NOVEMBER 20, 2017

The changing consumer was top of mind among retailers and suppliers during a recent category management roundtable conducted by Chain Drug Review in conjunction with MPG. Manufacturer and Retailer panelists delved into this, as well as the disruptive changes reshaping the marketplace in both the consumer products and retail sectors.

Category Managers Grapple with Disruptive Changes in Today's Consumer Marketplace


NEW YORK — The changing consumer was top of mind among retailers and suppliers during a recent category management roundtable conducted by Chain Drug Review in conjunction with Market Performance Group (MPG).

Much of the discussion centered on the changing consumer but it also considered the disruptive changes reshaping the marketplace in both consumer products and retail sectors. As the panelists delved into these complex themes they also looked down the road to the future industry landscape, acknowledging the positive shift toward growing consumer confidence — even as more people are shopping a variety of retail outlets and channels, including e-commerce.

The forum also tried to answer the questions “What will category management look like in the future?” and “What will the role of category management be?”

The group addressed other changing strategies as well, such as the future of joint business planning, the alignment process between the customer and seller, and the emerging trends of online shopping and e-commerce.

The panel also tackled such topics as shopper loyalty — how to keep consumers coming back with so many options, both in product and in available shopping channels — and tried to come up with strategies that both retailers and suppliers can employ to drive loyalty toward brands and stores.

The roundtable didn’t just touch on change happening from the point of view of the consumer, but discussed how those in the industry can be agents of that change as well.

The retailers taking part in discussing these important and multifaceted topics included:

Bill Bergin, group vice president of health and beauty at Rite Aid Corp.
Tim Buskey, vice president of consumer products at AmerisourceBergen Corp.
Day Gooch, vice president and divisional merchandise manager at The Vitamin Shoppe.
Heather Hughes, divisional vice president and general merchandise manager of seasonal and general merchandise at Walgreens.
Steve Light, vice president of consumer health at Cardinal Health Inc.
Chris Savage, senior director of consumer products at McKesson Corp.
Annie Walker, vice president and divisional merchandise manager of O-T-Cs at Walmart.
Suppliers included in the roundtable were:

Janet Carter Smith, vice president of retail at Molnlycke Health Care.
Michael Law, senior director of customer strategy and planning at Edgewell Personal Care.
Jeff Shirley, vice president of national accounts at iHealth.
Kim Sines, senior vice president of sales at Hello Products.
Kyle Stenzel, senior vice president of sales at Combe Inc.
Kristine Urea, vice president of category management and shopper strategy at The Nature’s Bounty Co.
Serving as moderators for the roundtable were Bob Candelora, managing partner at Retail Insights; MPG’s managing partner Marc Greenberger, consultant and executive director Kim Russo, executive vice president and client lead Dave Van Howe; and Jeffrey Woldt, vice president and editorial director of CDR publisher Racher Press.

There’s a lot of money being spent in retail today, stated Annie Walker, kicking off Chain Drug Review’s annual category management roundtable. She cited a rough estimate of $5.5 trillion spent annually in retail — an enormous number that represents enormous opportunities for those who are in the retail industry.

But while this opportunity exists, especially in light of rising disposable incomes, there also exists a disparity in income levels throughout the country, which, as Walker pointed out, requires retailers to better understand their strategy and how they are meeting the needs of today’s customer and shopper.

In Walker’s view, providing speed and value top the list in meeting the needs of the constantly evolving customer and shopper. But more than delivering value, it’s necessary for retailers to understand how customers “define” value, because, as Walker noted during the roundtable, value can be defined in many different ways. So retail outlets need to be able to provide value in those different ways to meet the wide range of needs for customers shopping retail today — and this holds true despite the growing influence of nontraditional shopping channels. Walker emphasized that a significant portion of retail shoppers make their purchases through brick-and-mortar stores. “So being able to sit in the balance of that is important to understand,” Walker said, adding that she believes brick-and-mortar will continue to play an important role in the retail space.

For Bill Bergin, gauging the loyalty component of shoppers is highly data driven and less about trying to segment shoppers into groups and more about recognizing that each and every customer is an individual and trying to understanding that individual customer’s wants and needs. “So when you send someone an email you don’t send them an email for dog food when they don’t have a dog,” Bergin offered as an example. “Or you really understand their purchase patterns and who are lapsed users, and it can really address each one of our consumers.”

From the perspective of an independent pharmacy, however, the scope of customer loyalty is shifting toward the patient, explained Tim Buskey. “Because our stores have very strong relationships with their actual patients,” Buskey said. “So for us, from an independent pharmacy perspective, it’s really turning that patient into a shopper while they’re in the store. “

So, in essence, as moderator Dave Van Howe noted in responding to Buskey, the pharmacist is and has been the linchpin for customer loyalty.

To further establish this relationship between the pharmacist and the customer/patient, Buskey cited a study that showed that 13% of the time a customer/patient would buy a product if recommended by a member of the pharmacy staff. “I think that loyalty and that pharmacist and staff are used to really helping that shopping experience within that pharmacy,” Buskey said.

But to really keep the customers coming back with so many choices available to them, retailers have to go above and beyond and establish what Kim Sines referred to as “the delight factor” — whether it’s delight by speed or value or by a different experience. “I think that’s what P&G are looking for in shoppers today, and that’s the difference that the people around the table here make,” Sines said.

The variety of brands represented at the roundtable prompted Van Howe to ask how suppliers go about establishing loyalty within their brands.

For Janet Carter Smith, the answer is somewhat tricky, because while clinicians and pharmacists know Molnlycke’s brands, consumers don’t necessarily know them, unless, Smith pointed out, “they’ve had an occasion to use us. So it’s actually something we’ve been working on closing the gaps.” What’s crucial to closing this gap, Smith noted, was thoroughly understanding the consumer and the pathway that led that consumer to the product in the first place. “Understanding the decision points and what goes into making them a consumer of your brand is really key to how do you make sure that those connection points remain. And in our case the pharmacist is a really important part of that delivery,” she said. “But also making sure that on the hospital side and the clinician side we’re making the connection, too. Where retailers fit into that is all that they’re doing in that space to make the connection from a health care perspective.”

But with estimates from the National Retail Federation putting loyalty to health and beauty aid products around 25% or 26%, for both brands and retail, it’s clear the levels could be higher. So what can retailers do to push up those percentages? According to Michael Law, brand relevance is essential. The retailer, he said, has to have relevance. “I think you have to understand how the consumer really defines value so that you can deliver on that,” Law said. “They value convenience, and being close to them may be important, or doing pickup at the store or home delivery may be important, as they really focus on the price. You better have the price in the market because that’s 100% transparent now.”

Providing an example, Law said that if customers value assortments, then it’s paramount to have the right assortments to offer them. “So I think it’s really understanding your target consumer and making sure that you’re delivering on the value that they’re looking for, but it’s a battle for relevance right now.”

Adding to the difficulty in meeting these consumer challenges, according to Heather Hughes is that today’s consumers have so many options, especially with the ability to shop globally via smartphones and mobile devices and have products delivered to the doorstep next day. “So, as a brand, it’s really important that connection point happens between you and your core consumer across all those different avenues and making sure that you have the right representation of products for that,” Hughes said, adding that hitting all those different points is a struggle that all retailers face in maintaining customer loyalty. “You can get the first capture but then maintaining the repeat in that customer over the course of time is very difficult.”

Another dynamic at play in terms of customer loyalty is the rapid pace and evolution of the digital age, which Buskey said brands have not yet caught up with. Growth in brands, in Buskey’s view, is to be found in the consumer rather than marketing teams. “What I mean by that is that people have more consumerism in their health care journey, whether it’s skin care to more clinical stuff,” he said. Buskey gave the example of a customer in her 40s taking care of aging parents as well as her own family. Buskey pointed to a McKinsey study in which the length of time this type of customer spends in a month looking for information on the internet is about seven times more than the average internet user. “She’s not going to branded websites, she’s going to retail websites,” Buskey said. “She’s hungry for knowledge about the product and how to use it. So I think brands that start to understand how to raise peoples’ health IQ and make them smarter consumers will win.”

Bob Candelora jumped on Buskey’s point and referenced artificial intelligence and how it is driving consumers to particular brands. “Because of past purchases it’s going to start impacting brands, if it hasn’t already,” Candelora said.

The other challenge brands face, according to Walker, is conveying to the customer the science behind the brand. “Unless the customer truly understands the science behind what you’re trying to deliver, it won’t work or do,” she said. “So a brand can come with some of the best science and the best innovation, but if the packaging and name, the marketing, if how you talk to customers doesn’t truly get that across, it just ends up being something that sits on the shelf.” Getting this message across to the consumer, along with providing value, equates to power, she said.

Law said Edgewell allocates a lot of its resources to its efforts to find the consumer, but he added that the company would have to put even more resources into the hospital side of the business, because when consumers come out of the hospital they are drawn to make certain purchases. “So finding brand relevance and a consumer that understands what your product will do definitely drives loyalty,” he said.

Where loyalty comes into play for Day Gooch is in the experience at the nexus of digital and physical. “So you can have a great personalization program for your CRM [customer relationship management] and so forth, but until you have that experience and you come in-store and drive that loyalty both ways, to me that’s where the synergy between those two really occur,” Gooch said. “For us it’s about a journey; it’s a journey with our customers, and does that journey start online or does it start in store? As long as it’s synergistic between the two when they come in-store and see the same authenticity that they see online, and that’s where we really find our sweet spot.”

For retailers such as Walgreens with a wide range of categories, building customer loyalty in terms of not only general merchandise but seasonal merchandise becomes an increasingly more difficult challenge. Loyalty, in Hughes’ view, comes from a model of care, of interacting with the customer. “But the care model is changing dramatically too,” she said. “Where some of it’s in person, some of it may be digital, but we have to deliver the care in the way that the customer is looking for.”

What helps Rite Aid drive customer loyalty, according to Bill Bergin, is technology — technology-based solutions at point of purchase. “For example, in vitamins we have a solution where you can tap into your particular needs,” Bergin said. “It’s a picta-light technology that will actually shine a light on the product.” Rite Aid has launched this picta-light technology in hair care as well as vitamins. “I think to be able to come into our store and help me pick the right medicine for me, help a woman select the right beauty product that meets her wants and needs, I think it’s very difficult to deliver that across 4,500 stores in a consistent manner,” he said. “So somehow I believe there could technological solutions that will help drive those purchase decisions right at the point of purchase, and so we continue to play with different models to try and solve that.”

Loyalty is further established through this technology, in Bergin’s view, not only because it helps to simplify the shopping experience but in the instantaneous feedback it provides, which then helps the retailer to further meet those customer needs. “So at point of purchase when you’re asking questions we can get the feedback about what your particular unmet need was, and then we can send emails and communicate with you directly,” he explained.

Customers, in Bergin’s experience, appreciate the personal aspect that this technology provides, though the full potential of technology in driving loyalty has not been fully realized. “I don’t think we’ve quite cracked the code, but we have several different tests with several different partners that we’re working on today,” he said.

But with so much data available, Van Howe presented the panel with the problem of how to gather all of that data practically in order to prioritize it and how to hone in on the customer using the technology to further drive and leverage loyalty.

To that question, Sines said “knowing the shopper” is key, and being able to cut through all the clutter with “rich insights” to communicate effectively with the shopper to meet his or her unique needs. “So by knowing exactly which new insights are going to make that connectivity to stay with the brand and with the retail partners is critical,” she said.

But in terms of gathering information on shoppers to help cement customer loyalty, there’s a long way to go, in Hughes’ estimation. “I think that we spent the last couple of years now really getting a better handle on how much information we can gather about our shoppers and really understanding the shopping behavior, and we know a lot of facts, but then how we effectively market to her, we still have a long way to go with that,” she said. “We still need to refine the path to communicate in the best way without overwhelming her. Because there are so many options that I think it’s still a work in progress.”

Building customer loyalty, however, is not the only practical use of all this data and technology — the result, of course, from getting those customers to back into the store and returning to the brand is that it boosts sales. To do that, said Kyle Stenzel is ensuring the customer has a good experience. “How do we make sure that they’re coming back because we’ve delighted them with the experience and the product that we’ve delivered to them?” Stenzel asked.

But what exactly is loyalty? How is it defined in terms of the customer’s commitment to a brand or store? For Chris Savage, understanding what loyalty looks like is essential. “I think it’s important to think about how we define loyalty, because it can be rented and it can be sort of owned,” Savage said. “And if you own it, then you’ve really created a connection with a consumer. If you’re just renting it, then it’s probably because you’re not meeting some other key consumer needs, whether it’s a manufacturer or a retailer, but there’s a lot of effort against brand switching and loyalty that I think the industry has an opportunity to really think about.”

With more shoppers turning to online and e-commerce channels, the panel turned to this growing trend to discuss how brands and retailers can incorporate these increasingly frequent shopping patterns into their business models — in particular how value is defined in this growing digital landscape.

For Hughes, convenience is the foundation. “We live such fast-paced lives nowadays. We have very little time to make those buying decisions, and between our kids and work and parents and taking care of all that, we have so many things pulling us in a million directions,” Hughes said. “So if retailers can help me make those choices quick and easy, but make me feel good about what I purchase, to me that’s a winning combination, that’s the value equation that makes me stay loyal, makes me want to shop at your store.”

But each customer responds differently, Walker pointed out, and it’s important for retailers and brands to keep that in mind. “You have to understand who you’re targeting from a value perspective. Value can be defined in many different ways based on different customers,” Walker said. “As a mom with two kids, and a working mom, value to me is to make my life easier and speed it up.”

Also important, in Walker’s view, is remembering that there are many families in the U.S. living paycheck to paycheck, and for these customers value has a different definition and meaning as well. “So you have to understand what that means to each individual customer and know and understand your strategy and how you meet those needs of the customer,” she said.

But how can one company or brand meet the needs of an individual consumer when there are so many different types of consumers? Will there eventually be a one-size-fits-all approach? In other words, one retailer serving one type of customer?

Not in Walker’s estimation — because for her, it all comes back to value. “I think if you rewound the clock and you looked backed years and years ago, people would have said, ‘Hey, can you sell an Apple iPhone in a Walmart, would your customer buy an Apple iPhone?’ Absolutely. If we can sell it for a great value then we absolutely can sell it,” she said, adding that it’s offering not just value but a great experience. “So we aim for people to have a great experience at the shop and go, ‘Wow, I got this iPad or iPhone for this value and I’m super excited.’ So, yes.”

Millennials are also mixing things up and helping to reshape the retail and product landscape, Sines noted. This younger, and increasingly important demographic grew up differently than preceding generations and they put less emphasis on category segmentation and are more focused on buying products that are good for their families. “While financially they may not have as much money, and jobs are harder to get, they’re making different choices, and that’s really fundamentally changing the landscape,” she said. “But again, it’s an interesting shift that that’s causing in the retail world in terms of value, and some of it’s speed and some of it’s great quality products that they’re looking for.”

But value shouldn’t be defined only in terms of dollars, Stenzel said, because for some products may offer a benefit that goes beyond the price tag — for example, a product that might keep a customer away from the doctor. “So if the cost of my product is $X but the cost of going to a doctor for a doctor’s visit including a co-pay for something like that is much more, I would put that in perspective to them, to show them that, ‘Hey, you’re not buying a $5 product, you’re buying a preventative care product so you don’t have to go pay a $50 co-pay,’ ” Stenzel said. “So it goes beyond just the value, it’s communicating the value in the right way and helping them understand what the trade-off is.”

The foundation of value, however, is trust, according to Steve Light. Whatever the value or the shopping experience, the main question that needs to be answered with a yes is the customer asking if the product they purchased works and is safe. “Bottom line,” Light said, “everything comes back to trust, with retailers, with product and with portfolios.”

Another challenge retailers in particular face is with brick-and-mortar traffic — specifically, converting consumers already in the store when they have so many other options outside of the store.

To add some perspective to this challenge — according to Nielsen data, for every 100 customers who go into a Walgreens, CVS Pharmacy or Rite Aid Corp. store, there is a 94% conversion rate. In other words, a customer going into the pharmacy will also purchase a nonpharmacy item, such as a soft drink or a cosmetic product.

But when those same 100 customers go into one of the estimated 23,000 independent pharmacies across the country to get a prescription, only 56% make a similar front-end purchase. So how do pharmacists, who do not receive front-end training in pharmacy school, achieve a better conversion rate? While part of the answer lies in price optics — having items on sale visible to the customer coming to the pharmacy to fill a script — the responsibility for that conversion rests with the store owner, according to Law.

An example of a retailer hitting high marks on this type of conversion, in Smith’s view, is Sephora USA Inc. and its many curated end-cap offerings for lipsticks and mascaras. “From a conversion standpoint you’re not looking through all the brands in the store to try to find that lipstick that can just kind of make you a little happier today because you’ve got a new color to try. They put it all together so that she can shop it, and it makes it easier,” Smith said. “I think where we are challenged in the health care space is how do we do that effectively?”

Hughes added to Smith’s Sephora example, saying that what Sephora is able to do is inspire. “You come in, you’re excited.” And that feeling can translate to customers across the board, regardless of product or brand. “You think that you can walk out feeling better,” Hughes continued. “And whether that’s a diabetes patient who is looking for a quick solution or something to make their life easier or better, a better quality of life. At the end of the day, to cause them to pause, make them feel something inside that inspires them to spend time, even if it’s two minutes. You’d have to stop for a quick second to learn more or find a new solution for their life, whether that’s across health care or beauty.”

The panel also discussed the increasingly important role social media is playing and how this form of communicating is changing the way retailers do business, especially as it relates to marketing. Jeff Shirley said iHealth invests heavily in bloggers, because bloggers talk to other bloggers and those communications can pass along favorable product and brand reviews. Shirley also referenced a report that said 47% of consumers will buy a product if it is suggested by a blogger they read. “So it’s very important to select very pointedly who’s blogging about your product,” Shirley said.

But employing bloggers and having a social media presence isn’t enough. Retailers and those trying to reach customers through social media need to stay on top of this digital space not only to be aware of what’s being said about them online but to monitor these accounts to get the most out of them.

Shirley added that iHealth connects with its community of independent owners in what he described as “pretty much a free form,” allowing them to express themselves freely, which serves to better identify problems that need to be addressed. “If there is something we need to solve, we’re just like Walmart, we jump in and we try to solve it,” he said. “We also have net promoter scores, and every month I get together with my team and go through them. We rate the scores from 0 to 10. I always look at the bottom scores, zero to 4, and if it’s O-T-C-specific I focus on that and go back in and try to correct whatever we’ve done, or provide a solution to our customers.”

Though Walgreens is not live on social media daily, the company does allocate resources to its online presence, according to Hughes. She said this presence is a great resource for understanding consumer needs and seeing needs that aren’t necessarily met, or any issue a customer might have with Walgreens’ products. “It helps as a part of our innovation process and our product development process, just making sure that we are on point,” she said. “So making sure that we are adjusting current products, maybe addressing individual needs if customers have a complaint or something we need to address — just understanding the evolving landscape and what customers are not finding in our products, or what they’re seeking. It’s a different way the data is used, and it’s important to us.”

Social media — bloggers, emails — is an avenue that allows the company to reach consumers, and it offers the company the opportunity to question what’s effective and what isn’t and essentially to analyze what is working and what isn’t. “I’d say the challenge is that there are pieces within our control and pieces outside of our control. So when you do reach out and you use bloggers, how much do you control that environment? But it can be really impactful when it is used in the right way.”

For Light, however, it all circles back to authenticity. He cited as an example a time when Cardinal Health had a shortage of Edgewell products in Canada, which upset many consumers. “So the team up there decided to own this misstep and apologize, and they took out advertising to apologize and let people know when those products would be coming back in stock,” Light recounted. “I think in situations like that if you are authentic and you own it, you can actually improve brand equity. So that was a very good experience for us.”

Buskey cited another such example with Domino’s when the pizza chain ran an ad campaign asking consumers for feedback to “tell us how bad we are.” “It’s amazing how that brand has changed in what it is today versus what it was,” Buskey said.

But for health care brands, having a social media presence is difficult, according to Smith. “It’s hard to react as a health care brand too, but I think going back to authenticity and going back to what Annie [Walker] said earlier, I think consumers are more educated today than they’ve ever been,” Smith said. “So as a branded company you need to help consumers understand the science behind how your product works, and that really goes a long way, because if they’re in-aisle and they’re looking to make a choice, consumers are searching for your product, and if they can find good education information that helps them understand how everything works, then it makes them feel you’re more trusted. The authenticity of your product is there, and I think that’s a really big opportunity for branding.”

This authenticity is especially apparent with Millennials and younger consumers, according to Sines, who said that brands that fail do so because they do not speak directly to this younger audience in the manner in which they wish to be spoken to — with straight talk.

“You look at a little company like OGX and they hired a roomful of Millennials to reach each one of their shoppers and talk in a voice that they want to be heard in, and, yes, they sold their company for $3 billion to Johnson & Johnson, and that’s because they connected and they had a really great product but they also really were marketing that product in a very different way,” Sines said, adding that many brands today have one “computer-like” voice that doesn’t speak from the heart, which simply will reach younger consumers. “Because there are so many other brands that are being authentic and transparent and direct and speaking their language, not company speak, but really just in a way that they want to be spoken with.”

Smith concurred: “I think you have to be absolutely clear that you’re telling the honest truth about everything, too.” Sines referenced actress Jessica Alba’s Honest Company — which settled a class-action lawsuit claiming it misled its buyers on some of its nontoxic, eco-friendly products — as an example of disingenuous marketing. “So if you’re going to put it out there, make it be completely what it is, not something that you think the consumer wants to hear.

Marc Greenberger touched on the importance of creating “a trusting relationship with Millennials and younger consumers, especially for the larger companies. “You can see it in their numbers,”Greenberger said. “I mean, it’s amazing, and it’s not just in health care, it’s in beauty as well. The question is can the big companies turn it around? They’re slipping so quickly it’s scary.” The smaller companies, Greenberger added, are more nimble and that’s where all the growth is coming from in health care as well as in other parts of the store. “So it’s a pretty amazing phenomenon that we’re living through right now, and some of us have front-row seats. It’s scary when you walk into these board rooms, because I think these companies are paralyzed.

Another important trend raised by Kristine Urea was the growing demand among consumers — younger ones in particular — for natural products and ingredients, “whether it’s homeopathy or different avenues for maintaining your health from a natural perspective,” Urea said.

Van Howe also raised the issue of clustering stores in certain communities and how best to reach targeted demographics of shoppers. “We talk about this consumer that is incredibly complex and diverse — we’ve got Millennials, we’ve got baby boomers, we’ve got Hispanics — we’ve got all of these different groups shopping in our stores,” Van Howe said. “What’s the reality of store clustering. How as a retailer, how as a brand, do you become relevant when you have this diverse population coming into your store? What does store clustering or store in the community look like today and in the future?”

In response, Hughes said it’s important to learn from data in order for the cluster model to work. “You really have to hone in to say clustering is really important. How do you determine what’s your core that works for all and then cluster in the right places, versus going too deep, too far,” she said. “It’s too complex for the model to sustain. And then how do you extend and use digital beyond that, but brick-and-mortar still has that great presence to make sure that you serve the community. When you think of community there’s the product on your shelf, when you think of how you cluster, there’s also still that people component, and you get the touch points in the community, and that goes a long way as well.”

Bergin explained that Rite Aid’s loyalty program also provides a window into clustering because members have the opportunity to opt in with their age, which provides extremely useful statistics on those using this feature. For instance, Bergin said that because of this data he knows that in Washington, D.C., Rite Aid has more Millennial shoppers than it has in any other market in which the company competes. “I can drill that down further and I can tell you that I have stores where over 50% of the shoppers are Millennials,” he said. “I know right down the SKU level, the brand level, I know exactly which brands are over-indexed. I know which SKU is over-indexed. So we are looking at, to your point, the complexity. So we put end-cap recommendations out to stores on a monthly basis.”

The specificity of this data also helps Bergin avoid painting one shopping demographic, such as Millennials, with too broad a brush. “I would caution, don’t treat Millennials as a single entity, because the data would tell you something very different,” he said. “The young Millennial wants red solo cups and energy drinks, but the older Millennial is married, they own a home, they have children, and they have a very different shopping dynamic.”

Shirley added iHealth’s perspective: “There is a difference, the way a brand has to attack that is we have to know who our consumer is,” he said. “And you can’t call them by the buckets. So each brand, we work hard to find out who really buys that product, or even that segment of that brand, because we can segment out into the different consumers as well.”

But while Millennials are getting so much attention, especially when the conversation turns to digital shopping and clustering, this younger generation is not the only demographic retailers need to be paying attention to, in the view of Gooch, who pointed out that a large number of older consumers still are often overlooked. Gooch cited an AARP study that put the number of Americans 50 years old or older at 111 million, with the number of Millennials at 75 million. Even more telling, over the next few years the population over 60 is going to grow by 16 million, with Millennials only growing by 5 million. “The over-50 spends $3.2 trillion in the U.S. economy; that’s bigger than the GDP of Russia, U.K., Brazil and France,” Gooch said. “They’re 50% of all consumer expenditures in the U.S., and only 10% of the marketing dollars go to that group. As retailers, and as brands, we’ve gotten so focused on capturing the next generation. With the improvements in health care I think the average age in the United States is about 75, maybe 77 years old. You’ve got 20 years of relationship with all the buying power in the U.S., and if you look at the data, there’s about 32 million people over the age of 65 today; that’ll be about 72 million in the next 20 years, it’ll be double. That’s 6% to 8% growth. Walmart, Walgreens, Rite Aid, our independents, would kill to have it locked in, the 6% to 8% growth. So I think it’s interesting that we tend to focus on the Millennials, but we lose where the real dollar is at. It seems like sometimes we chase pennies versus chasing the dollars.”

Hughes agreed that the industry has gotten too caught up in the terminology of the next generation, which in many respects has lead to a loss of focus on other important groups, such as baby boomers. In Hughes’ view, the important thing is knowing the consumer. “You need the generation of 23 and above, that’s a huge group of people that are buying things,” she said. “So it needs to go back to knowing your brand and who’s buying that brand, and not so much focusing on the next generation, because we are here now.”

Gooch added that he tries to convey the message of not overlooking other demographics to other merchants and the bigger chains. “I try to have that dialogue with them. Are you thinking about the boomer generation of America? Are you thinking about the opportunities with that customer? And they don’t have a good answer,” he said. “I don’t know if we presume that we’ve been there and they’re traditional and they’ll just keep showing up and we don’t have to work hard with them, but when you think about it, people over 50 are living like they’re 30. The point is that we have forgotten the youthfulness of our generation — 45, 55, 65 — and I think we want to live more independently.”

This lack of focus on older consumers is, in Gooch’s view, an element many companies are missing in their strategies, especially in light of consumers in their 50s and 60s being at the age when they more regularly become drug store customers. Unlike Millennials, older consumers take more medication — the primary product for many taking part in the roundtable — so why is there not more focus on these older consumers?

In Gooch’s estimation, many brands are lost in an aging paradigm, because they are using methods to go to market that are 30 years old and a new paradigm is needed that is based not only on technology but on the shift in demographics.

Another element, Gooch noted, is today 18% of the U.S. population is Hispanic; in 20 years one out of three Americans will be Hispanic. “You’ve got to be thinking about that customer’s needs, their lifestyle, their interests, how they react to brands — and not just myopically if they’re Hispanic, but are they first generation, are they second generation? Because they behave differently, kind of like the Millennials do, based on where they’re at in their generation in the United States,” Gooch said.

Boomers are the majority of Rite Aid customers, said Bergin. “We’ve got to be careful where our focus is. From Rite Aid’s perspective, if you look at the numbers, just look at ROI data, we’re losing in beauty, and the Millennial shopper is where we’re just not getting our fair share,” he said. “I think as retailers we know that’s the customer of the future, and quite honestly, Rite Aid and a lot of other retailers, we’re losing with that customer big-time today, especially in the beauty segment. So maybe we’re putting more emphasis on it than the ROI we’re going to get from it. I think that point is really valid, but I think it’s something that we’re not going to give up on, in winning that younger consumer, particularly in the beauty segment.”

But focusing too much on boomers could mean the losing out on the Millennials, according to MPG’s Kim Russo. “Because she will essentially be going to specialty stores,” Russo said. “So if you’re losing in the beauty category she will essentially be moving into the Sephoras and the Ultas of the world.” This observation lead her to ask the question: Is focusing on boomers the right strategy, given that they have an enormous amount of spending — but in doing so are retailers ultimately sacrificing the Millennials, and their potential future bread and butter customers, to these specialty stores? Because, as Russo pointed out, the specialty stores will essentially convert those consumers, which means retailers and brands who failed to focus on them in favor of boomers may have lost out on them for good.

Not necessarily so, according to Smith, who said that drug stores in particular have a huge opportunity to cater to both segments to utilize that pharmacist to build customer loyalty — “because if they’re a Millennial, they look to their pharmacist for advice on ‘My baby has a fever’ or ‘What should I give for teething?’ ”

But when it comes to focusing on boomers and Millennials does it need to be a case of either/or? Not for smart retailers, Gooch said. “As smart retailers and smart brands, with both the Millennial segmentation and the boomer, I think you’re figuring out there are intersections to take advantage of resources, but also recognizing that they’re distinct populations,” Gooch said. “So there’s enough assortment and enough footprint of product that we can address both those needs.”

Yet it’s not just a matter of focusing on both as separate groups but also capturing Millennials now as they represent the generation of the future. “I’m dating myself now, but if you look at what P&G did with Secret years ago, when everyone was coming out with teen deodorants they marketed Secret to 8-year-olds because they knew that they wanted to be like their mom,” Candelora said. “They included it in school packets and things like that. Back then if you look at the volume of Secret coming off your shelves you would say that they were pretty successful, that they figured out the customer, the young girl wanted the same deodorant as her mom. If you look at all the types of teen deodorant in that time, they all failed, every single one failed.” 
Looking ahead, Bergin pointed to what he described as a “huge philosophical shift for category managers,” because, as he said he tells his teams, “you’re not going to win if you don’t win with your biggest suppliers, so our joint business planning process unfortunately does not encompass our entire supplier base.” Rite Aid, Bergin said, has about 25 suppliers and a very robust joint business planning process that he said would never distill down into the indie brands. “So if our focus is going to be that going forward we’re not going to win with the big 25 — which is a horrible thought to think, I’m just coming from a retailer perspective — it would be a very daunting task to figure out how you take that shift and the way we do joint business planning today, and figure that out with 100 very small indie brands.”

Suppliers, according to Bergin, “want to win” with the 25 biggest retailers. “If we can win with, I’d say, in any given category, if I can come up with the biggest five suppliers and in a given category, I’m going to make my joint business plan, it’s that simple. So it creates a whole different set of challenges to be able to do those roles,” he added. But this shifting philosophy with category managers creates a dilemma, because retailers are not getting what they used to get from these larger suppliers — which retailers used to be able to count on to deliver the growth.

“You have to drive your own growth,” Bergin added.

In Walker’s view, category managers need to think broadly, to think innovative, to think outside the box and to bring fresh, innovative ideas to the segment. “Where suppliers of category managers that don’t do that or they just come with the same perspective that their sales side comes with, that’s where it becomes very challenging, and as a retailer you have to manage that,” she said.

In order for brands to win and grow, in Gooch’s view, they have to be more engaged and dynamic in their approach, which he sees taking place. “I am seeing some engagement on the part of the big brands now, because they’re hungry for growth. They need it from somewhere, and they’re seeing this is a relatively dormant market that’s got some opportunity for it,” he said.

For Sines, opportunity for growth is also to be found in areas that big companies have so far failed to invest in — smaller opportunities that could become big, focusing on the smaller brands. “True meaningful innovation can really make a difference, I think, for retailers to pick those areas where it’s growing, where there’s white space, and where there’s real meaningful innovation,” she said. “And then partnering with the little companies that are going to listen, that are going to be agile, and that are going to customize something for you to take advantage of that opportunity. Because that’s what the smaller and medium-size companies do best — they are really listening and partnering in different ways that are reaching that shopper fast.”

Speaking to growth, Greenberger pointed out that the larger manufacturers are failing now. He described the current state of the industry as a crisis and questioned whether the ship could be turned around. “If you’re running companies like Walmart and Rite Aid and Walgreens, you need growth, because if you’re not growing, you’re dying,” Greenberger said. “It’s that simple, and I’m looking at all the 2018 forecasts. It’s just crazy.”

Russo ended the roundtable by stressing the theme of authenticity, both in messaging and information, one of the themes she believed summed up the discussion. Relevancy was another, Russo said, the question to brands on how to remain relevant — the retailer, the supplier, and really targeting and connecting with the right consumer base to drive growth. “Respect, trust and transparency, constantly being mindful of those factors, and this idea around speed to drive change and make decisions. At the end of the day we’ve all agreed that the consumer is really in control,” she said. “So how do we provide and find actionable insights to really drive the compelling change in order to drive growth?”

And so the discussion continues …