SDM's strengths at work to maintain Canada leadership

Drug Store News, Feb 2, 1991

SDM's strengths at work to maintain Canada leadership

WEST VANCOUVER, B.C. -- London Drugs shouts low price and one-stop variety. Pharmasave is the neighborhood drug store with some chain advantages. The Real Canadian Superstore promises rock-bottom Rx prices.

Where does that leave Shoppers Drug Mart in far-western Canada? In the same position it holds nationally: as the top drug store player. Shoppers has roughly 160 stores in the four western Canadian provinces, including 80 in British Columbia and 41 in the Lower Mainland. Those units account for 41 percent of the HBA market and 28 percent of total drug store sales in the greater Vancouver area, according to Shoppers West vp-marketing Greg Harmeson.

But Shoppers has to fight for every point. Its challenges come not only from a thicket of tough competitors, but also from a briar-patch of regulations--including a meager dispensing fee which hasn't gone up in roughly five years.

The bigger threat

"This is probably the most competitive market in all of Canada . . . and I think the government is a bigger threat to us than the competitors," said Shoppers West president Dave McDonald. "We're a minimum of 10 points off our [company average] gross margin at pharmacy."

The squeeze in Rx margins stems from both government and competitive pressures, with big superstores like Real Canadian eliminating copays to draw pharmacy customers away. Said McDonald, "The only way for an independent to survive here is to be part of a group, unless he's doing something exceptional."

For its part, Shoppers has fought back with cost controls, economies of scale, effective marketing of its image and--perhaps most importantly--the best operating and merchandising systems it can field to support its franchisees. Even its competitors agree the chain's systems are extremely effective.

"We do a full market track study before we move into an area, and we'll establish a merchandising plan based on that," said Harmeson. "We've got a new `toy' with the Apollo (planogram) system."

The ultimate aim: what Harmeson calls "category rationalization" -- determining the profitability of every product.

Even now, he said, the chain buys almost exclusively on deal to improve margins, and it is "starting to control the mix more, just to push the most profitable items" by "feeding in POS information."

Shoppers also hits hard with advertising--52 circulars a year--and with unadvertised specials in the store to draw traffic. "At any given time, there may be as many as 500 sale items in the store, vs. only about 100 in the flyer," Harmeson explained. Maintaining in-stock levels is a big priority, he added.

The chain has an arsenal of other market strengths, as well--not least of which is its powerful name and trusted image. "The keystones of our business are convenience, selection, savings and service--we know we have to be the best in service and convenience," McDonald said.

PHOTO : Shoppers Drug Mart accounts for 41 percent of the HBA market and 28 percent of total drug store sales in the greater Vancouver area. The chain relies on convenience, selection, savings and service.