Drugstore.com CEO shares how customers’ buying habits have changed

There may be no one who understands how shopping patterns change in a recession better than health and beauty retailers. While Drugstore.com CEO Dawn Lepore shared a tremendous amount of fascinating insights today during her keynote, her comments on the subtle and not-so-subtle ways customers have adapted their shopping habits to adjust to a lagging economy were particularly compelling.

Company sales have been robust, despite the economy, but its customers are hardly sheltered from the downturn: though over-the-counter product sales rose 11% in the second quarter, the company saw the average order decline one percent during the same period of time, Lepore said.

But what’s been most fascinating to watch this year, Lepore offered, is not how much less people are spending but the shift in what they’re buying. “The big changes came not in the bottom line but in the personal preferences and habits we saw among shoppers,” she said, noting that sales of private label products grew close to 40% in the first quarter.

“It’s indisputable that the recession triggered a lot of cost-conscious behavior, and I think this might be the latest chapter in an online revolution,” Lepore said. “I’ve seen the habits, comfort level and shopping behavior change considerably among our shoppers, and it’s been a fascinating study.”

So what do people buy in a recession? For starters, sales of sleep aids are up 22% this year, as are sales of teeth whiteners (up 28%) and nutritional supplements (up 27%). A victim of the economy? Diet aids, which are down 13%. As Lepore reasoned: “If you can’t spend money, you certainly don’t want to stop eating at the same time.”

It’s also no surprise that, in a recession, shoppers love coupons. While sites like Coupon Cabin and Coupons.com saw increases in sales, Lepore needed to look no farther than their own coupon site, where manufacturer coupon redemption rose 198% (no, that’s not a typo) in the first half of 2009 compared to the same period in 2008. (And in case you think that’s because the company offered twice as many coupons, it’s not: Lepore said the number of coupons offered was only up 26%.) Coupons have been so successful for the company, they have begun to offer them on Twitter, and the response has been positive.

While the jury is still out on how consumers have fundamentally changed as a result of the recession, Lepore sees shoppers both trading up and trading down over the long-term. “Today and every day at drugstore.com we’re watching women put a $95 facial peel in a basket beside special-offer Pampers and buy one, get one 50% off Maybelline mascara,” she said. “The lesson to me is clear: don’t assume that some group of shoppers can’t shop with you. You have to support your customer by understanding the full range of tastes and preferences they want to express. Shoppers are smarter, they’re more independent. The old assumptions about who buys what just don’t work anymore.”

Lepore also cautioned retailers against trying to squeeze their customers into preconceived categories: working mothers, teens, value shoppers, prestige-brand buyers. “Increasingly, shoppers refuse to be pigeonholed according to budget or style,” she said. “The old caste system for shoppers has broken down; we see it in our shopping baskets every day.”

When asked if recent consumer shopping patterns provided any insight on if the economy was turning a corner, Lepore was understandably reluctant to declare an end to the recession. But she did give the crowd a dose of optimism by sharing a potential early sign: discretionary purchases are showing a slight uptick. Specifically, she offered, sales of electronic toothbrushes are rising.