New competitors

In the past drugstores were independent pharmacies that were not much bigger than local hardware stores, so there was not a lot of space for non-drugstore items. But now drug chains dominate the market, and are opening bigger stores with substantial seasonal promotional space for garden products, Christmas decorations and outdoor living/barbecues. One of the reasons for listing such products is the higher margin they offer (25 to 50 per cent); only 19 per cent can be achieved with pharmaceuticals. With the US drugstore business dominated by six big firms (CVS, Osco, Eckerd, Walgreens, Sav-On Drugs and Longs), and with them all trying to rapidly expand and dominate neighborhood shopping, hardware stores find themselves facing some stores which are newly built, clean, air conditioned and brightly lit, operate around the clock, advertise weekly in colorful circulars promoting seasonal items in particular, and offer convenient locations with free, store-side parking. As the number of independent hardware stores has declined over the past decade, the number of drugstore units has been exploding. Today the National Retail Hardware Association estimates there are 20 700 hardware stores – down from 34 000 two decades ago – plus about 10 000 home centers and 11 000 lumberyards. The six biggest drug chains operate more than 11 000 stores. How are the chain drugstores choosing to compete?
 They are selecting products appealing to both men and women that are relatively low cost, prepackaged and easy to carry out.
 Most items sold do not require explanation; these are strictly self-service stores.
 Many of these stores are open 24 hours and sell convenience food items (bread, milk, juice, coffee, snack goods, etc.), which makes them appeal to customers in a hurry.
 Most of the newer stores being opened are big (1 400 - 2 300 m²).
Varying space allocations Walgreens appears to be the chain most committed to competing with traditional stores. Its seasonal garden space, for example, is at least five metres of gondola space, plus additional space for charcoal grills and other outdoor living articles. Tools, small electricals and small plumbing items each have 1.2 m of display area, though light bulbs alone occupy a space of 1.2 to 1.8 m. Also represented are auto care products (1.2 to 2.4 m), cleaning products (2.4 to 3.7 m) and housewares, including electric appliances. The CVS and Osco drug chains devote somewhat less space to basics, but both also commit about the same…