Page 1

State of the Industry

the Issues

Death of the typical drug store clears way for innovation By Wendy Liebmann The death of the ubiquitous American drug store was not a moment too soon. We could be sentimental and pine its loss, but the fact of the matter is, it was long overdue. It was time to get rid of the store that had become nothing more than a commoditized version of what many of us remember so fondly from when we were growing up. The friendly local pharmacist, the recognizable face of our drug store, had long since disappeared, replaced by the harried pharmacy technician who juggled to keep up with equally harried customers and increasing amounts of ­paperwork. For over a decade, you could hardly tell one chain drug store from another. There were usually at least two competing chain stores facing off across the traffic lights on any suburban U.S. highway. Each had a drivethrough pharmacy; each had window posters featuring the specials of the day, the same product mix, same brands and same front-store service (or lack of it). The only differences were the color scheme and the logo. They were like “the Darrells,” characters in comedian Bob Newhart’s 1980s TV sitcom in which he and his wife ran an inn in rural Vermont. Those of a certain age will remember when, in just about every episode, one of the locals introduced himself as “I’m Darrell. This is my other brother Darrell. And he’s my other brother Darrell.” Well, that was what U.S. drug stores had become — Interchangeable. Undifferentiated. Convenient. Commodities. That was until recently, when the industry had to face new realties: Opening more and more of the same stores was no longer a legitimate growth strategy. The sluggish U.S. economy and the impact of the Internet meant that no one needed more stores to shop — of any kind, drug stores included. The leaders of the three major U.S. drug chains came to realize that it was no longer possible to grow by opening more lookalike stores, that the greater health needs of an aging population would not be enough to drive drug store sales, and that shoppers would not necessarily make most of their health care purchases in drug stores in coming years. Drug store chains, national and regional, finally recognized that if they were to grow, they must differentiate themselves, not only from each other but also from all the other retailers who now sell much of what drug stores do — and often for lower prices. To their credit, they responded. Today, it’s hugely exciting to see how the major drug chains 80

and smaller regional chains are aggressively approaching differentiation. Walgreens’ “Happy and Healthy” strategy, its new global partnership with Alliance Boots and its multiformat retail concepts have set its tone for change. CVS Caremark’s more health-focused approach began when it purchased Caremark and MinuteClinic, and it continues to expand its health care offer holistically. Rite Aid focuses on wellness (“wellness ambassadors” in-store, expanded health services, its wellness+ loyalty program, and a more customized approach for its older and often lower-income shoppers). Smaller regional chains have learned how to compete too. Examples include Kerr Drug’s extensive health services through its alliance with Duke University, Thrifty White’s sophisticated automated prescription delivery system that enables it to bundle all of a patient’s prescriptions and deliver them conveniently at one time, and Lewis Drug’s mass merchandiser footprint and surprising mix coupled with a strong pharmacy presence. Finally, the once ubiquitous U.S. drug store is being reinvented. And it’s about time. But that said, it hasn’t gone far enough, or fast enough, or been bold enough. And here’s why … It’s not enough to think that adding more food to the mix will be sufficient to bring more shoppers into drug stores more often. There are so many other places that people can now buy their food (conveniently and with more healthy options) that drug stores cannot win on food alone (see graphic below). It’s not enough to think that private label will keep shoppers coming back to one drug store versus another. Yes, it’s essential to offer lower prices in

Wendy Liebmann categories where shoppers are looking for better value — but not when all it does is make the category harder to shop. Skin care is a perfect case in point. If you’ve watched a woman try to buy a moisturizer in a drug store recently, you’ll understand how complicated it has become as more and more private label knockoffs of national brands have cluttered the mix. It’s not enough to have a loyalty program if the data is only used to deliver promotional offers and not build a more customized, intimate relationship between retailer and shopper. Look at how uses its analytics to understand a shopper’s life stage, preferences and needs, and then delivers on those. A perfect case is and its associated “stores”, beautybar. com,,, vine. com and more. All were developed based on understanding the life, needs and shopping behaviors of a woman with a young baby, and satisfying

them — next day, with free shipping. Now that’s a loyalty program. Nor is it enough to think that technology by itself will make the difference. An app, iPhone, iPad or tablet can help shoppers decide what’s right for them but only when retailers allow them to use them any way they want without feeling threatened. (How many retailers still tell shoppers they can’t take pictures in-store for fear they are looking for lower prices elsewhere — aka showrooming? Believe me — a lot.) A great example of a technology-enhanced relationship that really adds value is the Clinique Experience Bar at Blooming­ dale’s department stores. Shoppers sit up at the bar, use iPads to access product information and prices, watch videos, and try products (see photo below). Or, if they prefer, they can also get personal assistance. And last, it is not enough for drug store retailers (or any retailers, for that matter) to continue to give short shrift to minority shoppers. Drug stores have untold opportunities if they truly focus their attention and resources on serving the distinct needs of Hispanic shoppers and African-American shoppers. It’s not only about offering the right brands and products; it’s about service and experience. The drug store is a place Hispanic shoppers value because they feel more comfortable discussing health issues with their local pharmacist than with the doctor. They are highly digitized shoppers who use their smartphones to access information and connect with others much more than other ethnic groups, including Caucasians. African-American shoppers are increasingly using the Web as a way to find the brands and

products they want but can’t find in-store. In the hair care category, in particular, they outpace Caucasians three to one buying online. (That’s a trip lost from the drug store.) There’s so much more opportunity for drug store retailers than many yet recognize. All they have to do is look beyond traditional competition to see where shoppers are willing to go for their health and beauty. Outside the United States, there has been lots of innovation. Two recent examples are in the United Kingdom. Selfridges’ iconic London flagship department store opened a healthy juice bar and beauty concierge services in its new Beauty Workshop. All of this was designed to attract younger shoppers. Meanwhile, Lloyd’s Pharmacy, in West Thurrock, opened Health+ Village, an expanded version of its traditional pharmacy, with extensive health services (e.g., optical, dental, skin care treatments such as Botox, and laser physiotherapy), equipment and more. And that’s only some of the innovation that U.S. drug store retailers could learn from. In the end, the good news is that the traditional one-sizefits-all U.S. drug store is dead. Drug store retailers finally realize the need to differentiate from each other, to think beyond their traditional competition in order to grow. But there is still much more that needs to be done. And much more opportunity to be seized. Wendy Liebmann is chief executive officer of WSL STRATEGIC RETAIL, a New York-based global consultancy that helps clients build retail strategies and define shopping futures. She can be contacted at wliebmann@

Chain Drug Review/April 22, 2013

Death of the typical drug store clears way for innovation - Chain Drug Review 04/22/13  

Our work in the chain drug store space has given us a unique perspective on the innovative differentiation strategies transforming this long...

Read more
Read more
Similar to
Popular now
Just for you