Global Retail Innovation: Ten to Watch 2007

3.4 Premium and Value Added Retailing

Thought for the day...

1. Premium retailing has traditionally been about exclusivity, with retailers and suppliers focusing on core premium customers to drive sales. However, as interest in value-added ranges grows, those involved in the premium equation will need to consider how to extend their customer reach without diluting their proposition.

2. With consumers making purchases at both the premium and discount end of the price spectrum, how well placed are your products to meet these needs? Brands that lack a clear positioning or are squeezed in the middle ground are in danger of losing out.

3. Wellbeing, health and nutrition are set to be key themes in premium retailing and those that are able to demonstrate a real and true commitment to this could win favour in the eyes of the consumer. What is your business doing to capitalise on these trends?

4. In many cases, premium equates to fine food products, expensively packaged both in terms of production costs and the environmental impact of materials used. How can you create a premium product or proposition that is good for customer health, your bottom line and the environment?

3.4.1 Why will this be a Key Theme in 2007?
In order to escape the deflationary spiral of price reductions occurring in several global markets, many businesses have embraced the fast-growing premium end of the market. In some cases, this has led to a full scale change in strategy, although in many cases premium diversification has merely involved adding another revenue stream to existing operations. So, growth appears to be taking place principally at both ends of the market, leading to a squeezed position for those operating in the middle ground. In this context:

• Many smaller players are now focusing on differentiation as a means of creating a compelling proposition. Product quality and origin is likely to become increasingly relevant in 2007 with some consumers willing to pay more for quality assurances. The 2007 ‘Ten to Watch' series includes several examples of successful differentiated retailers such as Macro Wholefoods in Australia and Deli de Luca in Norway.
• Smart shopping is becoming increasingly commonplace in the grocery industry. In the so-called ‘hourglass economy' consumers are simultaneously seeking extreme value in commoditised items, often through discount purchases, whilst trading up into premium and luxury lines for discretionary purposes, often through standard supermarket operators or specialist food stores.

Extract from Chapter 2: Retailer Profiles

2.8 Shoppers Drug Mart

Summary, at financial year end 30th December 2006

Turnover: CND$7,786 million Operating Income: CND$684 million

US$6,868 million US$565 million

% turnover in home market: 100% No. of operating countries: 1

No. of stores: 1,045* Sales area (sqm): 808,550

Head Office: 243 Consumers Road Ownership: Public

Toronto, Ontario President & CEO**: Jürgen Schreiber

M2J 4W8

Canada

Website: www.shoppersdrugmart.ca

*At end of FY2006 (30.12.06), made up of 987 drug stores and 58 Home Health Care stores

**Replaces Glenn Murphy at the end of March 2007

BUSINESS OVERVIEW
Shoppers Drug Mart is Canada's largest pharmacy chain, operating over 1,000 stores across Canada (operating under the Pharmaprix fascia in Québec). It is a highly innovative retailer, particularly in respect of store format development, private label and its Shoppers Optimum loyalty card.

SUCCESS FACTORS
Store Expansion and Format Development

• Shoppers' store network (in terms of drug store selling space) grew by 10.6% in 2006, with 95 new stores opened or acquired, 48 of which were relocations. The company is also seeking to open larger stores in order to increase the range offered, with a target of +10% new space each year for the next 5 years.
• The business also focuses on differentiated products and services within its stores, such as its Healthy Living departments, which are staffed by natural nutritionists and feature organic and remedies. In 2002, the company also introduced the Beauty Boutique concept; a dedicated area of the store for the sale of prestige cosmetics and fragrances. There are now 95 Beauty Boutiques, with 50 more planned for 2007.
• Shoppers Drug Mart also operates a network of 58 standalone Shoppers Home Health Care stores, making it Canada's largest retailer of home health care products and services.
• All pharmacy services (such as prescription dispensing and patient counselling) are operated under the Health Watch sub-brand, which offers patient counselling on medications and disease management.

Private Label

• Shoppers Drug Mart operates two principal private labels, Life Brand and Quo, with over 2,400 SKU.s, currently equating to c 14% of non-pharmacy sales. This is being developed through a typical .good, better, best. strategy, consisting of Life Brand Essentials, Life Brand/Quo and various premium sub-brands respectively.
• Life Brand is designed as a cheaper alternative to branded products, covering the health, beauty, household cleaning and baby categories. The brand is also increasingly being extended into convenience food products, such as snacks and bottled water. The Quo cosmetics brand is a range of stylish products designed to make .make-up a breeze..

Loyalty Card Programme

• Now in its 7th year, the Shoppers Optimum loyalty card is one of the largest customer loyalty card programmes in Canada, with 7.8 million active card holders. Combined with category management software, Shoppers is also using the data to target specific customer segments and offer targeted marketing campaigns.
• Customers receive 10 points for every $1 spent, with bonus points also offered on products throughout the store. Points can then be redeemed in store in the form of a cash saving, or alternatively can be donated to a wide number of Canadian charities.

About this research

This is an extract from IGD's Global Retail Innovation: Ten to Watch 2007 research (published February 2007). It is available as a single-user PDF, on CD-Rom, or through their premium online format iReports.

SUMMARY OF CONTENTS:

• IGD's ‘Ten to Watch' Series – Background and Analysis
• Retailer Profiles

2.1 Amazon
2.2 Biedronka
2.3 Cook
2.4 Deli De Luca
2.5 Macro Wholefoods
2.6 Migros
2.7 Reliance
2.8 Shoppers Drug Mart
2.9 Shoprite
2.10 Wawa

Key Themes and Actions Points for 2007
3.1 Identifying Key Themes for 2007
3.2 Sustainability and the ‘Green Agenda'
3.3 Format Innovation and Differentiation
3.4 Premium and Value Added Retailing
3.5 Branding and Communication Strategies>

A full contents list is available at:
www.igd.com/tentowatch

Source: Global Retail Innovation: Ten to Watch 2007 , IGD, March 2007
 
IGD is an international food and grocery expert providing information to the food and grocery industry. Visit www.igd.com http://www.igd.com