March 10, 2008
Kmart Looks to Rx/OTC Combo to Trump $4 Generics
Kmart has long maintained that its low-cost prescription medicine program is superior to Wal-Mart’s $4 generics plan. Its plan, Kmart maintains, is more convenient because it covers 90 days worth of meds for just $15. Wal-Mart’s plan and others that have matched it, offer a 30-day supply of generics for $4.
Now, Kmart is intent on further differentiating from the competition by offering consumers who fill a prescription at one of its pharmacies the option of buying 10 popular over-the-counter (OTC) private label medicines for just $1 each.
The items sold, under the American Fare brand, include ibuprofen, children’s pain reliever, nasal decongestant, cough suppressant, cold and allergy tablets. The 10 items normally retail from $1.49 to $4.49.
“We’re not aware of anyone else that’s doing this so we really do think it’s innovative,” Mark Doerr, vice president of Kmart Pharmacy, told Reuters.
Discussion Question: Will the combination of Kmart’s 90-day Rx generics program with its $1 OTC private label offer be enough to cause consumers to switch to the chain’s pharmacies from other retailers? How effective do you think this program will be in driving Kmart’s Rx and OTC medicine business?
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Prescription purchases are based on the following prioritized customer hierarchy: Location, price, and ease-of-purchase (nice clerks). Older folks buy the most prescriptions and are also the least likely to drive (or bus, or walk, or hitch) to a far-flung location to buy their meds. Bottom line? Location, location, location.
If no one is coming in the door, no one will take advantage of this offer.
Personally, I want to do business with a pharmacy that I feel like is going to be there in the future. The pharmacist is one of the most important health professionals in the system. They have the education and experience to prevent us from taking medications that conflict with each other. This is best done if all medications are dispensed by the same pharmacy so all information is available to the pharmacist.
When a “marketer” like Kmart tries to get you to fill a prescription by holding out some meaningless offer designed to get you to spend even more money on grossly overpriced generic/PL products, they are actually doing damage.
One of the reasons Kmart has failed is that they have relied on “Silver Bullet” marketing tactics like this for years. All short term fixes, no long range plan!
There was a time three decades ago when this would have given Kmart a great boost. But the various erosions that have occurred since then–and the loss of the public’s support–will make this latest Kmart move an “also ran.”
Let’s do the math: 90 days for $15 or 30 days for $4. So Wal-Mart is not only cheaper on comparable generics over the same 90 day period but also drives traffic into its stores monthly instead of quarterly. The Kmart response feels like a gimmick instead of a well-thought-out competitive response when it desperately needs more footsteps in its stores.
My opinion is that Kmart’s plan is too convoluted to accomplish the same objectives as the $4 generic prescription. History has shown that consumers want simplicity.
Certainly, people are price conscious so there will be some effect. There also needs to be an image and perception change. Most stores look tired, lackluster and low budget. Would you rather get your prescriptions filled at a bright, happening Walgreens or Wal-Mart…or a worn out Kmart?
Every thing Kmart does is too little, too late and just not enough. Many competitors have something similar so there is really no differentiation. Walgreens has 99 cent aspirin every day. Kmart’s low sales per square foot problem is so bad they might have to sell every Rx for $1 in order to get foot traffic into their store. I doubt this will have much impact, since Kmart has no meaningful market share.
Too little, too late is right. The offer could’ve pulled in traffic–especially aging boomers and recession-fearful families–if it had been done correctly.
First of all, as has been pointed out, the Wal-Mart offer is actually cheaper over the 90 day period.
Second, for consumers who are really strapped for cash, the absolute low price point of $4 (vs. $15, not including the extra dollar for the OTC) is a genuine driver.
Finally, it seems that Wal-Mart has the last laugh. The once-a-month model drives traffic more frequently to its stores.
Kmart! What Up?!
Kmart’s action may come into play in rural communities where there is not a Walgreens or Wal-Mart on every corner and Kmart is the only option within 30 minutes of driving, leaving this a good option for consumers in the area.
As a merchandiser for independent drug stores is such areas, this may be a great opportunity for independents to boost sales and grab customers sighting excellent customer service and fully stocked shelves to their advantage.
Ok, with regards to Kmart they always join the party after it has ended.
As for these $4 generics or whatever the latest gimmick is, they are fairly pointless. As someone who has invested a lot of time in the study of health care costs for our company, these programs do not address the real concern. The issue is the high price drugs such as Lipitor and Embryl which are not available in generic form. They are the real problem in health care.
I know the retail industry likes to push these programs as if they are part of the solution, but it is comparable to cutting your arm off and putting a band aid on it. It doesn’t slow down the rising costs.
Looks like we all pretty much have the same opinion. It’s amazing that there is someone at Sears/Kmart that has the job of coming up with these ideas and is actually getting paid for it.
We’d like to raise a different line of thought as we debate whether $1 OTCs will drive Rx shoppers to Kmart. What will $1 generic OTCs do for the OTC business? Will they basically give away OTCs they would have sold anyway? As pharmacy margins decline, can Kmart afford to dilute Rx margins? Never mind alienate branded OTC manufacturers. Feels like a lose-lose.
Why doesn’t Kmart just meet the competition? Copy Wal-Mart’s prices, item for item. Not just prescriptions. Everything, no exceptions. Not just when people point out the price differences. Everything. Every day. To everyone.
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Prescription purchases are based on the following prioritized customer hierarchy: Location, price, and ease-of-purchase (nice clerks). Older folks buy the most prescriptions and are also the least likely to drive (or bus, or walk, or hitch) to a far-flung location to buy their meds. Bottom line? Location, location, location.
If no one is coming in the door, no one will take advantage of this offer.
Personally, I want to do business with a pharmacy that I feel like is going to be there in the future. The pharmacist is one of the most important health professionals in the system. They have the education and experience to prevent us from taking medications that conflict with each other. This is best done if all medications are dispensed by the same pharmacy so all information is available to the pharmacist.
When a “marketer” like Kmart tries to get you to fill a prescription by holding out some meaningless offer designed to get you to spend even more money on grossly overpriced generic/PL products, they are actually doing damage.
One of the reasons Kmart has failed is that they have relied on “Silver Bullet” marketing tactics like this for years. All short term fixes, no long range plan!
There was a time three decades ago when this would have given Kmart a great boost. But the various erosions that have occurred since then–and the loss of the public’s support–will make this latest Kmart move an “also ran.”
Let’s do the math: 90 days for $15 or 30 days for $4. So Wal-Mart is not only cheaper on comparable generics over the same 90 day period but also drives traffic into its stores monthly instead of quarterly. The Kmart response feels like a gimmick instead of a well-thought-out competitive response when it desperately needs more footsteps in its stores.
My opinion is that Kmart’s plan is too convoluted to accomplish the same objectives as the $4 generic prescription. History has shown that consumers want simplicity.
Certainly, people are price conscious so there will be some effect. There also needs to be an image and perception change. Most stores look tired, lackluster and low budget. Would you rather get your prescriptions filled at a bright, happening Walgreens or Wal-Mart…or a worn out Kmart?
Every thing Kmart does is too little, too late and just not enough. Many competitors have something similar so there is really no differentiation. Walgreens has 99 cent aspirin every day. Kmart’s low sales per square foot problem is so bad they might have to sell every Rx for $1 in order to get foot traffic into their store. I doubt this will have much impact, since Kmart has no meaningful market share.
Too little, too late is right. The offer could’ve pulled in traffic–especially aging boomers and recession-fearful families–if it had been done correctly.
First of all, as has been pointed out, the Wal-Mart offer is actually cheaper over the 90 day period.
Second, for consumers who are really strapped for cash, the absolute low price point of $4 (vs. $15, not including the extra dollar for the OTC) is a genuine driver.
Finally, it seems that Wal-Mart has the last laugh. The once-a-month model drives traffic more frequently to its stores.
Kmart! What Up?!
Kmart’s action may come into play in rural communities where there is not a Walgreens or Wal-Mart on every corner and Kmart is the only option within 30 minutes of driving, leaving this a good option for consumers in the area.
As a merchandiser for independent drug stores is such areas, this may be a great opportunity for independents to boost sales and grab customers sighting excellent customer service and fully stocked shelves to their advantage.
Ok, with regards to Kmart they always join the party after it has ended.
As for these $4 generics or whatever the latest gimmick is, they are fairly pointless. As someone who has invested a lot of time in the study of health care costs for our company, these programs do not address the real concern. The issue is the high price drugs such as Lipitor and Embryl which are not available in generic form. They are the real problem in health care.
I know the retail industry likes to push these programs as if they are part of the solution, but it is comparable to cutting your arm off and putting a band aid on it. It doesn’t slow down the rising costs.
Looks like we all pretty much have the same opinion. It’s amazing that there is someone at Sears/Kmart that has the job of coming up with these ideas and is actually getting paid for it.
We’d like to raise a different line of thought as we debate whether $1 OTCs will drive Rx shoppers to Kmart. What will $1 generic OTCs do for the OTC business? Will they basically give away OTCs they would have sold anyway? As pharmacy margins decline, can Kmart afford to dilute Rx margins? Never mind alienate branded OTC manufacturers. Feels like a lose-lose.
Why doesn’t Kmart just meet the competition? Copy Wal-Mart’s prices, item for item. Not just prescriptions. Everything, no exceptions. Not just when people point out the price differences. Everything. Every day. To everyone.