Revolutionizing the Drug Store Channel

Continuing on our earlier postings on new formats and footprints, this discussion wouldn’t be complete without talking about the changes taking place in the drug store channel. Once a destination for OTC and prescription drugs, health and beauty care and few other items only, today’s drug store offers a much expanded selection of foods and even fresh offerings. Much like the lines between convenience stores and grocery are blurring, so are the ones between drug stores and grocery stores.

Take Walgreens. In 2009, the chain set a goal of a making all their stores more customer-centric. This includes initiatives ranging from a different layout of items for better shopability, enhanced health and wellness services, different store architecture, a seamless blend between online and offline offerings and a wider assortment of foods. With the latter, Walgreens aggressively moved to provide an answer to the so-called food deserts — underserved communities, mainly in inner-city areas, lacking ready access to fresh, healthy foods. While supermarkets may seem like the likely solution to food deserts, it has been the drug store channel that stepped up to the plate. Walgreens now provides convenient access to an expanded selection of fruits, vegetables, sushi, salads, sandwiches and other staples at 1,000 store locations across the country.

All these initiatives aimed at one common goal: transform from a traditional drug store to a retail health and daily living destination. Built on years’ worth of research and a 12-store pilot in Chicago, their new store format combines enhancements in pharmacy and health clinics, customer-centric merchandising and new e-commerce techniques and technologies from their multi-channel strategy. The first step was a cost-effective refresh of the front end, which gave stores a cleaner look and better managed assortment. Next steps were enhancing customer experience, boost comparable store sales, reduce inventory and increase efficiency – all of which have been accomplished.

To us at Buxton, the success of the new Walgreens format is anything but surprising. They did their homework using research and data validation, and followed a proven roadmap to truly understand their customers’ needs:

1. Collect data from any and all sources ranging from point-of-sales to loyalty programs and surveys.

2. Develop a customer-centric strategy that is based in providing solutions for the target audience.

3. Run a pilot program using one or two stores in high-potential areas.

4. Analyze your learnings from the pilot programs.

5. Develop a new format rollout strategy.

6. Continue to collect data from the new stores to tweak and perfect the new format.

7. Continue to talk to customers to keep an eye on changing wants and needs.

No retail establishment, whether grocery, drug or restaurant, lacks data. The key is putting the knowledge to work. Need a hand? We’re only a phone call away!

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