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Costco is a value proposition aimed at relatively affluent consumers, which helps explain how the membership warehouse club was able to boost its market share. Costco also is America’s favorite place to fill the gas tank, ahead of rival Sam’s Club and all the convenience store chains in the country, according to researcher Market Force Information. “Ten to 11 percent of our sales are gas, and that clearly drives people into the parking lot,” says Costco CFO Richard Galanti. “And 30 or so of every 100 that pump gas go to shop. … even if one of those 30 is incremental, that’s good, aside from having a profitable gas operation.”
Costco doesn’t have much to worry about in the way of new competition in the retail segment it shares with Sam’s Club and BJ’s Wholesale. “That’s a very difficult space to get into,” says Bryan Gildenberg, chief knowledge officer at Kantar Retail. “It’s high-cube retailing and a different way of doing things” relative to supermarkets or traditional discount stores.
CVS raised its market share by 177 basis points last year, enjoying the residual benefits of Walgreen’s prolonged spat with pharmacy benefits manager Express Scripts over reimbursement rates. That will change, now that Walgreen and Express Scripts have patched things up and Walgreen has partnered with Alliance Boots and pharmaceutical wholesaler AmerisourceBergen.
The marketplace will change even more when provisions of the Affordable Care Act begin to kick in, Gildenberg suggests. Citing the convenient neighborhood locations most drug stores occupy and the forecasted 30 million more people who will have health insurance, “that will only be good for drug stores,” he says.
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