468 Retail and Channel Management Blog

Friday, January 30, 2015

London Drugs: Differentiation or Downfall?

A successful retail store should be easy to define. From low cost supercentres to specialized boutiques, each retailer’s format should clearly indicate what they offer to consumers.  What about London Drugs? This western Canadian company offers a product mix that is more difficult to categorize. Are they successfully differentiated from competitors or struggling to define themselves to consumers?

The unique product offerings of a London Drugs store are evident without even entering the building. The front signage displays the brand’s name in bold lettering along with the following subheadings: photolab, computers, electronics, and cosmetics. If it wasn’t for the mention of drugs in the company’s name, these descriptions would offer no indication that the store even has a pharmacy. These subheadings do serve as an attempt to summarize a retailer where you can fill a prescription, test mascara, get passport photos taken, start a cell contract, repair your laptop, and pick up a new microwave.  So is London Drugs considered a drug store? What about a department or general store? My assessment is that they meet certain traits of all these categorizes and fit somewhere in between.  I will examine how this positioning will pose difficulties for London Drugs, but also how they have used their unique format to their advantage.

A significant challenge for London Drugs in today’s retail environment is the increasing competition from a wide variety of companies. They must compete with the prices and selection of supercentres such as Walmart and Superstore. At the same time, London Drugs has to compete with the pharmacy service and specialization of Shoppers Drug Mart and the Katz Group. This “stuck in the middle” dilemma extends to their other product offerings. They compete with specialized camera and computer retailers in addition to big box stores such as Best Buy and Future Shop. This is without even considering the threat of online retailers such as Amazon.

Increased competition suggests the eventual demise of London Drugs. Yet this uniquely Canadian company has survived so far. As a private company they are able to focus on meeting their customers’ needs without the influence of shareholder demands. They have a well-defined target demographic of middle aged and senior customers. Their target consumer values high quality customer service and prefers to try products in person instead of buying online. They also target general plan and unplanned shoppers who enjoy taking their time while shopping. London Drugs’ reputation as a trustworthy Canadian company has created customer loyalty, specifically in their founding province of British Columbia [1]. Their emphasis on long-term customers is one of the reasons why they continue to compete with bigger retail companies.

My concern is that London Drugs will not be able to capture the next generation of lifetime consumers. Their stores are not engaging for young, tech savvy consumers. While they now offer online shopping, their in store experience is not sufficient to prevent young consumers from going where it is cheaper, easier, or more appealing. 

[1] http://www.bcbusiness.ca/retail/inside-london-drugs-bcs-most-loved-brand



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