Retail Spotlight: ever widening pharmacy ranges blur channel boundaries


In the third Retail Times and Euromonitor International Retail Spotlight feature, Jon Wright, head of retailing research at Euromonitor International, reports on the trend to parapharmacies as pharmacy stores extend and expand their product range and reach

Parapharmacies and drug stores extend their reach around the world

Parapharmacies and drug stores extend their reach around the world


Newspapers have been full of calamitous stories highlighting retailers’ decisions to close stores in order to concentrate on fewer outlets and their internet sites. However, one channel has bucked this trend. Operators of parapharmacies/drug stores have been adding stores at a phenomenal rate on a global basis, even in developed markets where overall store numbers have been falling.

Underlining how consumers continue to be attracted by what the likes of Dm, Walgreens and Matsumoto Kiyoshi are doing, the channel has been enjoying year-on-year rises in sales per store. Globally, sales growth in parapharmacies/drug stores is being driven by the addition of new stores, new products and, in developed markets, the expansion of increasingly sophisticated private label ranges; while macro factors like an ageing population and rising urban populations are also helping.

Growth globally but an explosion in Latin and North America

At a global level, the parapharmacies/drug stores channel has seen its share of total retailing sales rise by 40 basis points since 2006 to account for 3.5% of value sales in 2011. However, in Latin America and North America, the channel achieved share gains of 160 and 140 basis points, respectively, over the same period, showing how its evolution is impacting sales growth elsewhere in store-based retailing.

Within Latin America, Brazil has been the major driver of growth. In the country, the broad diversity of products on offer has made parapharmacies/drug stores preferred outlets for consumers. However, health and beauty items remain the most important, accounting for 30% of the revenues of large networks, and this share is creeping higher, encouraging operators to build bigger stores.

Meanwhile, in North America, the region’s largest chains are taking the format’s evolution further, bringing them into direct competition with a growing number of retailers. In 2011/2012, Walgreens has been the main driver of change. The company’s chief executive, Greg Wasson, has said it aims to be the “first choice for health and daily living needs” and the “convenient providers of health care, not just prescription drugs”.

The notion of convenience is becoming ever more important for cash-strapped consumers, encouraging many to shop closer to home, particularly at a time of high petrol/gas prices. Walgreens, with over 8,000 stores at the end of 2011, is often one of the most convenient places for consumers to shop, while one of the company’s newest stores, in Chicago, offers consumer food service options alongside a wider range of goods, showing how the company will increasingly compete against grocery stores of all sizes.

Outlook suggests recent growth of parapharmacies/drugstores will continue

Although growth rates in terms of sales and store numbers are set to slow in future, the parapharmacies/drug stores channel is forecast to continue to account for a growing share of consumers’ overall store-based retailing purchases.

The strongest expansion is expected to be seen in Latin and North America, with support from the Middle East and Africa. As retailers within the channel adopt some of the strategies seen elsewhere; be it to concentrate on beauty ranges, as in Brazil; or widen their assortment, as seen in the US; the channel is likely to attract a growing number of consumers. While this will be positive for retailers operating within the channel, it will be another headache for hypermarket and supermarket retailers, which are likely to suffer from a continued decline in footfall.

Please note:

Euromonitor International’s definition of the parapharmacies/drug stores channel includes retail outlets selling mainly over-the-counter healthcare, beauty and personal care products, home care products and other general merchandise. Such outlets may also offer prescription-bound medicines under the supervision of a pharmacist. Examples include Dm and Rossmann (Germany), Kruidvat (Netherlands), Walgreens (US), CVS (US) and Matsumoto Kiyoshi (Japan).