DRUG STORE RETAILERS ARE URGED TO CONSIDER PRODUCE

David Merrefield

Should drug stores offer fresh produce in a bid to build repeat shopper traffic, just as supermarkets do?

That provocative idea was broached by a consumer analyst speaking at a recent drug store trade association convention. Such an idea might seem ludicrous or brilliant, depending upon which shore of the trade channel gulf one stands.

According to a news article about this idea, which ran in last week's SN, drug retailers need to cast an eye on the power of repeat shopping trips. After all, consumers visit supermarkets about 85 times annually, against about 15 times for a drug store.

From the drug store perspective, then, augmenting the grocery-staple and packaged-dairy offer commonly seen in drug stores with perishables could do nothing but increase traffic and, therefore, sales. And, the same analyst was quoted in the news article to the effect that since supermarkets are entering the pharmacy business, why shouldn't drug stores offer additional supermarket categories such as produce?

The logic of all this is unassailable on its face, from the drug store point of view, and, should this actually be accomplished, it would pose a new worry for supermarket operators.

That raises the question: Could drug stores possibly offer produce in a sufficiently competent manner to threaten this basic supermarket category? Here are a few pros and cons:

Consumers: Drug stores have never been viewed by consumers as a source for produce. The effort involved in marketing the availability of produce in drug stores would be prodigious.

But the same might have been said a few years ago about the grocery staples now commonly seen in drug stores.

Spoils: Should drug stores enter the produce business, the spoil rate would be high for produce since relatively few consumers would actually purchase the category, especially at first.

This would sharply increase price points produce would require in drug stores, possibly making it too expensive against supermarket prices. But the same was said of supercenters a few years ago and that's a problem that some have managed to ameliorate.

Labor: Produce is a category that's highly labor-intensive compared to the ambient temperature and refrigerated product typically found in drug stores. That would increase the operational cost for drug stores, again increasing the price points such stores would need to command. But if store traffic were to increase dramatically, costs might be offset. The pros and cons could go on for some time, and it's likely that the cons outweigh the pros -- from the drug-channel point of view -- to the degree that produce will never be seen in many drug stores.

But this final observation might be kept in mind: Drug and mass outlets added grocery staples to increase consumer traffic, and soon enough they figured out how to offer them at attractive price points. Indeed, in so doing, those channels virtually reinvented the economics of the distribution system.

In some ways, supermarkets yielded portions of the category through inattention. Let's hope the past doesn't repeat when it comes to the produce category.