One reason for the new strategy might be increased price pressure, caused by the transparency of e-commerce. However, this won’t mark the end of the drugstore’s ELDP strategy, according to Christoph Werner, dm’s Head of Buying.
It is no surprise that dm is feeling the effects of increasing price pressure, despite leading the Health & Beauty channel in Germany. As prices become more and more transparent, the drugstore operator can easily be compared to others. Even though dm can differentiate with its successful private labels, it must also offer new and innovative products to lure shoppers into its stores. To do this successfully, it makes sense to rely on brand manufacturers with their greater R&D capabilities.
Exclusive products have two advantages. First, prices can’t be compared. Secondly, customers must go to dm to buy these products and at the same time are likely to pick up other items from their shopping list. Growing its customer base will be mandatory for dm to ensure future growth. Also shoppers' increasing acceptance for private label health & beauty items from discount chains is a threat that dm cannot ignore.
Schwarz Group’s discount chain Lidl is investing heavily in the marketing of its drugstore products, bringing celebrities onto its payroll and not only from Germany – recently the well-known Paris Hilton was hired to advertise products for Lidl. Low prices are no longer a safe card. Although dm is in no immediate danger and will increase its market share in Germany from current 2.8% to 3.3% in 2022 according to LZ Retailytics data, becoming more exclusive will help dm to remain successful.