Walgreens moves ahead with store redesign
NEW YORK Making good on its promise to overhaul and rejuvenate its store format and merchandise presentation, Walgreens shed new light on its store renovation program Tuesday.
That program will see its first large-scale test in the coming weeks, Walgreens’ top financial officer told investment analysts, with the unveiling of some 35 new or redesigned drug stores by early summer. By this fall, some 400 of the company’s more than 6,700 drug stores will sport the new, slimmed-down prototype, SVP and CFO Wade Miquelon told analysts at the Barclays Capital Retail and Restaurants Conference April 28.
The new format features a pared-back product selection — with SKUs down by 15 to 20%, according to Miquelon — and gondola heights lowered to improve department visibility and sightlines. Walgreens is scrapping many slow-moving and redundant product facings and offering more of what the company is calling “affordable essentials” like detergent, mouthwash, skin care products, shampoo and batteries.
The company is also emphasizing more promotional items in both its product selection and advertising, and grouping those products thematically to make it easier for the 5.3 million customers who shop its stores each day to find what they’re looking for.
The goal, said company leaders, is to create an easier and more exciting shopping experience for customers and boost average shopping baskets by at least one more item per customer. The result could be billions of dollars in additional revenues, more productive and profitable stores and additional customer visits as the company works to restore its sales and profit momentum in a recessionary economy.
One Wall Street analyst who has toured the new Walgreens experimental format, Mark Miller of William Blair & Co. Equity Research, called the early result “a good first effort,” adding, “management has improved the aesthetics in its new store format by reducing the SKU count…and keeping the merchandise presentation below its standard five-ft., six-inch risers.
“In addition to streamlining the assortment — which management hopes can reach a 30% reduction over time — the company has strengthened the product lineup in key healthcare and beauty categories,” added Miller. “Additionally, the new store format has an expanded selection of convenience food and staple items, which may help drive stronger traffic to the store.”
In a recent interview with Drug Store News, Walgreens president and CEO Greg Wasson said the company’s aim with its new store format is to “reinvent the front-end experience” by taking a microscope to “every category in the store.”
“It’s everything from reviewing our merchandise selection and our department adjacencies, our profile, our look and feel and so forth within the stores,” Wasson explained, “and also taking a good, hard look at our costs and our efficiencies and our processes, as to how we do business. I think the fortunate thing about the industry we’re in is that we sell a lot of what people need. So we’re focusing on all we can do to meet the new consumer needs and make sure we’re relevant in their everyday life, by offering high value…products and services.”
Walgreens merchandisers and category managers are going through every department within the store, and have “spent the last seven or eight months really understanding what does the shopper want,” said Miquelon.
According to a report from Dow Jones Newswires, Walgreens is reporting that the section-by-section overhaul of the company’s prototype front end is 80 to 90% competed.
“Hopefully, by mid-summer we’ll be well on the way,” Wasson predicted earlier this year.