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 --




Rite Aid

(RAD) - Get Report



(CVS) - Get Report

-- 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.


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.


Our fact-finding tour through the local CVS revealed that the store boasts a smaller selection of store-named products. This is neither a plus for the store nor for consumers looking for lower-priced items, and resulted in CVS falling in last place in our admittedly unscientific tally.

Still, consumers in our store would find their deals on better-known names like Neutrogena and Herbal Essence, which allowed CVS to score high in the cosmetics/hair care category.

It also featured a huge 50% to 75% off promotion on cosmetics like Revlon and Physicians Formula.

CVS had a larger selection of seasonal items -- such as beach chairs, outdoor toys, gardening equipment and grilling supplies -- than did its competitors. Heading into the 4th of July weekend, this could turn into a big plus for CVS if the weather manages to stay dry.


Our sleuthing through Walgreen confirmed that the store does the best job "tricking" its consumers with its "Compare & Save" campaign. It wins on price, and so it took first place in our tally.

Throughout the store, Walgreen-branded merchandise is strategically placed next to comparable name-brand items. The catch: based upon the packaging, it's hard to tell which is which.

It's therefore quite easy to be drawn to Walgreen's Cold and Flu tablets for $5.49 instead of DayQuil's pills at $13.99, or Walgreen's $5.99 decongestant instead of Tylenol Sinus for $7.99.

Management for the chain, in general, says it's working on tight inventory control, with about 18% of its total SKU count already eliminated. And that seemed to be the case in the store we visited.

Inventories were lean and a majority of the store was Walgreen-branded items. Everything from paper plates and stain sticks to ice cream and glass cleaner were branded with the Walgreen's logo. The only downfall, shoppers looking for some of their favorite brands may be disappointed.

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