A look at the trends and complexities shaping-or reshaping-dietary supplement retail.
As any health-and-wellness watcher knows, nothing about selling dietary supplements is simple-and it never was.
Just ask Robert (Bob) Sanders, executive vice president, home and healthcare practice leader, for market researcher IRI (Chicago).
“In the past, the supplement retail framework was always more complex than for, say, traditional OTC drugs,” he recalls. As recently as five to 10 years back, shoppers could choose from specialty stores like GNC and The Vitamin Shoppe; natural-food outlets; grocery, drug, and mass merchandisers; club stores; big boxes; convenience; and other brick-and-mortar channels-or they could go the “nontraditional” route with multilevel marketing (MLM), catalog and phone orders, and even sales in some enlightened doctors’ offices.
While they can still turn to all those options, today’s retailing landscape looks significantly flatter. (Thank you, ecommerce.) But in no way does that mean that our job of selling supplements is any less dynamic, intricate, or, in some cases, hard to wrap our heads around. In fact, with cannabis dispensaries itching to make their presence felt, we may be in for further complexity ahead.
Yet those veteran industry watchers aren’t letting things faze them. As Sanders says, “There is substantial upside for supplements in the U.S. in the near-term.”
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The State of Supplements Is Strong
If nothing else, the state of the supplement industry is strong. In fact, Sanders calls it “quite healthy,” pointing to estimated 2019 sales of almost $36 billion, per IRI Consumer and Shopper Insights Advantage (IRI CSIA) data. Even old-school brick-and-mortar belies rumors of its demise with a 4% CAGR from 2016 through 2019-twice the rate of the overall self-care industry.
“That makes it evident to us that consumers continue to exhibit high demand for supplements,” Sanders says, giving no small share of the credit to the take-charge stance that many consumers are adopting toward their health.
Indeed, he continues, “Across all ages, consumers are practicing more active prevention of disease and wellness maintenance.” And because supplements align more with their partiality to things “natural,” “simple,” and “clean,” consumers often prefer them to prescription pharmaceuticals and over-the-counter medicines alike.
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Another Brick in the Wall
But when it comes to where consumers purchase their supplements, not all channels fare equally well.
Consider the brick-and-mortar scenario. Amongst outlets in that sector, dollar stores exhibit the briskest growth of 23%, per IRI data-“Price is the biggest factor here,” Sanders wagers-but from a comparatively small base of 2% of channel sales.
Meanwhile, mass merchandise-Walmart included-“is doing just fine, thank you,” Sanders declares. At 6.3% growth versus a year ago, it’s “the best example of a big box,” he says, and represents the largest share of the brick-and-mortar pie. “Here, too,” he says, “price and selection are big factors.”
Although still growing, the drug channel’s mere 1.4% uptick indicates a loss of traction, Sanders suspects, as it “far underperforms the industry total of 4.3%.” The culprit? Again he blames prices-this time high ones, despite almost weekly promotions.
And grocery turned in growth of 3.6%, paralleling the industry average and outpacing drug. Notes Sanders, “This class of trade’s foot traffic is strong, given consumers’ willingness to still shop in-person for food.” At least for now.
All told, brick-and-mortar continues upward, with the conspicuous exception of the health, vitamin, and specialty sector, which sagged 3.9% over the prior year. For while such outlets offer consumers the advantage of education about their purchases, Sanders explains, “Once consumers gain that education and become knowledgeable and comfortable shopping for price and convenience, they can find it hard not to drift to other retail options.”
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It’s a Jungle Out There
Options like ecommerce-which, by the way, also offers consumers education, and in the palms of their hands.
As elsewhere, Amazon dominates this space. Not only does IRI data show that the dollar share going to brick-and-mortar supplement retailers has fallen from 69% in 2016 to 53% three years later; it also shows that 73% of all supplement ecommerce sales now go through Amazon, with the remaining 27% divvied up among other suppliers, including Vitacost.com, eBay.com, Walmart.com, Costco.com, and Puritan.com
As far as Sanders is concerned, the reason is clear: convenience. “Certainly ecommerce is growing quickly and is about the same size as traditional brick-and-mortar,” he says. “And with respect to supplements, consumers can not only educate themselves about particular products or ingredients, but can read reviews and select products that suit them best-all from their phones.”
As for nontraditional channels-MLM, catalog sales, direct mail-while they’re decreasingly relevant to some shoppers, IRI’s qualitative research shows that they’re still relevant to others.
“Once consumers find a product they like, that works for them, and is priced right, they’re fairly loyal,” Sanders points out, “which is why retail options like MLM still work today.” And with catalogues, “It’s hard to distinguish catalogue shopping by mail or phone from catalogue shopping that culminates in the catalogue’s online venue,” Sanders says. Adding yet more color to the picture of retailing complexity.
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The Color of CBD
These days, however, the dominant hue in that picture may be green-from cannabis and its superstar cannabinoid, cannabidiol (CBD).
“The emerging hemp-derived CBD category has ignited renewed interest in natural products and helped introduce new consumers to natural-product retailers,” says Jesse Karagianes, vice president of sales, CV Sciences Inc. (San Diego). “With so much negative stigma around the current healthcare system, consumers are looking for alternatives for dealing with modern wellness concerns, and CBD provides a plant-based solution to life challenges like stress and sleep difficulties.”
The shift has industry on its toes, Sanders adds, because “if CBD proves to be a more-than-satisfactory substitute for consumers, it could curtail sales of legacy remedies.”
Combined data from IRI and BDS Analytics project that CBD could ride the coattails of widespread consumer acceptance and increased availability in general retail to a market value of $18 billion in 2024.
Yet while mainstreaming will open more channels and growth opportunities, for now and the near future, cannabis dispensary sales will be the leading indicator of CBD’s success. “Dispensaries will be where innovation is likely to occur first,” Sanders predicts, “and then products will likely find their way into the mass market.”
What will it take for that to happen? A clearer regulatory vision, for one. As Karagianes says, “General retail will start to see gains when federal regulators can agree on the appropriate path to bringing ingestible hemp-derived CBD products to the mainstream.” (Read more here.)
Confidence will move the ball forward, too, he adds. “Credibility and trust are mainstays of successful retailers, and with more than 2,700 CBD brands now on the market, retailers have an obligation to thoroughly vet the CBD products on their shelves,” he says.
But no matter the sector, the secret sauce greasing supplement retailers’ success isn’t just being in the right place at the right time. “It’s more than that,” Sanders says. “They’re curating assortments that appeal to, and even delight, their shopper base. And they’re pricing these items along parameters of what consumers are willing to pay.” That’s as simple as it gets.
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