80� Chain�Drug�Review/April�22,�2013

State of the Industry the Issuesthe Issues

Death of the typical drug store clears way for innovationBy 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 techni-cian who juggled to keep up with equally harried custom-ers and increasing amounts of paperwork.

For over a decade, you could hardly tell one chain drug store from another. There were usual-ly at least two competing chain stores facing off across the traf-fic lights on any suburban U.S. highway. Each had a drive-through 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 cer-tain age will remember when, in just about every episode, one of the locals introduced him-self 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 — Interchange-able. Undifferentiated. Conve-nient. Commodities.

That was until recently, when the industry had to face new re-alties: Opening more and more of the same stores was no lon-ger a legitimate growth strat-egy. The sluggish U.S. economy and the impact of the Inter-net 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 look-alike stores, that the greater health needs of an aging popu-lation would not be enough to drive drug store sales, and that shoppers would not necessar-ily 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 retail-ers who now sell much of what drug stores do — and often for lower prices.

To their credit, they respond-ed. Today, it’s hugely exciting to see how the major drug chains

and smaller regional chains are aggressively approaching dif-ferentiation. Walgreens’ “Hap-py and Healthy” strategy, its new global partnership with Al-liance Boots and its multiformat retail concepts have set its tone for change. CVS Caremark’s more health-focused approach began when it purchased Care-mark and MinuteClinic, and it continues to expand its health care offer holistically. Rite Aid focuses on wellness (“well-ness 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 so-phisticated automated pre-scription delivery system that enables it to bundle all of a pa-tient’s prescriptions and deliver them conveniently at one time, and Lewis Drug’s mass mer-chandiser footprint and surpris-ing 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 shop-pers 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 shop-pers coming back to one drug store versus another. Yes, it’s essential to offer lower prices in

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 under-stand how complicated it has become as more and more pri-vate label knockoffs of national brands have cluttered the mix.

It’s not enough to have a loy-alty program if the data is only used to deliver promotional of-fers and not build a more cus-tomized, intimate relationship between retailer and shopper. Look at how Amazon.com uses its analytics to understand a shopper’s life stage, preferenc-es and needs, and then deliv-ers on those. A perfect case is diapers.com and its associated “stores” soap.com, beautybar.com, wag.com, casa.com, vine.com and more. All were devel-oped 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 shop-pers decide what’s right for them but only when retailers allow them to use them any way they want without feeling threatened. (How many retail-ers still tell shoppers they can’t take pictures in-store for fear they are looking for lower prices elsewhere — aka showroom-ing? Believe me — a lot.)

A great example of a technol-ogy-enhanced relationship that really adds value is the Clinique Experience Bar at Blooming-dale’s department stores. Shop-pers 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 retail-ers, for that matter) to continue to give short shrift to minority shoppers. Drug stores have un-told opportunities if they truly focus their attention and re-sources 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 experi-ence. The drug store is a place Hispanic shoppers value be-cause they feel more comfort-able discussing health issues with their local pharmacist than with the doctor. They are highly digitized shoppers who use their smartphones to ac-cess 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 out-pace Caucasians three to one buying online. (That’s a trip lost from the drug store.)

There’s so much more oppor-tunity 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 innova-tion. Two recent examples are in the United Kingdom.

Selfridges’ iconic London flag-ship department store opened a healthy juice bar and beauty concierge services in its new Beauty Workshop. All of this was designed to attract young-er shoppers.

Meanwhile, Lloyd’s Pharma-cy, in West Thurrock, opened Health+ Village, an expanded version of its traditional phar-macy, with extensive health services (e.g., optical, dental, skin care treatments such as Botox, and laser physiothera-py), equipment and more. And that’s only some of the innova-tion that U.S. drug store retail-ers could learn from.

In the end, the good news is that the traditional one-size-fits-all U.S. drug store is dead. Drug store retailers finally re-alize the need to differentiate from each other, to think be-yond their traditional competi-tion in order to grow. But there is still much more that needs to be done. And much more op-portunity to be seized.

Wendy Liebmann is chief execu-tive 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@wslstrategicretail.com.

Wendy Liebmann