Inside This Issue - Opinion
Walmart to put pressure on drug chains, supers
April 18th, 2011
The business leaders who gather at this year’s National Association of Chain Drug Stores Annual Meeting in Scottsdale, Ariz., will have a lot to discuss.
Ongoing efforts to expand the reach and impact of community pharmacy, the still fragile state of the economic recovery and the uncertain course of public policy, especially as it relates to deficit reduction and tax policy, head the list. It’s likely they will also find time during the strategic exchange sessions that are the heart of the event to consider another development that has the potential to alter the competitive balance — Walmart’s plans to shore up its domestic operations.
Already the biggest retailer of food and health and beauty aids and the No. 3 dispenser of prescription medications, the Bentonville, Ark.-based company has in recent weeks unveiled a series of programs that promise to make it an even more formidable rival for drug store and supermarket operators. Walmart will soon begin opening a series of small-format stores designed to extend its reach in both urban and rural areas.
The outlets will offer a variety of merchandise, including fresh food and, in many locations, prescription drugs. As described by Bill Simon, president and chief executive officer of the retailer’s U.S. business, a Walmart Express outlet, at about 15,000 square feet, that includes a pharmacy sounds an awful lot like a chain drug store.
If that weren’t enough, Walmart has reaffirmed its commitment to the principle most responsible for its success — “delivering low prices every day, on everything” — and making its outlets destinations for one-stop shopping. The initiatives will be backed by the return of many products to store shelves that had been removed in a misguided attempt at SKU rationalization, and a simplified ad-match guarantee. If execution in the field matches the vision at headquarters, Walmart should be able to reinforce the price advantage that has long been its greatest strength and close the convenience gap with retailers that have, up until now at least, operated smaller stores.
For drug chains in particular the challenge will be formidable. Their pharmacies will confront competition from Walmart in neighborhoods that it previously couldn’t penetrate, and convenience will no longer be the selling point that it once was. In response, members of the trade class will have to find new ways to maintain their edge.