We love Shoppers

It's okay to envy Shoppers Drug Mart. They've earned it.

It’s okay to envy Shoppers Drug Mart. They’ve earned it.

Over the past few years, the over 40 year-old brand with more than 925 stores across the country has gone from functional to fabulous. The most noticeable shift: replacing crammed, uninteresting stores with airy, bright, gorgeous spaces punctuated by aisles stocked with merchandise that you could spend hours indulging in. Yes, the last dash of whimsy was intentional. Because what Shoppers has managed to do – and why it gets our nod as the Brand of the Year – is transform picking up a prescription into something verging on reverie – and we suggest, in the process,

helping redefine the Canadian shopping experience.

With the glammed-up

in-store experience has come a deliberate move away from mass marketing.

‘Mass marketing is old fashioned, inefficient and expensive,’ says chairman/CEO Glenn Murphy. ‘It’s more suited to mass retailers. Customers and patients know our brand and frequent our stores, and with 1,000 outlets and close to one million transactions a day, we are our own medium.’

Indeed, a Shoppers store is a medium, and it’s a strategy that has worked incredibly well, says Chris Lund, CEO of retail strategy consultant Perennial.

‘Their big strategy shift is away from mass market to saying: ‘Our stores are where we’re going to build our brand,” says Lund. ”We’re going to build large, fabulous stores, where people can see the iconography and the façade from blocks away. The stores are going to be triple and sometimes quadruple the size they used to be – and we’re going to get really good in a handful of categories,” he says, in addition to its pharmacy, beauty, private label products and convenient food.

The extreme makeover started in 2001 with the arrival of Murphy to the top spot. Since, not only has the turnaround included bigger and better-designed locations, but better merchandise, a strong push on high-end cosmetics and greater investment into the brand’s private label products. (Penetration is ‘north of 13%,’ says Murphy, and in late 2004 it was 12%.)

It’s an effort, in these times of retail cross-pollination, which has positioned the company to take on the likes of Wal-Mart and, coincidentally, Loblaw, which was Murphy’s old stomping grounds for 14 years.

‘The other secret to their success is a major strategic transformation away from mass advertising where they were spending a fortune – [to] advertising messaging around things they think are relevant consumer positioning,’ says Lund. ‘So they advertise their points program and things going on around Optimum. That’s their unique offering in the marketplace and something that is worth celebrating.’

In fact, while speaking at Scotia Capital’s 10th annual Back to School Conference titled, ‘Focus on the Consumer’ in September, Murphy said the brand will become even more of a niche marketer. ‘We’ve pulled out the weekly flyer [which goes to 9.3 million households] and have been testing, using the Optimum card data, to create something brand new,’ a 24-page booklet with a lifespan of about three weeks based not on timelines, but on the psychology of how people shop. Market research began in Saskatoon, Sask. and London, Ont. this summer. How golden is the Optimum data? The seven-year-old program, which now touts about 7.6 million mainly female active users, was used, for example, to launch the brand’s very successful

line of magazines: first Glow, and

in the past two years Teen Glow and

Glow Health.

But the brand is on the prowl for more users. Starting in Quebec this fall, and rolling out across Canada in 2007, a personalized card – with the user’s name – will be introduced.

‘The goal is…to market to people based on what they’re thinking,’ said Murphy in his speech. ‘So, in a

three-week period, there would be a 600,000 person drop on babies, depending on who [needs it], based

on their purchase habits and lifestyle. So you can launch a macro,

three-to-four week marketing program and supplement with direct mail depending on your purchase habits and where you are at that moment in your life.’

JC Willams Group’s retail analyst John Torella is taken by the smarts behind the program. ‘It has [put them] in a leadership position,’ he says. ‘And the way that they have converted that to advocacy and traffic and intent to purchase, I think are all very innovative – and that’s in addition to outstanding financial performance.’

Second quarter results released in early October revealed same-store sales growth of 7%. Fiscal sales over 2005 were $7.2 billion and the company has been enjoying solid single-digit sales increases since Murphy joined in 2001.

Now plans are in the works to open a maximum of 300 new stores over the next five years, with most being between 12,000 and 14,000 sq. ft. and up. Today the average store is 8,300 sq. ft. It’s part of an aggressive real estate strategy that currently sees 35% of its stores over 10,000 sq. ft. and plans to invest in revamping about 450 of the other stores. (Murphy has said that they’re not sure if the remaining 200 are worth expanding.) ‘Their move into these larger store formats, where they’re going to move into pick-up and occasional food in a big way, is a very insightful way to leverage their traffic,’ says Torella.

And expect the momentum to continue. In September they announced the hire of Jurgen Schreiber as president/COO. A former CEO of European operations of A.S. Watson, one of the world’s largest health and beauty retailers with more than 4,000 stores, analysts expect Schreiber to usher the company to the next level. The rumblings have also begun that he may just be the man to spearhead expansion south of the border as he was responsible for A.S. Watson’s lofty acquisitions and also helped it significantly grow its cosmetics and fragrance business.

‘I think he’s going to mean more depth in businesses they’re just entering,’ Lund suggests. ‘What I like about him is he has really good experience in international markets. So when you look at things like cosmetics, when you look at categories like general merchandise, he has global experience with the Unilevers, with the [Estée] Lauders, access to Asian, South American, Western European markets. I think that will mean a lot for Shoppers as they continue to continue to throw gasoline on this fire that they’ve built.’

He adds: ‘I’m hopeful for them that he will be Dave Nichol-esqe, as in ‘I’ve traveled the world, and here are some really interesting products I want to bring into the Life Brand.’ I think that would be wonderful for Shoppers.’

Coincidentally (or not) on the heels of the Schreiber announcement came news that Shoppers has made some serious inroads into the coveted prestige cosmetics arena, inking at long-term deal with Clinique to sell its products in the chain’s Beauty Boutiques. In the past 12 months, 35 new Beauty Boutiques were added. There are now 100. In 2002, the company had deals with 15 prestige brands, now, it’s 34. With it, their share of the market has jumped to 15% from 5% four years ago.

‘They have materially taken the momentum away from department stores and even some specialty stores that used to be very strong in cosmetics,’ says Lund.

‘I don’t know a female who doesn’t view a Shoppers Drug Mart the way some men view Canadian Tire.’