CVS’ future rests on front-end, private-label evolution
NEW YORK CVS Caremark has no doubt been a trailblazer in the healthcare arena, positioning itself along the front lines to leverage its various points of care to improve outcomes and lower healthcare costs. But with all that CVS Caremark has done and will continue to do in the healthcare space — and it is no doubt a lot — it still has more than 7,000 retail locations, and the front of the store continues to be a critical part of its business and a major growth driver for the company.
(THE NEWS: At his last analyst day, Ryan sets out course for future CVS Caremark. For the full story, click here)
The front end is an $18 billion business for CVS and to be sure the company continues to look for ways to drive even more productivity out of its stores. It comes as no surprise that one area it will target for additional growth is private label. Private-label penetration currently stands at 17%, and over the next two to three years, company executives expect that number to grow to more than 20%.
"Private-label brands continue to grow and evolve. In this economy, consumers have shown that they are much more willing to try private-label products," Mike Bloom, EVP merchandising and supply chain, told analysts during Friday’s 2010 analyst meeting in New York. He noted that by the end of 2010, CVS/pharmacy will have nearly 5,100 private-label items storewide, which is an increase of 900 items versus last year. Each year, the company adds about 900 new private-label items and leverages ExtraCare to encourage trials among cardholders.
What is news, particularly to suppliers, is that a key component of CVS’ private-label program is an entirely new line that the company plans to introduce in February 2011, called Just The Basics — named to clearly communicate its functional, value-priced, smart, simplicity positioning. What is significant is that the new line is not a national-brand-equivalent type execution, but rather, more of a basic entry-point, low-price alternative.
"Now, while many retailers are stuck in the brand-follower mode of the 1980s, we have evolved to a leadership role," Bloom said.
The company also is increasingly turning to "treasure hunt" items and is using its circulars to drive front-end sales. For example, it recently promoted a WiFi-capable Netbook for $99.99 on the front page of its circular. While a Netbook isn’t your traditional drug store product offering, it has proven to be a hit among shoppers. CVS sold $3 million worth of Netbooks in three weeks, and it will be a $15 million item at CVS, the company said.
Then there’s beauty. As the article states, CVS is piloting a mini format of its Healthy Skincare Centers (in 120 stores) and will launch in January an ExtraCare Beauty Club.
Clearly the front end continues to be a significant growth driver for CVS and that will continue to be the case for a long time to come.
Energizer launches iPhone charger
ST. LOUIS Keeping up with the times, Energizer has launched a rechargeable case with built-in battery for the newest edition of the iPhone.
Energizer’s AP 1201 for iPhone 4 has “smart” battery technology that auto senses the iPhone 4 battery power status, which is indicated through “hidden” LEDs on the back of the case. For efficient power management, two charging options provide either high-speed quick charge direct to the iPhone 4, or get simultaneous pass-through charging of the iPhone and AP1201 case. The AP1201 is rechargeable up to 500 times and comes with a USB charging cable.
“Energizer appreciates the value and utility that smart phones offer consumers, and also sees that the average consumer’s power requirements have been underestimated,” said Jim Olsen, VP marketing for Energizer North America. “The AP1201 is a direct response to the power deficit that many experience, and is just one of a full line of Energizer Energi To Go solutions that is bringing convenient power to consumers, and that is making mobility easier for them.”
The Energizer AP1201 now is available for a suggested retail price of $69.99 at major retailers nationwide.
Target misses September estimates
NEW YORK Target said its same-store sales rose 1.3% in September, missing Wall Street’s expectations for a 1.9% gain. Total sales for the five weeks ended Oct. 2 rose 3.1% to $5.56 billion.
Coming in a month that was relatively positive for most retailers, the results represent a setback in Target’s quest to turn around sales with a focus on groceries and marketing that emphasizes low prices.
The chain said Thursday that grocery, beauty and healthcare sales were strong, but that its monthly performance was near the low end of expectations.