said Cardinal Health’s Duvall.

“Drug stores are located in nearly every community, and these outlets can serve as valuable hubs for the shopper experience, even as that experience expands and diversifies,” she said.

This represents an opportunity for stores to “embrace multi-functionality,” said Duvall, noting that research indicates that consumer demand for buying online and pickup in store will continue to grow.

“Connecting the store a consumer already knows and trusts to a new direct-to-consumer online transaction may give some consumers more confidence purchasing from you through a new channel,” Duvall said.

Moreover, expanding and providing additional community health services also will enable education and caregiver services to grow simultaneously. “This new era of consumer experience represents a major opportunity to strengthen the role of the physical store while pursuing new channels and delivery methods to adapt to changing customer preferences,” Duvall said.