Drug Stores

The drug store industry consists of establishments that are concerned with retailing prescription and non-prescription drugs and other “front-end” products. Drug stores may also retail additional merchandise to walk-in customers such as health products (like vitamins and supplements), toiletries, cosmetics, greeting cards, and non-perishable food products to walk-in customers. Some drug stores provide photo processing services.

Drug stores may be stand-alone establishments, or may be incorporated into other retail outlets. Drug stores purchase their merchandise from manufacturers in other industries, including: toiletry preparation manufacturers, soap and cleaning compounds manufacturers, drug wholesalers, and photo supplies and equipment manufacturers.

The majority of drug store sales are due to the number of prescriptions they fill, as prescriptions are the initial cause of customer traffic in the store. The remaining profit they generate comes from the sale of the “front-end” items. The volume of “front-end” merchandise in drug stores is growing due to drug store companies expanding the selection in order to increase revenue.

The demand for drug stores is dependent upon the need for medical prescriptions, the aging population, and new advances and innovations in medical care. Competition exists between different companies involved in manufacturing of the goods found in drug stores, and also between alternative retailers that offer similar services. Large drug store companies have advantages in purchasing for their locations, and as they are already established in the market they have access to an extensive consumer base. Smaller drug store companies strive to achieve effective and creative advertising strategies to garner more consumer traffic, and also focus on operating out of convenient locations. Independent companies primarily rely on their accessibility to medical insurance businesses to generate a profit.