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Drug channel needs to amp up its CE potential

BY Barbara White-Sax

The drug store channel isn’t maximizing its potential in the consumer electronics category. According to research by TWICE and the Stevenson Co., CE sales at Walgreens, Rite Aid and CVS amounted to $111 billion last year, less than 1% of the chains’ combined revenue. At Walmart, electronics comprise about 7% of sales. TWICE’s research also revealed that CE sales at all three drug chains were down last year.

“There’s much more to consumer electronics than photo,” said Steve Koenig, director of industry analysis at the Consumer Electronics Association. Koenig said drug chains should have a dedicated buyer overseeing the booming category, expand their selections and promote the category “front and center on circulars to let consumers know what’s available in their stores.”

Stephen Baker, VP industry analysis at the NPD Group agreed. “Tech continues to go small and mobile, and those products throw off a large accessory business [for which] drug stores can use their convenient locations, hours and frequent shopping trips to exploit,” he said.

Baker said that drug stores have done “a great job in leveraging their high foot traffic during the holidays to focus on low-cost, highly gifted products,” such as e-readers, MP3 players and GPS systems. “This past holiday, we saw products like tablets and netbooks in drug store channels as well. As those categories grow in awareness, those are likely to provide a tremendous holiday opportunity for the drug channel,” he said, noting that the channel should stick to products under $100. Drug stores need to maintain the momentum during the rest of the year.

 

The article above is part of the DSN Category Review Series. For the complete Consumer Electronics Buy-In Report, including extensive charts, data and more analysis, click here.

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Gas price hike could damper retailer-consumer relationship

BY Michael Johnsen

WHAT IT MEANS AND WHY IT’S IMPORTANT — Analysts already are speculating dire outcomes if the price of a gallon of gas eclipses $5 this summer on account of Middle East turmoil today. Any additional strains on the supply chain system, such as increased operational costs as high as 20%, would only make matters worse.

(THE NEWS: Rising gas prices not only factor driving supply chain costs. For the full story, click here)

A Stifel Nicolaus analysis issued last week suggested that consumers on average would have 2% fewer discretionary dollars to spend if gas prices peaked at $5 per gallon. The speculation is even worse for the poorest of Americans — those that are part of the lowest 20% in terms of income would have 6% fewer discretionary dollars.

About the only retailers who truly benefit from high gas prices are those with a bank of gas pumps out front, a line of pharmacists within the store and row after row of food items in between — because it’s those supermarkets that will satisfy that growing need for the “one-stop shop.”

But even those supermarket retailers could feel the pinch if higher gas prices, compounded by increased transportation costs as was suggested by the National Retail Federation, are reflected in escalating pricing of consumer-packaged goods.

“The environment is much more rational today, and competitors are passing on cost inflation in categories, including dairy, perishables, produce and dry grocery,” suggested Ed Kelly, Credit Suisse research analyst, in a recent note regarding Safeway. “The company was able to pass along 0.5% to 0.7% of inflation in [the fourth quarter], and expects to comfortably pass on expected inflation of 1% to 2% during the year,” he noted. “We remain somewhat skeptical, as inflation could easily be higher than management expects.”

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Walmart raises dividend

BY DSN STAFF

BENTONVILLE, Ark. — Walmart said Thursday that it is increasing its annual dividend 21% on the back of strong earnings.

The retailer last month reported a 27% increase in fourth-quarter net income as it benefited from cost-cutting and strong international sales. Walmart said it will pay an annual dividend this year of $1.46, up from $1.21. It will pay quarterly dividends of 36.5 cents in April, June, September and January in fiscal 2012, which ends Jan. 31.

The next dividend will be paid on April 4 to shareholders of record on March 11.

Walmart president and CEO Mike Duke said the company was able to boost its dividend because of its earnings performance in fiscal 2011 and its strong financial position.

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