The Shopping Spy: Inside the Drugstores

It is, by now, a truism that drugstores are struggling with sales of non-pharmacy items, as their consumers make do without discretionary products like cosmetics and hair care.

At all three public drugstores -- Walgreen(WAG), Rite Aid(RAD) and CVS/Caremark(CVS) -- pharmacy sales are far outpacing sales at the front end.

In Rite Aid's first quarter, pharmacy same-store sales grew 1.6%, while front-end comparable sales declined by the same amount. Walgreen reported a 3.8% uptick in its pharmacy same-store sales in the third quarter, while comps at the front-end rose a measly .9%.

But numbers only tell so much of the story. Indeed, in the retail world, there is much to be learned by walking the floor, observing the inventory levels, the product mixes, the promotions and overall consumer reaction. Eyeballing the aisles can also reveal whether what management is saying hews to how the stores are actually performing.

With that in mind, we bring you our first on an ongoing retail-sector series: The Shopping Spy -- a column we've launched with a visit to the big-three drugstores, in an undisclosed neighborhood in New York City, to see what exactly is going on at the front end.

The Shopping Spy: Drugstore Rankings

RITE AID: Based on our spy mission to Rite Aid, it was immediately clear that the drugstore is winning with its store-branded merchandise. Fewer Rite Aid-branded items were left on the shelves compared to similar name-brand products, especially in toiletries like body wash, moisturizer and tooth brushes. Consumers, apparently, would rather pay $2.79 for a Rite Aid-brand moisturizer than $4.19 for an almost identical Vaseline version.

But Rite Aid appears to be struggling with its premium products. Higher-priced shampoos, for example, were being heavily discounted. The drugstore featured John Frieda shampoos at buy-one-get-the-other-half-price deals. There were also sales on Caress and Dove body wash, Kellogg's cereals and name-brand coffee like Starbucks.

It's weakest category was digital photography; none of the printing machines were in order when our spy visited the store.