Walgreens plays game right with expanded front-end initiatives

WHAT IT MEANS AND WHY IT’S IMPORTANT — Walgreens has talked plenty about its Customer Centric Retailing initiative since the overhaul of its store merchandising and marketing strategy kicked off two years ago. But the rejuvenation of Walgreens’ sprawling, coast-to-coast store network is just the tip of the CCR iceberg, company leaders said.

(THE NEWS: CCR is just the beginning, says Walgreens CEO. For the full story, click here)

CCR, they told hundreds of shareholders at the company’s annual meeting on Jan. 12, is changing the way the chain approaches merchandising and store presentation, and opening up a menu of new and potentially lucrative business opportunities at the front end of the store.

Among those already emerging: The expansion of the chain’s fresh-food format, now featured in nearly a dozen stores that cater to underserved residents of Chicago’s “food desert” neighborhoods who don’t have access to supermarkets or other healthier food alternatives. Walgreens, company leaders revealed at the annual gathering at Chicago’s Navy Pier, sees an opportunity for as many as 400 or more of its expanded food sections in urban stores around the United States.

Also promising: The “Look” beauty boutiques developed by Duane Reade, the Manhattan-based drug chain that Walgreens bought last year for $1.1 billion. At the meeting, president and CEO Greg Wasson told shareholders that the company has learned a lot about beauty merchandising from Duane Reade’s merchants, and is beginning to apply the upscale beauty concept to its own stores.

Walgreens managers also saw new opportunities in store-brand merchandising, and in the fledgling customer loyalty program the retailer is launching. Wasson also credited Duane Reade for the expertise it has brought to his company in loyalty card programs.

Duane Reade’s merchants — some of whom came from Canada’s innovative Loblaw’s supermarket chain — may have other things to teach their new bosses, as well. Duane Reade has shown a penchant for flexibility and an ability to adapt to the needs and wants of local consumers in specific neighborhoods around New York. To wit, in Brooklyn’s Williamsburg neighborhood, the chain responded to initial opposition from the community to its plans to build a new store by opening a bar that specializes in craft beers at the store. In other parts of the city, it meets the specific needs of local consumers with such offerings as quick lunches, fresh flowers and even fresh-baked pies, according to a report from The New York Times.

Give Walgreens’ managers their due; they saw the future and aligned the company to meet it. In doing so, Walgreens seems to have landed in the sweet spot where a massive, customer-focused retail presence across the country meshes with the country’s critical need for more accessible, community-based healthcare services to prevent and more cost-effectively manage disease.

It was clear from the company’s festive annual shareholders’ meeting that Walgreens again is starting to fire on nearly all cylinders. The mood was celebratory, in contrast to the more somber cast of the past two annual gatherings, and chairman Alan McNally left no doubt that he’s pleased with the job president and CEO Greg Wasson has done since his elevation to top manager — and with the leadership team Wasson has put in place to drive Walgreens’ reinvention.

Walgreens seems to be becoming increasingly adept at leverage: At wielding its massive retail and healthcare firepower in pursuit both of a strong service-provider role in a reforming, more cost-conscious healthcare system and of a slew of new merchandising opportunities in such areas as beauty and food.

The chain’s retail presence is inescapable. Thanks to a decade of saturation-style expansion — most of it on the best retail corners with new, freestanding stores built to modern Walgreens specifications, augmented by a series of savvy acquisitions of strong regional players — the company now operates at least one of its 7,655 drug stores within 3 miles of most American households. And it’s “now No. 1 or [No. 2] in 115 markets across the country,” Wasson proudly announced at Wednesday’s shareholder powwow.

Walgreens has leveraged that dense market penetration to become the nation’s top pharmacy service provider — nearly 1-in-5 U.S. retail prescriptions are now filled in its pharmacies — and the top provider of flu shots outside the U.S. government.

That’s just the community-based side of the company’s 8,000 “points of care.” Thanks to an aggressive drive to open Take Care Clinics and pharmacies in the workplace, Walgreens also has become the go-to health resource for hundreds of employers and millions of employees where they work, driving both new revenue opportunities and name recognition, and capturing hundreds of thousands of potential new prescription customers.

There’s also a quietly expanding effort to put more Walgreens pharmacies in hospitals and community care centers, where the chain already operates more than 100 on-site dispensing centers. And the company continues to expand its retail-based Take Care Clinics: Some 350 of its stores now include the walk-in health centers. On Wednesday, Walgreens announced that it was adding new health services delivered by the nurse practitioners in those clinics, going beyond acute-care services to include more preventive and disease management offerings.