Mass Merchant, Drug and Club

Overview

Uniquely protected and vulnerable to online share shift, mass merchant, drug and club (MDC) retailers have been forced to evolve at an accelerated pace. As a leader in retail consulting, L.E.K. has empowered MDCs to relentlessly optimize their cost base and structural advantages (e.g., one-stop shop and fresh for mass, pharmacy trips for drugs, membership model and sub-MAP pricing for club) to fund the journey to their future. As consumers’ tastes, preferences and willingness to pay for convenience continue to shift, L.E.K. helps MDCs stay ahead by developing the custom tools needed to respond to their competitors, both online and offline.

Our leaders and experts have supported many retailers by attacking cost of goods sold (COGS) and operational efficiencies, and creating strategies to drive customer acquisition, deepen engagement and share of wallet, integrate ecommerce and flexible fulfillment with their broader channel strategy, and develop the roadmap to get there. We create a more profitable and growing future for our MDC clients that marries the best of their past with the technology of the future.


Key questions and challenges

Our experienced professionals have a deep understanding of the key challenges in today’s MDC marketplace, and we encourage our clients to consider these key questions:

  • What format advantages do you have? How are you leveraging them to defend and win share, online and offline?
  • How do you drive customer loyalty and share of wallet? What methods do you have to disproportionately reward your most loyal customers? Where can you leverage lifetime and transaction data to provide a disproportionate advantage in retaining and growing share with those customers?
  • How do you successfully increase comp growth to meet shareholder expectations while improving margin? Within that structure, how do you fund the journey to making needed investments to become more competitive in the customer experience, both online and offline?
  • How do you structure merchandising and pricing where customers are cross-shopping across the street and across the world?
  • What promotions move the needle for your customers and your top and bottom line? Where are markdowns’ ROI-positive when considering cannibalization, pull-forward and halo effects? How do you calculate those moves across the lifetime value of your customers?


Examples of our work

To learn more about how we help clients create value in the MDC sector, please refer to these insights and case examples:

  • A large national drugstore chain wanted to recalibrate its loyalty program and prepare the foundations for a CRM strategy going forward. L.E.K. assessed the current loyalty program in a competitive context, assessed whether changes to the structure could save margin (or drive additional behavior) without negatively impacting sales, evaluated whether the retailer should differentially reward its top customers, and identified the optimal program architecture and path forward for the client. The resulting plan reduced overall costs and improved the cost-benefit ratio of the loyalty program.
  • A major pet food manufacturer wanted to grow its flagship brand’s sales within a leading national warehouse club chain. Facing a number of challenges within the channel, including limited pet SKUs and a large private-label focus, L.E.K. assisted the client in developing a plan to significantly and profitably grow the business and identified potential lessons that could be extended to other brands. The agreed-upon strategy is expected to generate an additional $7 million in three-year cumulative operating income.
  • L.E.K. assisted in re-evaluating the growth and corporate strategy, and identifying areas for performance improvement, for a leading global mass merchant. We assessed the major dynamics of the market, conducted a detailed competitive review, evaluated the price and value proposition compared with competitors, and conducted detailed analyses across category management, store footprint and profitability performance. Ultimately, eight initiatives were identified to significantly improve financial performance.
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