Kelly Perritti is shopping. A mom to two small girls under the age of ten, she’s a regular customer at this CVS in North Arlington, New Jersey, browsing the aisles here for multiple products — everything from prescriptions to printer ink to milk. So you’d think she would have been aware of the changes the company has made lately.
“I haven’t actually noticed,” she said.
CVS wants to be seen as healthy, so it's been making changes of late in an effort to distinguish itself in the minds of consumers. But the new initiative has been understated and the changes are subtle. In this store, like in many others, CVS has moved some candy away from those low shelves by the cash register. But only about a quarter of it. For retiree Joe King, who has diabetes, heading to the checkout counter is still a danger zone.
“My Almond Joys are there, my Chunkies are there, and my Mounds are there. Let me get out of here, quick,” he said.
The company has also removed transfats from its store brand food products. But why all these small changes now? They’re connected to a decision CVS made three years ago, which Perretti did notice.
“I know that they stopped selling cigarettes, which was excellent. It was just wonderful,” she said.
But losing tobacco products was expensive. The move cost CVS $2 billion dollars in lost sales from 2014 to 2015.
“If they're going to make a big bet like that, it wouldn't make sense then to have other products that are perceived as unhealthy close to the front in an impulse position,” said Barbara Kahn, who teaches marketing at the University of Pennsylvania's Wharton School. Too many candy bars near the register could undermine the message CVS wants to send consumers, she said. “We’re you're healthy option. We're the ones that you can depend on because we're looking out for your health success.”
That message, said Kahn, is important because retail sales are headed down. It’s the pharmacy business that’s growing. CVS’ pharmacy sales rose almost 10 percent last quarter to more than $32 billion dollars. The company said it has close to 10,000 pharmacies and fills a billion prescriptions a year.
But setting yourself apart from the competition is tough.
“I would say overall drugstores are still a category that in the consumers’ minds are not incredibly differentiated,” said CVS Pharmacy President Helena Foulkes. “And that's partly why we're doing this.”
The hope is, Foulkes said, that the healthier offerings, as well as additional changes the chain is making in its beauty products will help the chain to stand out. "That more and more the consumer will start to give us credit for being unique in the marketplace, because again we're reflecting what she's looking for," she said.
First and foremost, said Foulkes, CVS is a health care company. "So that is the most important element of our business and that's the brand that is the overriding force for the company," she said. But for most Americans, health care has become increasingly complex. So the decision is also meant to make shopping easier.
"I would say that the level of complexity and stress for all Americans is increasing," Foulkes said. "Their lives are super complicated. They've got a lot to worry about financially. And so we want to in some ways keep their life as simple as possible and give them access to really good choices to make the decisions that they want to make ultimately."
But it's hard to make everyone happy.
Notes John Palizza, a former Walgreens executive, unless your brand name is something like Whole Foods, changes can be a turnoff for shoppers resulting in lost sales.
“And that is at direct odds with Wall Street investors,” he said. "Who have, you know, the attention span of a mayfly." Those investors want profits, now. But CVS said it is seeing an increase; overall, sales are up 2.5 percent so far this year at its new stores, and it plans to update 80 more stores this year.
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