It’s no secret that the U.S. retail landscape is experiencing one of the most seismic shifts in decades. Each day brings new challenges to navigate such as consolidation, price wars, channel fragmentation and major shifts in when, where and how consumers shop. Drug stores are not immune to these dynamics, either, and in many cases are hard at work to keep up with the changes in the industry.
While health care needs like pharmacies and in-store clinics continue to be the foundation of the drug store channel, these retailers have begun to invest heavily in other areas of the store to align with the dynamics and preferences of today’s shopper. This means bigger investments in beauty, personal care, household care and pet care.
Brick and mortar drug stores dollars represent 6% of the total U.S. fast-moving consumer goods (FMCG) industry, or a $53 billion market as of 52 weeks ending May 27, 2017. Before drug store retailers can tap into their shoppers in the store, they first need to understand the influence of today’s multicultural population. Today, multicultural consumers (of African-American, Asian-American or Hispanic heritage) are 125 million strong and represent 39% of the U.S. population. By 2044, this group of ethnically diverse consumers are projected to represent more than half of the population.
With this growing population comes a new wave of consumption. Buying power is expected to eclipse significantly among African-American and Asian-Americans households by 2020 ($1.8 trillion and $1.1 trillion, respectively). These figures, identified by Nielsen Diverse Intelligence consumer reports and analysis from the Economic Policy Institute, point to billions of dollars added to the marketplace—which is sure to be felt by the drug store channel.
According to Nielsen Homescan data, the number of trips all consumers took to drug stores declined 3.1% in the last year ending April 29, 2017. Despite this decline in trips, they spent 3.1% more (an average of $20 per trip) than in the year prior. Retailers must capitalize on every occasion that consumers enter their stores, and that means identifying purchases that stretch beyond traditional drug store items in the healthcare department. More importantly, they need to understand where multicultural shoppers’ dollars are being spent and which items are filling their shopping carts.
Beyond in-store clinics and the traditional health care aisle of the store, here are some departments that should be top of mind for drug store retailers where more multicultural dollars are spent in comparison to non-Hispanic whites.
Beauty is in the eye of the beholder, and with hundreds of items in the beauty section of the average drug store alone, it's important that drug store retailers and manufacturers stand out to shoppers while they’re in the aisle. Compared to non-Hispanic whites, African-Americans and Hispanics spend more per trip on fragrances in the beauty aisle. Among Asian-Americans, more of their dollars are spent on beauty categories like cosmetics, hair coloring, and hand and body lotion. This comes as no surprise given the rising trend of K-beauty; skin care, makeup and bath/body products from South Korea that are gaining popularity, according to Nielsen’s Asian-American Consumer Report (May 2017). The buzz around K-beauty led to several South Korean brands arriving on the shelves across U.S. retailers, including drug stores.
When it comes to personal care, Hispanic shoppers spend more per trip than any other group of consumers. According to a recent Nielsen study, 47% of Hispanics who visited a retail clinic in the last year also purchased personal care items. This group also spent more than non-Hispanic whites and other multicultural groups on products like baby health and beauty care products and shaving needs. African-Americans on the other hand, spend more on bathroom products like bar and liquid soap, while Asian-Americans spend significantly more on disposable diapers and training pants.
Today’s consumers are moving in hyper speed, and the need for products that reduce the time spent on cleaning tasks is strong. According to Nielsen’s global home care report, 28% of Americans purchase home care and cleaning products from drug stores. Hispanic consumers spend significantly more on homecare products than the average consumer, primarily on items like disposable bags and laundry detergent. Drug store retailers still have an opportunity to market other household products like cleaning supplies and bath tissues, which African-Americans and Asian-Americans spend more on, respectively.
No bones about it: Pets today are more a part of the American family than ever, and that means shopping for pets is a growth opportunity across channels. According to Nielsen’s Category Shopping Fundamentals study, pet care is the top trip driver of any FMCG category. Last year, the pet care aisle triggered 57% to retail stores—more than beauty, personal care, household care or healthcare categories. Multicultural shoppers in drug stores are spending more than their non-multicultural counterparts. Asian-Americans spend the most per trip on dog food, while Hispanics spend more on cat food and pet accessories.
With dollars continually shifting between channels and in many cases, moving online, it’s imperative for drug store retailers to understand what’s driving consumers into their stores and into the aisles, in order to continue delivering value. As multicultural consumers change the face of America, their increasing spending power is key to growth in the drug store aisles. In order to win the multicultural dollar, drug store retailers should keep their spending habits and category favorites top of mind when strategizing shelf assortment.
This article originally appeared on Chain Drug Review
Amid the changing consumer landscape, we need to be cognisant of consumer realities and how they translate into opportunities for brands. There is a significant opportunity in Africa to understand that a consumer’s ability to consume doesn’t usually start with the branded product. In that regard, it’s critical to identify a brand’s mandate/role for today and tomorrow, and pinpoint which stage of the need state each business is prepared or able to tap into.
Unfortunately, this is where many new and existing businesses have fallen short, as less than 20% of consumers in Africa are able and willing to purchase branded products. That means the overwhelming majority of consumers are fulfilling their needs outside of the branded format. With an in-depth understanding of consumer needs, businesses will be able to adapt their offerings to match those needs, across a broader spectrum and build equity for the future.
Another million-dollar question for businesses is whether to create new propositions for Africa or bring ones in from other emerging markets and hope that Africa’s consumers will buy them. As they ponder this question, brands need to be mindful that success requires more than just bringing another affordable or available product to market. Marketers and manufacturers need to look at the specific day-to-day lives of consumers and identify needs to solve. With deep analysis, brands can identify many unmet needs, whether based on tradition, taste preference, new needs, ease of use, scarcity, accessibility, health and wellness, aspiration or sustainability, or differentiation.
Potential for growth exists across the continent, whether viewed in absolute or relative terms, among current and future consumers. The key for brands is identifying where to execute based on overall consumer potential and ask these questions to ensure success: