Presented by: MANAGING DISRUPTION IN DRUG Jessica Campbell Analyst March 7, 2013 Chain Drug Webinar.
-
Upload
gilbert-boyd -
Category
Documents
-
view
213 -
download
0
Transcript of Presented by: MANAGING DISRUPTION IN DRUG Jessica Campbell Analyst March 7, 2013 Chain Drug Webinar.
Presented by:
MANAGING DISRUPTION IN DRUG
Jessica CampbellAnalyst
March 7, 2013
Chain Drug Webinar
© Copyright 2013 Kantar Retail
Agenda
2
– Facing the Growing Threat of Dotcom Pricing
– Making Amends: The Lasting Effects of Walgreens Dispute with Express Scripts
© Copyright 2013 Kantar Retail
Shopping Basket Analysis
– Study Details:• Conducted December 2012
• All prices collected on the same day
• Includes Marketplace (3rd party) listings and sale prices
• Omits shipping charges
– Basket Details:• Only exact items included
• In certain instances some SKUs were purchased in multiples to match the quantity required by online retailers
Methodology and Background
Source: Kantar Retail anaylsis 3
© Copyright 2013 Kantar Retail
Summary of Findings
– Both CVS and Walgreens in-store pricing was significantly higher than online retailers
– As shoppers become more comfortable shopping for HBA online and delivery services become more convenient, price will become an important factor to capture sales
– Drugstore.com was the closest online retailer to matching in-store prices
Online pricing causing disruption in drugstore HBA sales
Source: Kantar Retail anaylsis 4
© Copyright 2013 Kantar Retail
Walgreens Total Basket ResultsAmazon registered the least expensive total basket
Source: Kantar Retail anaylsis 5
• 19 exact items; 10 personal care, and 9 OTC
• 22% of items collected were available for Subscribe & Save through Amazon.
• If taken into account for this study, savings from Subscribe & Save would have been USD 2.36
• Walgreens total basket was 26% more expensive than Walmart.com, driven by the OTC sub-basket
• Walgreens indexed at 105 to Drugstore.com, the main difference being in the OTC sub-basket
Promotions in-store lowered Walgreens basket by 3%Promotions in-store lowered Walgreens basket by 3%
© Copyright 2013 Kantar Retail
Walgreens Personal Care Sub-BasketWalmart.com had the lowest Personal Care sub-basket
Source: Kantar Retail anaylsis 6
Walmart.com’s basket was driven by
Nature Made
Walmart.com’s basket was driven by
Nature Made
© Copyright 2013 Kantar Retail
Walgreens OTC Sub-BasketWalgreens indexed highest to Amazon in OTC
Source: Kantar Retail anaylsis 7
Nearly two-thirds of prices on Drugstore.com were within 10% of Walgreens
Nearly two-thirds of prices on Drugstore.com were within 10% of Walgreens
© Copyright 2013 Kantar Retail
Walgreens Implications
– Walgreens will need to develop its omnichannel strategies to consider these significant price gaps
• Including leveraging Drugstore.com and Walgreens.com
– Walgreens will need to invest in areas beyond price to retain shoppers by:
• Analyzing true price competition
• Leveraging experience in digital innovation
• Examining the potential of stores to redefine convenience
Can no longer depend on convenience & immediacy alone
Source: Kantar Retail anaylsis 8
© Copyright 2013 Kantar Retail
CVS Total Basket Results
Source: Kantar Retail anaylsis 9
Amazon registered the least expensive total basket
• 18 exact items; 11 personal care, and 7 OTC
• 21% of items collected were available for Subscribe & Save through Amazon.• If taken into account for this study, savings from Subscribe & Save would
have been USD 2.36
• CVS’s total basket was 25% more expensive than Walmart.com, and both sub-baskets were consistent
• CVS indexed closest to Drugstore.com at 104• The main differentiator was personal care, which indexed at 107 compared
to 101 for OTCPromotions in-store lowered CVS’s total basket 4%Promotions in-store lowered CVS’s total basket 4%
© Copyright 2013 Kantar Retail
CVS Personal Care Sub-BasketWalmart.com Barely Beats Amazon in Personal Care
Source: Kantar Retail anaylsis 10
Only one item was
comparable across all
three retailers
Only one item was
comparable across all
three retailers
© Copyright 2013 Kantar Retail
CVS OTC Sub-BasketCVS Indexes at 141 to Amazon, 122 to Walmart.com
Source: Kantar Retail anaylsis 11
Amazon’s sub-basket was highly inconsistentAmazon’s sub-basket was highly inconsistent
© Copyright 2013 Kantar Retail
CVS Implications
– CVS should look at pricing strategies and reconsider who their competitive set really is
– CVS will need to draw shoppers into the store and promote loyalty by:
• Creating value beyond price
• Leveraging ExtraCare to better target promotions
Is ExtraCare enough to keep shoppers from shifting online?
Source: Kantar Retail anaylsis 12
© Copyright 2013 Kantar Retail
Channel and Supplier Implications
– Online retailers are disrupting the Drug channel by:• Redefining convenience• Creating new price reference points• Changing shopper expectations
– Suppliers should plan against these disruptors by collaborating with retailers to offer:
• Relevant and targeted promotions• An engaging in-store experience• Value beyond price
Online offers are shifting how consumers think and shop for HBA
Source: Kantar Retail anaylsis 13
© Copyright 2013 Kantar Retail
Agenda
14
– Facing the Growing Threat of Dotcom Pricing
– Making Amends: The Lasting Effects of Walgreens Dispute with Express Scripts
© Copyright 2013 Kantar Retail
About One in Six Shoppers Has Changed Rx Destination in Past Year
15
Proportion consistent with past experience
Have Changed Place Where Most Prescriptions Filled(vs. last year, among all shoppers who have prescriptions filled)
June 2012
In 2008, 18% of all shoppers had
changed places where most
prescriptions filled vs. previous year
In 2008, 18% of all shoppers had
changed places where most
prescriptions filled vs. previous year
Source: Kantar Retail ShopperScape®, June 2012
© Copyright 2013 Kantar Retail
Insurance Most Likely Reason for Change
16Source: Kantar Retail ShopperScape®, June 2012
Main Reasons Changed Place Where Most Prescriptions Filled, 2012(among all shoppers who changed primary Rx destination, multiple answers allowed)
Likely driven by the Express Scripts fallout
© Copyright 2013 Kantar Retail
Majority of Express Scripts Shoppers Switched Pharmacies
Source: Kantar Retail ShopperScape®, February 2012 17
*Note: small sample size (n = 126)
Only 9% of respondents claimed to sign up for Walgreens Prescription
Savings Club
Only 9% of respondents claimed to sign up for Walgreens Prescription
Savings Club
© Copyright 2013 Kantar Retail
CVS and Supermarkets Gained the Most Script Traffic From Split
Source: Kantar Retail ShopperScape®, February 2012 18
*Note: small sample size (n = 85)
Rite Aid only gained 9% of customer pharmacy traffic, well
behind competitors such as Walmart and CVS.
Rite Aid only gained 9% of customer pharmacy traffic, well
behind competitors such as Walmart and CVS.
© Copyright 2013 Kantar Retail
Target Has Most “New” Rx Shoppers
19Source: Kantar Retail ShopperScape®, June 2012;, target.com
Among Current Rx Shopper Base, % Who Has Changed Place Where Most Rx
Filled in Past Year; June 2012
Target 30%
Mail Order/Online Pharmacy Associated with Insurance Plan
18%
Supermarkets 17%
Walgreens 16%
CVS 16%
Walmart 15%
Other Retailer Types, incl. Clubs 14%
Rite Aid 14%
Nearly one-third of Target’s current Rx
shopper base is new in past year
Nearly one-third of Target’s current Rx
shopper base is new in past year
Same proportion of Walgreens and
CVS Rx shopper base is new in past
year: about 1 in every 6 shoppers
Same proportion of Walgreens and
CVS Rx shopper base is new in past
year: about 1 in every 6 shoppers
© Copyright 2013 Kantar Retail
TGT Pharmacy Rewards Differentiated Draw
Target Walgreens CVS Walmart Supermarket
Gift card/discount offer w/new or transferred Rx*
Better customer service
Previous store no longer accepted insurance
Previous store no longer accepted insurance
Previous store no longer accepted insurance
Ability to do more one-stop
shopping
Easier shopping experience
Previous store no longer
convenient
Ability to do more one-stop
shopping
Ability to do more one-stop
shopping
Better customer service
New store opened that’s
more convenient
Better customer service
Offer free/discounted generic drugs
Easier shopping experience
Easier shopping experience
Previous store no longer
convenient
Easier shopping experience
Previous store no longer
convenient
Offer free/discounted generic drugs
Express Scripts impact also evident
20
Top Reasons Retailers Gained New Rx Shoppers, 2012
Source: Kantar Retail ShopperScape®, June 2012
*Read as: The top reason why shoppers who previously used a different provider for filling most Rx but now get most Rx filled at Target changed to Target is gift card/discount offer
© Copyright 2013 Kantar Retail
Target Expands Pharmacy Rewards
– Now open to all guests– For every 5 Rx filled, guests receive a 5% off
total purchase for a future visit– REDCard holders stack the 5% on top of their
everyday 5% for a total of 10%– Supports E4 (Easy, Experience,
Educational, Engaging) renovation pilot program/ redesign in OTC
21
Beyond REDcard holders in April 2012
Source: Target documents, Kantar Retail analysis and store visits
© Copyright 2013 Kantar Retail
How Did This Affect Walgreens?
22
© Copyright 2013 Kantar Retail
Walgreens 2012 CompsThe loss of Express Scripts traffic significantly impacted both FE and Rx comps
Source: Company reports, Kantar Retail analysis 23
Walgreens leaves
Express Scripts network
Walgreens leaves
Express Scripts network
© Copyright 2013 Kantar Retail
Walgreens and Alliance Boots Partnership Lead to Agreement with Express Scripts
Source: Company reports, Kantar Retail analysis 24
Synergy Opportunity
© Copyright 2013 Kantar Retail
Walgreens Attempts to Regain Shoppers with Balance Rewards
Source: Kantar Retail ShopperScape®, August2012 25
Balance Rewards launched as the dispute came to an end.
How likely are you to move your prescriptions back to the Walgreens
pharmacy?
(among shoppers who moved prescriptions from WAG at end of Express Scripts partnership)
Sample size 296
Extremely/somewhat likely 48%Not very/not at all likely 41%
Don't know 12%
If Walgreens had a loyalty card, would that make you more likely to move your
prescriptions back to Walgreens?
(among shoppers who moved prescriptions from WAG at end of Express Scripts partnership)
Sample size 296
Yes 34%
Maybe 39%
No 27%
Read as 48% of all shoppers that moved their prescription to another pharmacy due to Walgreens' split with Express Scripts said they are extremely or somewhat likely to move their prescriptions back to Walgreens now that the partnership has been restored.
Read as 34% of all shoppers that moved their prescription to another pharmacy due to Walgreens' split with Express Scripts said that if Walgreens had a loyalty card they would be more likely to move their prescriptions back to Walgreens now that the partnership has been restored.
As of January 2013 Balance
Rewards registration was at 55 million
As of January 2013 Balance
Rewards registration was at 55 million
© Copyright 2013 Kantar Retail
Walgreens is Regaining Shoppers at a Much Slower Rate than Originally Expected
Source: Company reports, Kantar Retail analysis 26
Total Year 2012 Effects
Sales Change -0.8%
Rx Sales Change -3.1%
Total Comp -3.6%
FE Comp 0.6%
Rx Comp -6.1%
Script Comp -5.1%
Walgreens did not regain shoppers as quickly as anticipated, but is
well positioned for 2014
Walgreens did not regain shoppers as quickly as anticipated, but is
well positioned for 2014
Source: Walgreens 1Q 2013 earnings presentation
© Copyright 2013 Kantar Retail
CVS Expects to Retain Majority of Express Scripts Transfers
Source: Company reports, Kantar Retail analysis 27
• Gained 24 million scripts
• ~ 4.0% of comps (total 7.8%) attributed to the Walgreens/Express Scripts impasse
• 85% of gained Express Scripts members are now enrolled in ExtraCare
CVS now expects to retain 60% of scripts
gained – more than the 50% originally expected
CVS now expects to retain 60% of scripts
gained – more than the 50% originally expected
Effects will continue into 2013, impacting same store scripts and pharmacy sales
Effects will continue into 2013, impacting same store scripts and pharmacy sales
© Copyright 2013 Kantar Retail
Implications– Demonstrates the effect that changes in the health
care landscape can have on retail pharmacy• Increasingly important with the imminent health care
changes
– Retailers will continue working to retain shoppers into 2013
• Suppliers should do what they can to drive traffic, grow the basket, and offer value to help keep shoppers
– Alliance Boots partnership not only lead to an agreement with Express Scripts, it sets them up for new growth potential beyond the typical reliance on retail pharmacy
Source: Kantar Retail analysis 28
© Copyright 2013 Kantar Retail
Learn more about urban retailing
Join us at our upcoming event we’ll take an interactive look at the urban retail opportunity and experience
–We will look at the developing urban formats and learn by example:
• ��How do merchandising and communication change in the new urban store?
• What are the display opportunities compared to ��conventional customer formats
• Are there new and different opportunities for cross-��merchandising and marketing?
• Which categories and departments grow, and which are ��challenged for space?
29
– Kantar Retail Experts will lead guided store tours and workshops to bring perspective and insight to help you capitalize on this unique and emerging opportunity.
© Copyright 2013 Kantar Retail
245 First StreetFloor 10Cambridge, MA02142
F +1 617 499 2723www.KantarRetailiq.com
Jessica Campbell
D +1 617 912 2874
Analyst