Regional chain adapts to shifts in retailing, health care

Lewis Drug is celebrating its 75th anniversary, and the company is marking the occasion with a yearlong series of promotions and special events.

The first of them, Customer Appreciation Day on March 25, will highlight the Sioux Falls, S.D.-based company’s heritage and close ties to the communities it serves in that state, Iowa and Minnesota, with a chance to win a range of prizes and 12% (7% plus 5%) off merchandise throughout the store.

The milestone is a fitting occasion for Lewis to look back, but president and chief executive officer Mark Griffin is determined to keep the company nurtured by his father, John, oriented toward the future. “Over those 75 years we’ve reinvented ourselves numerous times,” says Griffin, “and today we have another opportunity to do so.

“Amazon has really disrupted the retail business. Young people, the 18- to 35-year-olds who were the core customers for regional malls, are now going to the internet to do their shopping. The brick-and-mortar side of retail is going to go through a revolution, not an evolution, and we have to be ready for it.”

Lewis has proven adept during its first three-quarters of a century at tailoring its business to the demands of the local marketplace. Its methodical climb to 55 stores that will generate close to a quarter-billion dollars in sales this year included a number of innovations that extended far beyond the standard concept of a chain drug store.

The company operates two formats — traditional drug stores, mostly in rural areas, and larger, multidepartment stores, where pharmacy and other core drug store offerings are complemented by an extensive selection of food and beverages and such categories as furniture, kitchenware, grills and outdoor living, toys, and pet care.

Although the 35,000- to 50,000-square-foot stores have come to define Lewis in the mind of most consumers, Griffin understands that the departures from the standard drug store model that played such a big part in the company’s rise must be rethought and strengthened for a 21st century appeal.

“What you do is try to provide relevant goods and services at maximum efficiency,” notes Griffin, who has been with the family-owned company for almost four decades and assumed his current role in 1986. “Doing that might not involve a 50,000-square-foot store, it might be a 25,000- or 30,000-square-foot format.”

Lewis is re-examining its business in light of the growing e-commerce threat and continued pressure applied by such longtime rivals as Walmart and Walgreens. Every aspect of the business — from store layout and design to the merchandise mix and service levels — is under scrutiny, with Griffin’s daughter Nicole, a corporate vice president, and Bob Meyer, senior vice president and general merchandise and marketing manager, taking a leadership role.

“If you’re not going to be in the e-commerce business today, you’d better be in the convenience business,” says Mark Griffin, who adds that Lewis is testing the waters in online retailing. “You’d better be very convenient.

“It’s all about ease of shopping and efficiency. So we need to present consumers with the easiest way to shop, but we also need to be efficient in our presentation. That goes all the way down to how you put SKUs on the shelf, how deep you post them and how many facings you have. You need to really think hard about those things to get the efficiency you need these days.”

It should come as no surprise that Lewis’ willingness to alter its business model to better meet customer needs extends to health care. Two decades ago the company anticipated the current vogue among pharmacy operators for forming alliances with other health care providers. Through its partnership with Sanford Health, one of the largest medical providers in the upper Midwest, Lewis develops real estate and shares common sites for pharmacies and clinics.

Griffin says the partnership with Sanford is a win-win for everyone involved. People have easy access to affordable care, the presence of the clinics brings more customers into Lewis stores, and Sanford ensures that patients get the care they need without needlessly utilizing more costly forms of treatment. The two companies are now working on establishing real-time communication between pharmacists, customers and Sanford ­physicians.

Like other Lewis programs, the alliance with Sanford arose from the perception of an unmet need in the community and a determination to find a solution.

“We’re close to the ground, close to the issues that are impacting our customers,” Griffin explains. “My management team and I are in the stores every week and stay in touch with our customers and our team members, which is important because we owe them so much.

“The high level of involvement we have in the communities where our stores operate has enabled us to continue to grow at a pretty good pace. Lewis is doing well in a tough environment, but we can always do better.”