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NEW YORK -- "The customer we have is the one we have to make the most of."

That is what May's Drug Stores vice president of buying and merchandising Bob Berman told a packed conference room of industry executives assembled here earlier this month for Drug Store News' fifth annual Industry Issues Summit at Manhattan's Marriott Marquis hotel. Indeed, as the amount of retail square footage continues to increase across the nation--not to mention rising competition from the dollar stores-capturing consumer loyalty and growing the drug store market basket perhaps have become more critical in today's climate than ever before, several panelists suggested.

Berman was one of 18 industry leaders--split across two panels representing the retail drug and supplier communities-who debated the finer points of chain drug retailing in front of more than 160 executives of some 95 companies. Other retail panelists included CVS executive vice president of merchandising and marketing Chris Bodine, Walgreens senior vice president of marketing George Riedl, Rite Aid senior executive vice president of marketing, logistics and pharmacy services Jim Mastrian, Duane Reade senior vice president of merchandising Tim La Beau and Rite Aid senior vice president of category management Bryan Shirtliff.

Panelists agreed that retailer-supplier partnerships become more important as the category management process evolves, requiring honest input from both sides of the equation. For instance, as SKU rationalization becomes a bigger piece of each category manager's job, the retail buyer also actively is looking to broaden the category assortment to sustain ever-burgeoning sales targets. "How you build those assortments is crucial," one retailer insisted.

"Our supplier advisory board has become an important force for influencing and affecting how we go to market, Shirtliff said, describing how Rite Aid has developed its merchandising mix. Rite Aid looks to the board as a vehicle for seeking advice, sharing ideas and developing best practices."

Sharing more refined marketing data between supplier and retailer was identified as one way to grow the business in drug stores. For instance, marrying supplier statistics, including shopper demographics, with retailer point-of-sale data could help ensure a level of differentiation between the chains, one panelist noted.

While differentiation is important to retailers, according to more than one supplier across the two panels, delivering customization on a chain-by-chain basis can place ,a strain on both the supplier s distribution channel, as well as on the retailer's bottom line.

Making better use of shared sales data also can lead to possible co-marketing opportunities between suppliers in non-competing categories--opportunities that aren't always so obviously synergistic. For instance, one supplier found a correlation between the sale of film and a certain cheese brand.

Another way to create differentiation--especially in light of pricing pressures applied by mass giants like Wal-Mart--is to slice more imported goods (particularly from Europe and Asia) into mix, several retailers commented. These types of imported items can be used to help differentiate seasonal sets, as well as foster variety in certain other, perhaps more everyday general merchandise categories, such as home office supplies.

Retailers can help drive sales by focusing on store execution, many of the panelists noted--though some pointed to different areas of potential disconnect, including miscommunication between the stores and headquarters, as well as timing lapses on the part of the vendor. "That is our responsibility to our suppliers ... to execute," Mastrian said. "You have one chance to get it right." Of course, Mastrian noted, it is also incumbent upon the supplier to ensure that things like promotional materials arrive on time and that product is shipped in the right configuration for the stores to use.

Some panelists emphasized that smaller regional chains still play, an integral role in a supplier's go-to-market strategy. It was the regional chains that really helped us get started [some 35 years ago], said Paul D'Andrea, senior vice president and general manager of the photo imaging group at Fuji. Maintaining direct contact with those regional players is still important to Fuji and other suppliers.

Some larger supplier panelists cited the fiscal reality they face in making fewer local sales calls. For this reason, trade show venues such as NACDS Annual and Marketplace and the ECRM shows have taken on greater importance in maintaining those relationships. Panel members cited new opportunities to reach regional players online using ChainDrugStore.net, a communications network that links suppliers and retailers.

Representing the supplier community were Eric Brown from Pro-Line, Pacific World's Joel Carden, D'Andrea of Fuji, Anne Fink of Pepsi, Alberto-Culver s Dick Hynes, Kurt Laufer from Wrigley, Frank Maione of Pfizer, Kodak's Lori Manning, Pharmavite's Mike Miller, Johnson & Johnson s Paul Nunnari, Dr Pepper's Rich Schuttenhelm and Keith Wypyszynski from Wyeth.

A special report on this year's Issue Summit will be included with the Feb. 16 issue of Drug Store News.

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