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NEW YORK -- Generally viewed as products that are made and marketed for use in a small and specialized but profitable market, niche items play a critical role in driving front-end profit at drug chains across the United States and Canada.
However, determining which products actually fall under the niche umbrella is not always clear cut. Depending on where a drug chain operates, the demographic base that it serves and the way that the chain sees itself in the broader marketplace, it can view niche products very differently than its counterparts.
Wadsworth, Ohio-based Ritzman Pharmacies Inc., for example, has been successful for a half century by positioning itself as a provider of traditional health care services along with complementary and alternative therapies.
Its list of niche products, therefore, differs dramatically from that of such industry giants as Walgreen Co., CVS Caremark Corp. and Rite Aid Corp., which offer a broader mix and feature more general merchandise in their front-end assortments.
But even positioning a business as health care-oriented doesn't mean that the niche products that drive sales are solely health care items.
For instance, merchandising executives at Kerr Drug--generally recognized as one of the drug chains that puts the greatest emphasis on health care --cite such items as Peter Pan peanut butter, Salon Grafix hair spray and Silly Bandz novelty wrist bands among their bestperforming niche items.
'Niche items are new items that fill a unique need for a consumer,' says Bill Baxley, senior vice president of merchandising and marketing at Kerr. 'While not fully developed as a brand, they serve to add excitement and freshness to the mix.'
As many drug chains trim their mix through SKU rationalization, some suppliers of niche products say the retailers are running the risk of completely eliminating the sort of excitement that Baxley refers to by limiting the assortments almost exclusively to tried-and-true items.
'It is definitely getting harder to get shelf space,' says Mark Smith, director of marketing and sales at Perfecta Products Inc., the marketer of Zim's Crack Cream dry skin remedy and Maxfreeze external analgesic--both formulated with unique ingredients that set them apart from other items in their respective sectors.
'You have to have a point of difference, and we feel our products do this,' he says. 'We've been lucky that the products work, and we have a very loyal following.'
Despite the vast differences in retailers' lists of their bestperforming niche products, most agree there are several factors that these items have in common. For instance, retailers and suppliers alike concur that true niche items should provide dependably high margins, appeal to a specific consumer group, promote innovation, and offer a unique solution or benefit to an underserved consumer market.
In addition, niche brands are usually not advertised in the national media but instead are supported by highly targeted marketing programs as well as co-op advertising.
This lack of promotion, those in the industry note, means that the products are not usually marked down--something that allows them to deliver their full margin potential.
And retailers and suppliers note that shoppers who routinely purchase niche brands and products are among the industry's best customers, often spending twice or even three times as much as consumers whose shopping is basically limited to commodity items.
NICHE PRODUCTS OR BRANDS SHOULD:
* Provide margins of 40% to 60%.
* Record sales of at least one-half to one piece per month per door.
* Appeal to a narrow yet significant segment of consumer demographics.
* Drive innovation.
* Provide a specific solution or benefit to an underserved consumer market.
* Be a product or category that is not openly price-embattled between or among retailers.
* As a rule, be consistently supported with highly targeted advertising and promotional programs through cable television networks, speciality print and co-op advertising.
* Be sustainable at retail through incremental sales, profit and unit movement.
SIGNIFICANT NICHE PRODUCT CATEGORIES
* Beauty specialty
* Consumables
* Diabetes management
* Disease/condition management
* Ethnic products
* General merchandise
* Immediate care
* Lifestyle management
* Natural/ homeopathic
* Personal care
* Special use
WALGREENS NICHE PICKSPRODUCT MANUFACTURER5-Hour Energy shots Living EssentialsBio-Oil skin care Union-SwissBreathRx Discus DentalCococare Cocoa Butter Cococare Products SticksDermaSilk Double Chin Biotech Firming SerumDr. Katz Therabreath Dr. Harold KatzMega-T dietary supplements CCA IndustriesMegaRed omega-3 krill oil Schiff Nutrition GroupMerlot Grape Seed Oil Merlot Skin CareSarna anti-itch lotion Stiefel LaboratoriesSlim Shots appetite IdeaVillage controllerKERR NICHE PICKSPRODUCT MANUFACTURERCrazy Critters Telebrands Corp.3M natural scrub sponge 3MLudens Cherry Blacksmith BrandsNasaflo neti pot NeilMed Pharmaceuticals Inc.Protein Plus peanut butter NBTY Inc.Temparin Max Hold DenTek Oral Care Inc.Carmex tube Carmex Laboratories Inc.Hyland's Leg Cramp caplets Hyland's Inc.Memory card organizer Pioneer Photo Albums Inc.Silly Bandz BCP Imports LLCCerave skin care Coria Laboratories Ltd.Just For Men hair color Combe Inc.Salon Grafix hair spray Continental Consumer Products* The individual retailer charts in this section show theresponses of national and regional drug chains when they wereasked to name important niche brands.
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