Inside This Issue - Opinion
Outsiders bring new thinking to industry
September 14th, 2009
by David Pinto
Chain drug retailing is changing more quickly and more dramatically than at any time in recent memory.
Moreover, the changes are, for the most part, strongly positive, benefiting the individual drug chains developing new directions and programs while elevating and enhancing the efforts of the entire chain drug industry as well.
Here are two samples:
Walgreens, despite initial skepticism and predictions of disaster within the supplier community, is brilliantly repositioning itself to compete against the most successful mass retailers in the country. A series of dramatic personnel changes instituted over the past several months, additions that have precipitated much anguish and conjecture in the chain drug industry, are now increasingly being viewed for what they are — sound business decisions. They have at once injected new blood, new thinking and new excitement into a retailer in desperate need of all three.
In addition, they have combined to expand Walgreens’ sense of itself, its possibilities, its vision and its horizons. Perhaps the most striking example of this expanded retailing vision was an around-the-world fact-finding trip the retailer’s senior executives completed earlier this summer, a tour led by CEO Greg Wasson and senior merchant Bryan Pugh with the object of exposing the drug chain’s top managers to the newest ideas, concepts and retail prototypes around the globe. It was an excursion no previous generation of Walgreens top managers would even have considered.
Meanwhile, Walgreens’ ambitious SKU-rationalization and Customer-Centric Retailing programs are proceeding on schedule, with strongly encouraging results to date. At the same time, the retailer is keeping an eye on its day-to-day business. To that end, Walgreens has just opened its third unit in Alaska, to very receptive results.
Then too, the drug chain is working to find and hire five local market managers (they will be based in Walgreens regional offices throughout the country) to take a leading role in customizing assortments to local customer tastes and preferences in Walgreens drug stores throughout the country.
Then there’s the example of Duane Reade, the New York City-based drug chain, which is currently undergoing the most dramatic and impressive transformation chain drug retailing has seen in a very long time. The renovation effort is being led by two Canadian retailers, former Loblaws president John Lederer and Joe Magnacca, most recently the chief merchant at Shoppers Drug Mart. Last year, Lederer signed on as Duane Reade’s chairman and chief executive officer, bringing Magnacca, with whom he worked at Loblaws, on board as chief merchandising officer.
Under their leadership, the drug chain has embarked on an ambitious repositioning program, one that combines an extensive renovation effort with selective new-store rollouts, and an initiative to upgrade the current offering.The remodeling program — which will reorder some 25 of the retailer’s 250 stores (160 of which are in Manhattan) by year’s end, and an equal number annually going forward —has not only transformed the stores but reoriented the retailer’s once questionable image and reputation for poor customer service as well.
The newest Duane Reade stores emphasize a stylish and compelling new logo, a new emphasis on service, an SKU-rationalization initiative, an upscale beauty assortment, more-compelling private label offerings, clearer sight lines, wider aisles, easier access to the pharmacy counter and three distinctly positioned color-coded store areas designed to appeal to different customer aspirations: How Do I Feel (blue), How Do I Look (purple) and What Do I Need (green).
The renovation program is accompanied by an aggressive new advertising campaign, one that ambitiously ties the drug chain to the city whose residents it serves.
Perhaps most noteworthy in all this, Duane Reade will open a drug store in Manhattan’s heavily trafficked Herald Square next month, one that will bring together all the elements the retailer has rolled out and fine-tuned over the past several months.
The most compelling aspect of the changes these two drug chains are quickly and successfully implementing is that they are being led and implemented by staffers new to the U.S. chain drug retailing community.
At Walgreens, the catalysts are Pugh, a former Wal-Mart and Tesco staffer, and Kim Feil, who came to Walgreens with no retail background or experience. At Duane Reade, the transformation is being orchestrated by two executives, Lederer and Magnacca, who are more at home in Canada than the U.S. (though that’s changing rapidly, particularly for Magnacca), and at least as comfortable around supermarkets as they are around drug stores.
That, in the end, is probably the point of this story, the fact that, in a notoriously inbred industry, a group of outsiders can quickly and dramatically bring new thinking, new ideas and new approaches to chain drug store retailing — all without the benefit of an extensive chain drug background or education. It is a lesson the chain drug industry would do well to study.