CEO and her team have developed an ambitious strategic plan.
CAMP HILL, Pa. — When Heyward Donigan was chosen to lead Rite Aid Corp. in the summer of 2019, she was tasked with restoring an iconic brand that had lost some of its luster. After devoting the first months on the job to shoring up the company’s finances — which still suffer from a large debt load taken on in the 1990s — the new chief executive officer and her team, comprised of Rite Aid veterans and newcomers, developed an ambitious strategic plan with three main objectives — revitalizing the retail and digital experience for customers; enabling pharmacists to practice at the top of their license and realize their full potential; and making its Elixir subsidiary the dominant pharmacy benefits manager for midsize employers and regional health plans.
Unveiled in mid-March, just as the seriousness and severity of COVID-19 began to sink in, the plan has come to fruition with remarkable speed. For the boldness of her vision and skill in executing it, even in the midst of a pandemic, the editors of Chain Drug Review have named Donigan the publication’s Retailer of the Year.
Perhaps the most tangible sign of Donigan’s influence on Rite Aid is the drug chain’s “store of the future.” The format, which thus far has been launched in three slightly different iterations in Etters and Moscow, Pa., and Littleton, N.H., is designed to transform the drug store shopping experience. Innovative fixtures called nesting tables allow unimpeded sight lines throughout the stores, whose expansive windows let in ample natural light. Cutting-edge digital signage, vibrant colors (including a touch of greenery), and a revamped product mix shaped by the company’s holistic approach to health and well-being distinguish the format, which, in another significant departure, brings pharmacists out from behind the prescription counter to facilitate interaction with customers.
“In terms of dramatic change, our store of the future is like no other retail experience that I’ve seen outside of Nordstrom,” comments Donigan, who prior to joining Rite Aid was president and CEO of Sapphire Digital, which develops technology platforms that help consumers find health care providers that best meet their needs. She previously held management roles at behavioral health improvement company ValueOptions, Premera Blue Cross, Cigna Healthcare, General Electric, Empire Blue Cross Blue Shield and U.S. Healthcare. “What we’re doing is a real departure from the traditional drug store. Very fresh.”
The format — which Donigan says will be rolled out in coming months across the entire Virginia Beach market, at 11 stores in Boise, Idaho, and at a couple locations in Oregon — and the broader RxEvolution under way at Rite Aid are a direct result of the company’s determination, to borrow a phrase from Ezra Pound, to “make it new.”
“The culture we’re trying to drive is one of innovation and extreme nimbleness,” Donigan explains. “We want to maintain a relentless customer-first focus and consistent approach to our target consumer segments, particularly 25- to 49-year-olds caring for their kids, their parents and their pets. We’ve got to be the most innovative, the most accountable and the most responsive retailer in reaching those segments and meeting their desires and needs.
“That’s one of the three legs of the stool. The second is driving the significant and important culture of elevating and supporting our pharmacists to deliver on the promises, engaging consumers in ways never before seen in health care. Finally, driving a culture using lean tools where our associates really lead and drive our processes from a bottom-up perspective. I think we’ve shown how versatile we are, because we’ve done everything we set up to do in the last year on top of a pandemic.”
Rite Aid’s openness to innovation is evident in the product mix. Shoppers at store of the future locations, and increasingly throughout the chain, should quickly notice the replacement of slow-turning categories irrelevant to the company’s mission — for example, motor oil, consignment clothing and “old-school electronics” — with an expanded range of health, beauty, food and beverage products.
“The amount of merchandise and assortment change that’s gone on in this company is really truly astounding,” says Donigan. “We are changing so much of our merchandise to align with our focus on whole-being health. We’re expanding the products we offer that promote health and wellness, are better for the environment, and create a point of differentiation from the other drug store chains. We’re highlighting existing products that meet those criteria, but we’re bringing on a lot of new items that have attributes and ingredients that our customers care about, including organic, non-GMO, cruelty free, fair trade, recyclable, natural, chemical free.”
She adds that in 2019 Rite Aid was the first major drug chain to remove vaping products and raise the age to purchase tobacco products to 21. It has started to deemphasize tobacco. Cigarettes and related products are not sold in the store of the future. The jettisoning of items that have been drug store staples and quest for more relevant products has prompted the company to reach out to a variety of new vendors.
“I’ve got to give my category management team a fist bump, because they have had to do a lot of research, find out what influencers like, find out what our target customers love, find out what’s hot, and then go out and convince new suppliers that this isn’t the same old Rite Aid,” Donigan says. “These folks would never in the past have considered working with Rite Aid, and in some cases some of our new partners are only in, maybe, one other retailer, like a Target. We really ventured into some exciting new space.
“Our brand relaunch and new advertising campaign are going on right now. Between the store of the future and just the general availability of new merchandise, we’ll be able to really demonstrate that we have something special that suppliers are going to care about. We just have to keep this up, we can’t stay still.”
The movement at the front end of the store coincides with equally significant changes in the pharmacy department. In addition to moving pharmacists out front where they are more accessible to customers, Rite Aid has reengineered the pharmacy work flow and augmented the role of technicians to free an additional 20% or more of pharmacists’ time for interaction with patients.
“Over the past few months, we’ve trained our pharmacists to be certified integrative pharmacy specialists,” Donigan says. “They received instruction on alterative medicine and over-the-counter remedies, and are now certified to be able to offer both traditional and alternative remedies.”
Rite Aid is also providing practitioners with what it calls Tip Sheets devoted to specific health concerns. “The focus of the last month or so has been for them to consult with our customers on immunity products, for all the reasons you can imagine,” notes Donigan. “Tip Sheets and consultations at this time of year emphasize the importance of things like getting a flu shot, and point out that customers might also consider zinc, vitamin D and elderberry. We can actually demonstrate now that we’re seeing an increase in sales tied to those consultations, and we’ve seen a rise in loyalty around our customer’s view of these interactions with their pharmacist.”
The changes should help Rite Aid achieve the goal of becoming what Donigan calls the “last-mile connector in health care.” “There is a lot of excitement about this among health systems and health plans, because it’s been difficult to engage with consumers around things like medication adherence and diagnostic testing,” she says. “The fact that our pharmacists engage with customers upwards of 30 times a year — in some cases every 10 days — is an incredible opportunity. This is an area that will pick up the greatest momentum in short order, over the next year.”
The process will be augmented by the realignment of Elixir, where a variety of assets, including two PBMs and a Medicare Part D business, are now being integrated. Acknowledging that the turnaround at Elixir has taken longer than anticipated, Donigan sees ample room for growth. Elixir now accounts for 1% of a $400 billion market. We see our opportunity to be the $150 billion market that repreents small and mid-sized employers and regional health plans.”
Digital technology and omnichannel options are central to Rite Aid’s RxEvolution. “Right away we recognized the need for us to drive significantly improved digital and omnichannel experiences, including the app, the website, pay and go, buy online and pickup at store, and all of Elixir’s capabilities,” Donigan comments. “Like any good digital company, we are continuing to use lean methodology to sprint and test and reiterate and improve.”
The nimbleness that Donigan prizes was on display last October, when the company agreed to purchase Bartell Drugs for $95 million. The addition of Bartell’s 67 stores in Seattle and Washington state’s King, Snohomish and Pierce counties makes Rite Aid the leader there with a 40% share in the drug store market. More important, the deal gives the company an ideal proving ground for its holistic health care strategy.
“The more research we do on the potential of markets with advanced analytics and artificial intelligence, the more Seattle rises to the top,” says Donigan, “not just Seattle but the whole Pacific Northwest. It’s a large and growing market, and very crucial for Rite Aid.
“In terms of lifestyle, many of the people there have a very holistic and sustainable mindset. Those communities are densely populated with our target customers. Millennials, especially in the Pacific Northwest, really care about their health, about better-for-you and safe products, and about the environment and social justice — all of the things that we’re really aligning with.
“So the acquisition of Bartell is a really exciting opportunity because it’s about more than just retail pharmacy. It’s about using our pharmacies to augment the health care system as we all try to close gaps in care and engage patients. In addition, becoming a distinctive PBM offering that targets middle-market customers and regional health plans will enable us to have an even bigger impact on the health and well-being of people in the community.”
Donigan indicates that she and her colleagues are closely monitoring reaction to the transformation of Rite Aid among progressive-minded consumers like those in Seattle.
“The research that we did showed that we still have an iconic brand with a loyal following, but mostly people said, ‘Oh, that’s my grandmother’s favorite store.’ They described us as an old man in a trench coat. I absolutely believe that we can and will change that perception.”