CDMA buoys regional chains' front end

March 21, 2005

Toys. Hardware. Digital photography. Concentrating on these three niche areas can provide regional drug chains with a way to increase their front-end profitability.

Toys. Hardware. Digital photography. Concentrating on these three niche areas can provide regional drug chains with a way to increase their front-end profitability.

This is the contention of Jim Devine, president of the Chain Drug Marketing Association (CDMA). The 79-year-old organization represents small and regional pharmacy chains. CDMA's primary purpose is to support its members' marketing and purchasing efforts through trade shows, a private-label program, and strategic alliances. The association is busy ramping up its alliances and programs to help its members increase their front-end profits.

Acknowledging that mandatory mail order has cut into pharmacy profits, Devine said, "Front end is becoming much more important to our members, especially those who have stores with 5,000 square feet or more, and we have a lot of these members. We are trying to do things that we haven't done for a long time or that we have never done."

Devine was also enthusiastic about CDMA's alliance with True Value, the hardware company. This alliance provides CDMA members with special deals on merchandise.

Fifty-two of CDMA's 98 members have put up a one-time fee of $1,500 to become CDMA/TrueValue members. In addition to hardware items, CDMA/True Value members gain access to a wide variety of merchandise from True Value, including plastic ware; Rubbermaid; household appliances from manufacturers such as Sunbeam, Homedics, and Mr. Coffee; and personal care appliances such as Conair and Vidal Sassoon. The mix also includes seasonal items for Halloween, Christmas, and Thanksgiving, as well as items that sell well in the spring, such as birdseed and garden seed.

CDMA has also struck an alliance with the Photo Marketing Association (PMA), which Devine believes will benefit members. Devine pointed out that when digital photography was introduced, many pharmacies "thought it was the end for their photo processing. It turned out not to be true at all-at least for the people who have stepped up to the plate with in-store digital kiosks. Digital photography is a bigger business today than photo processing was," said Devine.

PMA recently made a presentation to CDMA members to offer advice about how to grow this profitable category. Devine said there is a host of accessories that pharmacies can sell, including T-shirts and coffee cups, for digital photos to be printed on.

Devine believes regional chains can derive hefty profits from beefing up their toy offerings. CDMA has an alliance with Worldwide Distributors, a toy supplier, and is offering members direct import pricing on over 700 toys that are brought in from China.

Members can also obtain soft goods such as sweatshirts, pajamas, underwear, gloves, coats, jackets, and T-shirts. "The soft goods area is a really big category, and that includes men's, women's, and children's clothing," said Devine.

Besides new programs in toys, photography, and hardware, CDMA is introducing a savings discount card called Quality Choice Healthcare Savings Card. The card offers consumers three tiers of benefits at three different price points: $6.99 entitles consumers to discounts on prescriptions, dental, and vision benefits; $19.99 offers hospitalization and emergency room visits; $49.99 qualifies consumers to purchase insurance. "We sell the card to members and they can sell it to consumers or area businesses. It's a great business-to-business opportunity for our stores," said Devine.

CDMA is also endorsing a national program for its membership, called Caregivers, in which caregivers or relatives of patients receive rebates on products.

What is the greatest challenge facing CDMA today? Devine, who has been at the helm of CDMA for 15 years, said that many of the larger regional chains have been acquired by even larger chains. "Our job has gotten harder. The biggest job I have is trying to convince the manufacturers to support the regional chains. They concentrate so much on their top five or six accounts."