Drug presents opportunity to help office sector out of bind
A new year could be an opportunity for home-office product sales as consumers turn their attention to organizing and preparing for tax season.
Office supplies represented 2% of nonprescription sales in drug stores for the 52 weeks ended Oct. 3, 2009, totaling $900 million, according to AC Nielsen. That was a 3.3% dip in sales from the same period last year. Industry experts believe the category may be underperforming in the drug channel.
“Back-to-school and back-to-college are the biggest seasons for home-office products in the drug channel,” an ACCO Brands representative said. “It’s a convenience play, and stores are getting more aggressive with promotional offers, especially after many of the big-box retailers tear down BTS and run out of merchandise. The drug channel tends to be more of a destination once school starts since they have stock of products needed.”
Shelly Morick, president of Better Office Products Co., said she thinks drug retailers can grab a bigger share of category sales by devoting more space and promotions during BTS, tax season and second semester. Basic filing, presentation, envelopes, binders, sheet protectors and organizational products should be part of a stationery section year round, Morick said. Better Office Products’ line of eco-friendly, biodegradable and recyclable products addresses consumers’ interest in green products.
Fourth quarter also is a key time to promote organizational tools. April Whitlock, director of brand management for Carolina Pad, said drug retailers’ home-office businesses usually are impulse-driven and currently are underperforming. “By capturing and promoting filing systems right after the holidays, drug retailers can capture the natural top-of-mind impulse of consumers who are ready to organize their life and finances,” she said.
To increase the impact of the category year-round, Whitlock said retailers should take advantage of product innovation and work with vendors who can provide fashion as well as commodity products. “Executive mom” organizational products — such as file folders, expandable files, planners and products such as Carolina Pad’s new tiered memo books and flip-top organizers — are strong year-round performers.
As in many other categories, retailers are turning to private-label products to meet the needs of the basics in the category. CVS and Rite Aid stock private-label everyday home-office products, including three-hole punchers, magnets, binder clips and calculators.
Drug chains can grow sales by adding value packs, especially on endcaps and in high-traffic areas.
Another area of growth is computer accessories. “Many drug stores consider this category as a small part of their overall business, and if they do something, it’s on an in-and-out promotion, but business is very steady on basic items,” said Liza Abrams, a spokeswoman for Sakar International. Abrams said the basics include two mouse offerings (wired and optical wireless), Hubs, Web cams and surge protector electrical strips. Ethernet and extension cables, she said, are huge sellers at stores near colleges and universities.
Rite Aid, which has many locations near colleges and universities, devotes 4 ft. to ink cartridges and computer accessories. The chain’s planogrammed set includes Sakar’s iConcepts Web cam, which retails for $19.99, USB cables at $9.99 and flat-panel speakers for $14.99.
“Retailers don’t need branded goods at higher retail. These products today are commodity items; it’s like buying paperclips,” Abrams said. The best time to promote is during back-to-school with a small bump in the fourth quarter to second semester. “Promotions can be set on an endcap or wing titled ‘All your needs for the upcoming year,’ and should be set in store late July to run 60 days,” she said.
Walgreens taps veteran to head CCR
NEW YORK In a high-stakes campaign to fire up its front-end appeal, reaffirm its relationship with America’s consumers and rejuvenate its same-store sales, Walgreens has gone to its bench.
Walgreens has named one of its veteran operations people, Mike Arnoult, to the key post of VP in charge of Customer Centric Retailing. Until last month, the post was held by Chong Bang, who left the company in mid-December to oversee merchandising at Toronto-based Shoppers Drug Mart.
Unlike Bang, Arnoult is more a seasoned operations manager than a merchant. His appointment is a clear sign that Walgreens has moved beyond the conceptual and launch phase of CCR, and is ready to begin the next phase of the massive project: the expansion of a CCR-based store design across Walgreens’ coast-to-coast network of 7,147 drug stores.
Nevertheless, Arnoult inherits a critical challenge at the retail behemoth. CCR encompasses Walgreens’ massive effort to pull together a sprawling marketing and merchandising operation and focus its efforts more sharply on meeting and anticipating customer demands. Within two or three years, it will transform the chain’s front-end presentation and go-to-market strategy coast-to-coast with a leaner, more condensed merchandise mix; a sharper focus on health, wellness and patient education in the aisles; improved departmental adjacencies and signing; and — Walgreens merchants hope — a better overall shopping experience.
Bang took CCR all the way from conception to realization, streamlining assortments, cutting hundreds of redundant SKUs, and applying new rationale to categories, adjacencies and promotional strategy at the front end. He also oversaw the test and launch of a new Walgreens store prototype, based on CCR principles and a better read of consumer needs.
Arnoult will now take the CCR rollout from a 400-store pilot in Texas to nationwide completion. Given the chain’s aggressive plans for 2010 — nearly 3,000 stores scheduled for a CCR redesign by the end of the year — he’ll need to bring all his proven management skills to bear to coordinate local-market remodeling activities with Walgreens’ operations and merchandising teams.
“We’re evaluating the findings from the Texas stores and doing some tweaking,” company spokesperson Tiffani Washington told Drug Store News in December. “We’ll continue the rollout [of the CCR-based store overhaul program] starting in January.”
Arnoult brings to his task a strong resume in store, district and regional management. His 20-year career at Walgreens includes stints as store manager, district manager and store operations VP, followed by a year as head of online merchandising. He’s a 1990 graduate of Marquette University with a B.A. in communications.
“His ability to build relationships and collaborate across the organization will be invaluable,” Walgreens asserted.
Bartell to cease filling Medicaid prescriptions at 15 locations
NEW YORK The Medicaid storm is still intense in Washington as Bartell Drugs has announced that — as of Feb. 1 — it will no longer fill Medicaid prescriptions at 15 of its 57 stores. Limiting access to pharmacies with its payment cuts could spell an increase in other healthcare costs — costs that represent the majority of health expenditures.
As stated in the article, the decision stems from a court decision in Massachusetts in September 2009 that reduced the industry pricing standard.
Bartell stated that — unlike most other insurance providers, including other states — the Washington State Department of Social and Health Services has made no effort to offset this significant reduction, resulting in sizeable reductions in payments to pharmacies.
The intent, according to Bartell, is to return to the established level of compensation prior to the Sept. 26, 2009, court action. As it currently stands, Bartell simply can’t afford to fill the Medicaid prescriptions.
While Bartell currently is the only pharmacy retailer to take such action, it certainly isn’t alone in the battle.
In March 2009, Walgreens threatened to stop serving Medicaid patients in 44 of its stores in the state. The company at that time stated that it operates 111 pharmacies throughout the state, but the 44 pharmacies in question represented more than 60% of its total Medicaid business in the state. However, in May 2009, Walgreens stated that it would continue to serve Medicaid patients when the state agreed to make smaller cuts than it had planned.
But will the court decision in Massachusetts now prompt other pharmacies to follow in Bartell’s footsteps? Perhaps, but if you ask Doug Porter, the state’s director of Medicaid, he will likely say no. In a recent Seattle Times article, Porter was quoted as saying that Medicaid recipients should not worry about other companies following suit and he is “convinced pharmacies can weather this change.” As reported by the Seattle Times, several pharmacies and industry trade groups filed suit in U.S. District Court in Seattle trying to force the state to return its reimbursement rates to those it was paying before the Massachusetts settlement. A hearing is scheduled for Jan. 15.
Last year, the pharmacy groups filed another lawsuit, after an earlier attempt by the state to cut its reimbursement rates. That suit was withdrawn when the state agreed to make smaller cuts than it had planned.
“We are deeply concerned about the health of our patients. Pharmacists are on the front lines of our healthcare system protecting patients by ensuring safe and appropriate medication use. Commercial healthcare payers and Medicaid programs in some states have already adjusted pharmacy reimbursement necessary to maintain patient access to the essential care provided by pharmacies. If Washington Medicaid does not do the same, it can result in reduced access to medicine for our neediest and most vulnerable patients ultimately leading to expensive emergency room visits and hospitalizations,” stated Jeff Rochon, Pharm.D., CEO, Washington State Pharmacy Association, in an NACDS press statement issued in September.