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Drug Store Retailing - US - March 2019

"US drug store revenues are expected to be valued at over $293 billion this year. While the sector has consistently posted revenue gains, the pace of growth is projected to decelerate in light of continued channel-shifting and a consumer preference toward generic drugs versus name brands. Drug stores are focused on retention while at the same time trying to evolve to modernize store formats, expand product offerings and services within and beyond the pharmacy, and build ecommerce. Digitization and a fresh, fearless approach to new partnerships are important undercurrents in this evolution. While this may not be the “year of Amazon” in the drug store/healthcare industry, the threat is looming larger than ever, causing drug stores and others with pharmacies to actively try to prepare for what this could mean."
- Diana Smith, Associate Director - Retail & Apparel

This Report looks at the following areas:

  • The role of drug stores
  • The role of technology
  • The beauty opportunity
  • The food and drink opportunity

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • Overview
          • The role of drug stores
            • What you want to know
              • What we see
                • The role of technology
                  • What you want to know
                    • What we see
                      • The beauty opportunity
                        • What you want to know
                          • What we see
                            • The food and drink opportunity
                              • What you want to know
                                • What we see
                                  • What it means
                                  • The Market – What You Need to Know

                                    • Pace of sales growth slows
                                      • Prescriptions are big business
                                        • Aging population presents an opportunity and a threat
                                          • Americans’ efforts to prioritize their health and wellness is a plus for drug stores
                                            • Consolidation drives change
                                            • Market Size and Forecast

                                              • Positive market conditions fueling expected growth
                                                • Figure 1: Total US drug store revenues and fan chart forecast, at current prices, 2013-23
                                                • Figure 2: Total US drug store revenues and forecast, at current prices, 2013-23
                                            • Market Breakdown

                                              • Growth occurring in the largest sectors: prescriptions and health/beauty
                                                • Figure 3: Share of total US drug store revenues, by segment, at current prices, 2018
                                                • Figure 4: Total US drug store revenues and forecast, by segment, at current prices, 2013-23
                                            • Market Perspective

                                              • Mergers and acquisitions only make the big guys bigger
                                                • CVS Health and Aetna
                                                  • Amazon steps into the healthcare industry
                                                    • Acquisition of PillPack
                                                      • Partnership with Berkshire Hathaway and JPMorgan Chase
                                                        • Launch of personal medical devices
                                                          • Walgreens and Rite Aid
                                                          • Market Factors

                                                            • An aging population presents opportunities
                                                              • Figure 5: Number of households, by age of householder, 2008 and 2018
                                                            • Holistic health and wellness approaches become the norm
                                                              • Obesity gets worse
                                                                • Figure 6: Prevalence of obesity among US adults aged 20 and over, 2008-18*
                                                              • Number of uninsured Americans cut in half
                                                                • Figure 7: Prevalence of Americans who are uninsured,* 2005-17
                                                              • Health care costs rise faster than average incomes
                                                                • Figure 8: Median household income, by race and Hispanic origin of householder, in inflation-adjusted dollars, 2007-17
                                                                • Figure 9: Household income distribution, shares by age of householder, 2017
                                                            • Key Players – What You Need to Know

                                                              • Drug stores look to add convenience and accessibility
                                                                • Rite Aid is feeling very exposed
                                                                  • Exploring new partnerships and targeting opportunities
                                                                  • What’s Happening?

                                                                    • Evolution is underway as drug stores test new store formats
                                                                      • Walgreens
                                                                        • CVS
                                                                          • Membership programs could help to mitigate channel leakage
                                                                            • Walgreens
                                                                              • CVS
                                                                                • Drug stores are trialing delivery programs
                                                                                  • Walgreens
                                                                                    • CVS
                                                                                      • Figure 10: CVS direct mail featuring delivery services, June 2018
                                                                                  • What’s Struggling?

                                                                                    • Rite Aid needs a turnaround
                                                                                      • Figure 11: Rite Aid stock price, February 2019
                                                                                  • What’s Next?

                                                                                    • More to smile about: dentistry comes to drug stores
                                                                                      • Catering to seniors
                                                                                        • Walmart and Anthem
                                                                                          • Amazon and AARP
                                                                                            • Incentives for wearables
                                                                                              • Walgreens and Microsoft team up to tackle the future of healthcare
                                                                                                • Increasing employee productivity through digital devices
                                                                                                • The Consumer – What You Need to Know

                                                                                                  • Drug stores are losing shoppers
                                                                                                    • Men are a prime target
                                                                                                      • Nearly half of consumers are multichannel shoppers
                                                                                                        • More than a place for healthcare and medicine
                                                                                                          • Battle for beauty share heats up
                                                                                                            • Good place for quick fill-in groceries
                                                                                                            • Retailers Shopped

                                                                                                              • Key highlights
                                                                                                                • Leading drug stores sandwiched in the middle
                                                                                                                  • Figure 12: Retailers shopped – Inside versus outside channel (net), December 2018
                                                                                                                  • Figure 13: Retailers shopped, December 2018
                                                                                                                • Mass merchandisers and Amazon garnering younger consumers
                                                                                                                    • Figure 14: Retailers shopped, by age, December 2018
                                                                                                                  • Price wars, rather than income level, dictate where consumers shop
                                                                                                                    • Figure 15: Retailers shopped, by household income, December 2018
                                                                                                                  • While grocery stores are gaining overall, they are likely losing share of multicultural consumers to Walmart
                                                                                                                    • Figure 16: Retailers shopped, by race and Hispanic origin, December 2018
                                                                                                                  • Limited options for rural consumers
                                                                                                                    • Figure 17: Retailers shopped, by geographic area, December 2018
                                                                                                                • Items Purchased by Channel

                                                                                                                  • Key highlights
                                                                                                                    • Opportunity to create stronger associations with drug stores and nonmedical items
                                                                                                                      • Figure 18: Items purchased by channel – Select categories (net), December 2018
                                                                                                                      • Figure 19: Items purchased, by channel, December 2018
                                                                                                                    • Opportunity to increase basket size or number of trips
                                                                                                                      • Figure 20: Repertoire groups of items purchased by channel – Drug store, December 2018
                                                                                                                    • Men are a prime target
                                                                                                                      • Figure 21: Repertoire groups of items purchased by channel – Drug store, by gender and age, December 2018
                                                                                                                      • Figure 22: Items purchased by channel – Drug store, by gender and age, December 2018
                                                                                                                  • Method of Shopping

                                                                                                                    • Key highlights
                                                                                                                      • In-store shopping preferred
                                                                                                                        • Figure 23: Method of shopping, December 2018
                                                                                                                        • Figure 24: Retailers shopped, by method of shopping, December 2018
                                                                                                                      • Enhancing the in-store experience
                                                                                                                        • Figure 25: Method of shopping, by generation, December 2018
                                                                                                                      • Catering to multichannel shoppers
                                                                                                                        • Figure 26: Attitudes toward drug store websites, by generation, December 2018
                                                                                                                    • Attitudes toward Shopping at Drug Stores

                                                                                                                      • Key highlights
                                                                                                                        • Drug stores catching up from an omnichannel perspective
                                                                                                                          • Figure 27: Attitudes toward drug stores’ digital capabilities, by generation, December 2018
                                                                                                                        • Parents are looking for little conveniences
                                                                                                                          • Figure 28: Attitudes toward drug stores’ digital capabilities, by parental status, December 2018
                                                                                                                        • Retail clinics not seen as comparable to one’s own physician
                                                                                                                          • Figure 29: Attitudes toward retail clinics and in-store seminars, gender and age, December 2018
                                                                                                                        • Apathy may impede drug stores’ ability to change perceptions
                                                                                                                        • Drug Store Beauty Opportunity

                                                                                                                          • Key highlights
                                                                                                                            • The landscape
                                                                                                                              • Drug stores should go after grocery stores for share of beauty
                                                                                                                                • Figure 30: Total US retail sales growth of beauty products, by channel, at current prices, 2013-18
                                                                                                                                • Figure 31: Top five retailers shopped for beauty and personal care products, June 2018
                                                                                                                              • The consumer
                                                                                                                                • Women 18-34 should be a targeting focus
                                                                                                                                  • Figure 32: Drug store beauty shoppers, by gender and age, December 2018
                                                                                                                                  • Figure 33: Willingness to try new beauty products, by channel, February 2018
                                                                                                                                • Natural, multipurpose, and clean beauty are trending topics
                                                                                                                                  • Results-oriented approach to beauty buying
                                                                                                                                  • Beauty Attributes by Retailer

                                                                                                                                    • Key highlights
                                                                                                                                      • Price and product selection important attributes, but drug stores fall short comparatively
                                                                                                                                        • Figure 34: Beauty attributes by retailer, December 2018
                                                                                                                                        • Figure 35: Correspondence analysis – Symmetrical map – Beauty scorecard, December 2018
                                                                                                                                      • Drug stores more likely to be associated with inclusive product lines among multicultural beauty shoppers
                                                                                                                                        • Figure 36: Product variety attributes by retailer, by race and Hispanic origin, December 2018
                                                                                                                                      • Retailer-specific highlights
                                                                                                                                        • CVS key beauty initiatives
                                                                                                                                          • Walgreens key beauty initiatives
                                                                                                                                            • Rite Aid key beauty initiatives
                                                                                                                                              • Walmart key beauty initiatives
                                                                                                                                                • Target key beauty initiatives
                                                                                                                                                  • Amazon key beauty initiatives
                                                                                                                                                  • Desired Beauty Offerings at Drug Stores

                                                                                                                                                    • Key highlights
                                                                                                                                                      • Samples, selection, and services play to the masses
                                                                                                                                                        • Figure 37: Desired beauty offerings at drug stores, December 2018
                                                                                                                                                      • Females 18-34 and moms core targets for any new drug store beauty initiatives
                                                                                                                                                        • Figure 38: Desired beauty offerings at drug stores, by age of women and parental status, December 2018
                                                                                                                                                      • Convenience-oriented services can draw in more men
                                                                                                                                                        • Figure 39: Desired beauty offerings at drug stores, by men 18-44, December 2018
                                                                                                                                                      • Personalized services appeal to non-Hispanic Black beauty consumers
                                                                                                                                                        • Figure 40: Desired beauty offerings at drug stores, by race and Hispanic origin, December 2018
                                                                                                                                                    • Drug Store Food and Drink Opportunity

                                                                                                                                                      • Key highlights
                                                                                                                                                        • The landscape
                                                                                                                                                          • A secondary consideration, not a destination
                                                                                                                                                            • Figure 41: Purchase incidence by channel – Any shopping (net), April 2018
                                                                                                                                                            • Figure 42: Channels shopped by item, April 2018
                                                                                                                                                          • The consumer
                                                                                                                                                            • More quick fill-in grocery trips needed
                                                                                                                                                              • Figure 43: Attitude toward drug stores as a grocery option, by age, December 2018
                                                                                                                                                            • Price, convenience, and fresh products influence where people shop
                                                                                                                                                              • Figure 44: Top five channel drivers, September 2018
                                                                                                                                                            • Addition of healthy foods aids in perception changes
                                                                                                                                                              • Figure 45: Attitudes around drug stores’ healthy food assortments, by gender and age, December 2018
                                                                                                                                                            • Catering to organic shoppers and those with special diets
                                                                                                                                                              • Figure 46: Attitudes toward food/drink shopping at drug stores, by gender and age, December 2018
                                                                                                                                                          • Appendix – Data Sources and Abbreviations

                                                                                                                                                            • Data sources
                                                                                                                                                              • Sales data
                                                                                                                                                                • Fan chart forecast
                                                                                                                                                                  • Consumer survey data
                                                                                                                                                                    • Repertoire analysis methodology
                                                                                                                                                                      • Correspondence analysis methodology
                                                                                                                                                                        • Direct marketing creative
                                                                                                                                                                          • Abbreviations and terms
                                                                                                                                                                            • Abbreviations
                                                                                                                                                                              • Terms
                                                                                                                                                                              • Appendix – The Market

                                                                                                                                                                                  • Figure 47: Total US drug store revenues and forecast, at inflation-adjusted prices, 2013-23
                                                                                                                                                                                  • Figure 48: Total US drug store revenues, by segment, at current prices, 2016 and 2018
                                                                                                                                                                                  • Figure 49: Drug store sales and forecast of health, beauty, and personal care products, at current prices, 2013-23
                                                                                                                                                                                  • Figure 50: Drug store sales and forecast of health, beauty, and personal care products, at inflation-adjusted prices, 2013-23
                                                                                                                                                                                  • Figure 51: Drug store sales and forecast of food and beverages, at current prices, 2013-23
                                                                                                                                                                                  • Figure 52: Drug store sales and forecast of food and beverages, at inflation-adjusted prices, 2013-23
                                                                                                                                                                                  • Figure 53: Drug store sales and forecast of general merchandise, at current prices, 2013-23
                                                                                                                                                                                  • Figure 54: Drug store sales and forecast of general merchandise, at inflation-adjusted prices, 2013-23
                                                                                                                                                                                  • Figure 55: Drug store sales and forecast of other* products, at current prices, 2013-23
                                                                                                                                                                                  • Figure 56: Drug store sales and forecast of other* products, at inflation-adjusted prices, 2013-23
                                                                                                                                                                                  • Figure 57: Population by age, 2013-23
                                                                                                                                                                                  • Figure 58: Americans who are uninsured, by age, 2016-17
                                                                                                                                                                              • Appendix – The Consumer

                                                                                                                                                                                  • Figure 59: Drug stores shopped – Past four weeks, August 2013-18
                                                                                                                                                                                  • Figure 60: Drug store shopping frequency – Past four weeks, July 2017-August 2018
                                                                                                                                                                                  • Figure 61: Retailers shopped by retailers shopped – Part one, December 2018
                                                                                                                                                                                  • Figure 62: Retailers shopped by retailers shopped – Part two, December 2018
                                                                                                                                                                                  • Figure 63: Interest in beauty trends, by age, February 2018
                                                                                                                                                                                  • Figure 64: Interest in beauty trends, February 2018

                                                                                                                                                                              Drug Store Retailing - US - March 2019

                                                                                                                                                                              US $4,395.00 (Excl.Tax)