'CVS Pharmacy is part of a broader health care ecosystem.'
WOONSOCKET, R.I. — CVS Health has a unique opportunity, says chief merchandising officer Musab Balbale, and it’s twofold. First, as an operator of more than 9,000 stores focused on health and wellness, it has the ability to connect with members of the community seeking vital information, products and services. The company’s acquisitions of Oak Street Health and Signify Health — providers for older adults that, respectively, deliver primary care and in-home health assessments — have only reinforced CVS’ integral role in the community, Balbale notes. “Being part of the fabric in which we reside is an important attribute, and one where our proximity and size provide incredible value,” he says.
Secondly, CVS Pharmacy is not only a retailer but “part of a broader health care ecosystem,” he says. “And for us, while sales are important, the ability to offer services to help improve health outcomes of our customers and members is equally important.”
For being a key contributor to both facets of CVS’ uniqueness, Balbale has been named Chain Drug Review’s Merchant of the Year.
Most notably, he is an architect of the company’s new store prototype, in Millis, Mass., about 30 miles from Boston. The development of the store’s capacity to link customers to CVS’ companywide health care offerings reflects a favorite Balbale quote from Winston Churchill: “People overestimate what they can do in one year, but underestimate what they could do in five years.”
Says Balbale, “I take to heart the ability to drive change in a relatively rapid period of time.”
That’s evident from the speed with which he and his “exceptional team” designed the prototype and its ongoing multidimensional enhancements. Balbale makes special mention of vice president of retail store formats Christophe Griffiths, “who is leading our team and just has a really crisp vision as to where we want to go, and has the discipline to not let an illusion of perfection get in the way, but to let the customer tell us how to keep getting better.”
Besides a refined assortment, the store has a reimagined physical space, and a rebalance of everyday-low pricing and promotions. The prototype seeks to create a better customer experience, and it does so first and foremost by centralizing the personnel. “So when you walk in, the colleague is facing you and has a chance to greet you,” says Balbale. “We know our colleagues are incredibly important to the customer experience, and it’s an area where we have the opportunity to differentiate ourselves from a lot of other retailers, to show that we are a neighborhood store, we serve the community, and our customers visit us on a regular basis and get to know the colleagues. And so creating a physical structure that allows the colleague to better engage with customers more frequently was really important.
“It’s one of our advantages from having a smaller physical footprint. We have the opportunity to actually talk and build relationships with our customers. That’s a little bit harder in a bigger box where the traffic is much heavier. And so as we think about how we go up against other retailers, whether grocery or big box or e-commerce, our size and our proximity to the customer really engenders personal relationships and makes that a competitive edge.”
Another key element is the “circuit” design that departs from the typical drug store layout that funnels customers to the pharmacy at the back. “What the circuit allows us to do is create movement for the customer and show more of what we offer across our entire portfolio of products.”
Another primary feature was “becoming more deliberate in how we talk to the customer and the stories that we tell. And so instead of having end-caps that are a bit disjointed, both from a visual perspective and from a storytelling perspective, the products on the end-caps and shelves were thoughtfully selected to together tell a comprehensive story or journey around health and wellness that we want to communicate to the customer.”
Another objective of the prototype was to reaffirm CVS Health as “a health and wellness authority,” and it does so by moving wellness, beauty and categories like healthy snacks up front. “While we continue to offer the great selection that we always have, it’s organized in a way where we’re leading with more of our health and wellness assortment, so that our personality and our brand promise is at the forefront,” Balbale explains.
While the Millis location does not have a MinuteClinic, with medical clinics located in selected CVS Pharmacy retail locations the circuit highlights the pharmacy. The pharmacy itself has more of a private area than usual, and CVS’ supplemental benefits program, which connects customers to Medicare benefits, is more at the forefront. “As we imagine taking the learnings from Millis elsewhere, the distinct ‘personality’ of the store will make it easier for the customer to engage with our other offerings.”
Shoppers’ reaction to the prototype is reflected in rising net promoter scores (NPS). The scores reveal that “customers like the store quite a bit. They like the feeling of openness, they like the connection to the colleague. They like the refreshed — personality of the store.”
At the same time, CVS has found that the store personnel enjoy talking to customers and see their work as furthering their wish to serve their community. “As we reduce the assortment, and as we’ve simplified our promotional tags, we intend to make their work a bit easier as well. And so far we’re finding the colleague NPS continues to accelerate.”
And beyond what people are saying, the company is seeing promising results in Millis. The prescription drug business has benefited from the relocation of the pharmacy up front, which has led customers to consider it more as they think about the clinical parts of their health and wellness needs.”
Regarding the merchandise mix, Balbale says, “What we’re trying to do is make it easier for customers to find the products they’re looking for, while also introducing them to new products, brands and categories that they may not have realized were at CVS. So we simplified our assortment pretty significantly — we pulled back about 18% in that store, and we’re now continuing to iterate, to say where did we pull back too much? Where did we not pull back enough? Merchandising is an ongoing, iterative process.”
Recognizing that customers come into the store for a specific reason, whether for a cold or flu remedy, or a vitamin or beauty product, the theory behind the prototype is that the faster they can find it the more time they have to explore the rest of the store.
That exploration will bring them to brands they might be surprised to see at CVS, like Harry’s in the shaving category, Bubble in skin care, and Starface pimple patches. Such brands are on customers’ minds, and giving them greater visibility “lifts the personality of the store to be one that’s much more trending and current.”
Together, the simplified mix and altered traffic flow have changed “how easy it is and how exciting it is to shop at CVS,” he says. “And then as we build out our stories, our end-caps and features — again, that’s an ongoing iterative process — we’re balancing what’s new with what drives value and what’s seasonally relevant. We’re trying to bring to the forefront the combination of the exciting and different and the convenient and easy. So the shopper might say, ‘Let me add this to my basket,’ and ‘This is a really great value. Let me stock up.’ ”
While wellness and beauty is the first thing one sees when walking in the door and the last thing one sees when leaving, consumables and general merchandise remain core categories.
And the store has added segments like pet wellness, based on the recognition that people think about their pets as members of their family. “So we’re extending that joy of shopping to the pet category,” Balbale says. “We’ve also added items for celebrations. People come to our stores oftentimes for a last minute gift before they’re going to a birthday party for their kid’s friend or a dinner party, and it’s an opportunity for us to offer them convenient gifting. So we continue to explore new categories that provide additional reasons for customers to come to CVS.”
Chainwide, CVS Pharmacy continues to be a retailer that balances national brands and store brands. Customers sometimes want a private label product and sometimes want a national brand, says Balbale, and sometimes they’re indifferent and decide between the two at the shelf. “So we think the balance is really important. We also believe that we have an opportunity to continue to simplify our store brands from a branding perspective. And so there’s some exciting work that’ll be in the market in the next year, or year and a half, where we’ll have refreshes of our brands across health and beauty, and consumables. And as we do that we’re particularly cognizant of continuing to drive quality in our store brands.”
Mike Wier, who was promoted last year to vice president of store brands, “is doing really amazing job of looking at every single product in our portfolio and determining quality standards that reflect our ambitions as a health and wellness retailer,” notes Balbale. That creates trust with the customer, he adds, saying that with a simplified branding portfolio, “we believe there’ll be incredible strength in our store brands,” which will continue to drive both value for the customer and reasons for the customer to come to CVS versus other retailers.
“None of that takes away from the incredible innovation that our national brands are developing, and we’ll continue to offer those great products as well,” he emphasizes.
Regarding the prototype’s balance between everyday-low prices and deals, he says promotions drive excitement and urgency for a customer. “They can be fun. There are a lot of consumers who like the hunt for a deal. And so we will continue to be a promotional retailer. That being said, we can make a lot of headway in making those promotions a bit simpler for the customer, especially for the customers that are coming into our stores less frequently. Testing and learning is going on at many stores, with the ultimate goal of finding the right balance between an everyday accessible price and promotions that drive traffic and excitement for the customer.”
Looking at CVS’ overall strategy, Balbale says the view of the pharmacy and front store as one integrated retail experience is being fostered by chief pharmacy officer and president of pharmacy and consumer wellness Prem Shah. “It really gives us an opportunity to better serve the customer regardless of what brings them into the store. So if they’re coming in for the front store, say, for a beauty product or a Halloween product, or if they’re coming in for the pharmacy, it’s still a single experience. The role of the front-store experience is to create a relationship with customers that can then extend into other parts of our health care ecosystem.”
“That might include introducing Aetna members to Signify Health, which increases access to health care services for older adults and others who are medically underserved by bringing clinicians into the home to assess medical conditions and social determinants of health, and to help close care gaps, or introducing seniors who may need a PCP to Oak Street Health, a leading value-based primary care provider for older adults that has centers across the U.S.”
“The ability to make customers aware of the incredible health care offerings that we have and increase accessibility of care and improve outcomes for Americans is really, really important,” Balbale comments. “And it’s one of the places where I think, as an enterprise, we’re differentiated.
“And so whether it be our health care delivery or how we’re better connecting with our Aetna customers and making it easier for them to use their supplemental benefits in our stores and through our online platform, or finding ways to better connect pharmacy shopping and front-store shopping trips, we’re trying to serve the customer versus drive individual business units.
“Putting that customer at the center and thinking holistically about the needs of that customer allows us to come together as an enterprise and unlock access to greater health and well-being.”