Drug Store News: Lines—what lines? You can't blur what's not there

You'll hear a lot of people these days try to talk to you about channel blurring; try to tell you that the lines of retail are being crossed every day by customers trying to balance the time/value equation.

Baloney. That would suggest there were any lines left at all. The lines aren't blurred--the lines are gone.

If you're a drug store retailer in America today, that's the way you have to look at your business and the customer you are chasing.

There are no lines any more.

You have to believe that's the way customers see it.

It's not that consumers can't distinguish anymore between a big box electronics store like Circuit City and 7-Eleven. When they're in the middle of shopping for a 60-inch plasma-screen TV and they suddenly get thirsty, they don t want to have to leave the store to go get a Coke. Circuit City doesn't want them to leave the store, either--lose a $10,000 sale over a soda? That's crazy.

The reality is people wan! what they want. And you can sell it to them, or they II go somewhere else and buy it there. Until someone shows me the fourth dimension in retailing, there are only three ways to compete for consumers: price, convenience and experience--and in that order.

In that order because, like a pyramid, the possibilities for success are greater the further you move down from the top: price. Given the Wal-Mart factor, not to mention the warehouse clubs like Costco--and to say nothing of dollar stores--there are serious limits on price.

To survive in a retail universe with no lines, pricing definitely needs to be competitive, and for drug stores, as the Eckerd-Penney years have demonstrated, focused on the right categories. Investing promotional dollars--especially as much as Eckerd did in those years--on items like paper products, snacks and soda might just be drug store retailing's version of Russian roulette. You might win, but you're more likely to blow your brains out trying.

As it turns out, one of the first things CVS and Brooks did after they bought the Eckerd stores a year ago was reduce prices on thousands of items in the store--the kinds of items people shop drug stores for. Things like lipstick and mascara, Tylenol and toothpaste.

Still neither will ever price these items cheaper than Wal-Mart. Pricing is important, but drug stores won't win on price.

Then, there is convenience. Almost every drug chain in America is playing the convenience game. It's a good idea. Because the right mix of price and convenience is what makes drug chains competitive today.

But that's a pretty tough game to try to win, convenience. It's a pretty flimsy basis for a relationship with anyone or anything. You're convenient? How long can that possibly last before something better--truly better, maybe even unique or (gasp!) exciting, or even just more convenient--comes along? Was there anybody in high school who would have been happy to have been voted Most Convenient?

As much as drug chains are trying to be more convenient, convenience stores, at least some of them, are trying to get more involved in health care. New Jersey-based Quick Chek operates more than 100 stores, 12 of them with pharmacies. And BP Connect has made growing HBA a major priority. Why? Because it makes them different than am/pm and 7-Eleven. It also makes them competition for drug chains that compete against it. A better selection-for a c-store--better merchandised grew category sales 20 percent last year in BP Connect stores.

Then, there's experience. Experience makes people loyal. Customers who shop REI will tell you they may never buy a parka anywhere else ever again. Because at REI you don't just try on a coat for size, pay for it and walk out of the store. You try on the coat and you walk into the "rain room" to see how it might hold up in the elements. You don't just kick the tires and buy a mountain bike. You take a lap or two around the test track.

When you have that kind of thing happening in your store, customers begin to see the lines again. Otherwise, it's not that the lines are Blurred, so much as that they really aren't there any more.

Circuit City has beverage coolers. Office Depot and Staples sell OTC pain relief, candy and soda. Sears is now in the pharmacy business thanks to the addition of 1,150 Kmart pharmacies. Best Buy, too, is in the pharmacy business, through its high-tech health care hybrid eq life. CVS and Brooks have crossed the line into department store beauty merchandising with programs like Lumene--a CVS exclusive-and the upscale skin care counters built around the European brands Avene and Vichy. Duane Reade is doing it, too--they're also renting DVDs and testing a Chock Full o' Nuts coffee program.

Blurring lines? There are no lines any more.