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Hurricane Sandy efforts drive Ahold 4Q sales

BY Alaric DeArment

AMSTERDAM — Ahold reported sales of $10.4 billion for fourth quarter 2012 and $43.6 billion for the entire fiscal year, the company said in an earnings report.

That marked a 7.5% sales increase compared with fourth quarter 2011 and an 8.5% increase compared with fiscal year 2011, respectively.

The company’s U.S. business — which includes the Stop & Shop, Giant-Landover and Giant-Carlisle supermarket banners and the Peapod online grocery service — had sales of $6.1 billion during the quarter and $25.8 billion for the year, representing sales increases of 4.3% and 3.1% over fourth quarter 2011 and fiscal year 2011, respectively. The company said the increase in U.S. sales for the quarter was driven partly by its efforts to keep stores open during Hurricane Sandy. Comps for the quarter increased by 2.8% and increased 1.9% for the fiscal year.

 

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Costco’s new PBM: It’s all about differentiation

BY Alaric DeArment

Costco announced in its January 2013 magazine that it would begin offering pharmacy benefit management services, targeting small businesses and highlighting a 200-employee company based in Washington state.

It remains to be seen whether the club retailer’s efforts to compete with the existing PBM businesses of companies like CVS Caremark, Walgreens and Walmart will be successful, and analysts like Citi’s Deborah Weinswig appear skeptical that they will. But whatever the outcome, it’s clear that Costco is looking to compete in a bigger way.

Pharmaceutical industry consultant and author of the blog Drug Channels, Adam Fein, described the current prescription-growth environment as slow. Indeed, the generic wave is resulting in a major commoditization of the drug market, to the point where mass-merchandiser Meijer is even giving away the generic version of Pfizer’s cholesterol drug Lipitor (atorvastatin) for free. Fein also noted that in a PBM industry that is consolidating, winning requires scale or differentiation, and that Costco Health Solutions could build its business with generics.

In such an environment, what will matter for pharmacy retailers is how they differentiate themselves to drive customers to their stores. For many, such as the three biggest drug store chains, this means things like loyalty cards, particularly Rite Aid’s Wellness+ card, which rewards customers for using the pharmacy. But for Costco, as Fein wrote, the new PBM targets self-insured employers that are close to Costco stores; even though the PBM’s network will includes tens of thousands of independent pharmacies, it’ll also make picking up drugs at the local Costco all the more convenient, especially when one considers the club retailer’s existing specialty pharmacy business. In other words, Costco’s PBM may lack the scale of giants like Express Scripts, CVS/Caremark or Catamaran, but it does have the chance to differentiate itself. And Costco has long specialized in catering to small businesses anyway.

Even if some analysts’ skepticism about Costco’s latest move is correct, and it doesn’t gain enough traction or manage to compete with the bigger and more established PBMs, the whole point of being in the retailing business is to drive foot traffic, and if CHS manages to do that, then the club retailer’s foray into the PBM business might just work.

 

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Duane Reade’s ‘Show Us Some Leg’ campaign illustrates power of social media

BY Antoinette Alexander

Duane Reade experienced nearly a 20% boost in sales of its private label hosiery thanks to a seven-week social media campaign dubbed “Show Us Some Leg,” according to a published report.

The important takeaway here is that the success of this campaign speaks to the overall importance of engaging consumers beyond the walls of the bricks-and-mortar store.

As the story states, Duane Reade’s VIP Blogger Team reportedly helped to create more than 10.9 million impressions by encouraging entrants to upload their original photos wearing Duane Reade-brand hosiery via a Duane Reade Facebook page application. That’s 10.9 million impressions that translated into a 20% boost in sales — pretty impressive.

The campaign results are in line with a study released late last year by LoyaltyOne, which found that social media engagement between a consumer and brand drives both immediate and long-term sales increases.

Furthermore, a separate study by RedPrairie, designed to help retailers and manufacturers better understand the shopping habits of Gen Y, found that “successful engagement with millennial consumers is about adding value to their shopping experience, and respecting both their privacy and their preferred methods of communication.”

The reality is that retailers and manufacturers must not underestimate the value of being multichannel and having the capability to connect with the consumer when they are not in the store.

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