Pugh applies customer focus to Walgreens’ front end

2/16/2010

CHICAGO —When he joined Walgreens in January 2009, VP merchandising Bryan Pugh brought a new dynamic to the legendary but troubled drug store giant: a strategic approach to highly targeted, location-specific mass merchandising forged during his tenure at Walmart Stores and Tesco USA.

Pugh succeeded George Riedl as Walgreens’ top merchant last March after Riedl was tapped to head the company’s Power pharmacy innovation program. (Riedl has since left the company.) But by then, the Walmart veteran already was effectively driving a radically new approach to marketing and merchandising at the 108-year-old chain, in close coordination with Chong Bang, the former head of Walgreens’ Customer Centric Retailing initiative.

For a company steeped in a promote-from-within culture and incremental changes at the front of the store, putting outsider Pugh in charge of merchandising was a radical shift.

Pugh came to Walgreens with a clear mission: to shake up a front-end product presentation and sales strategy that was beginning to lose its luster as the chain grappled with an economic crisis, a cautious and increasingly fickle consumer base, outdated merchandising techniques and a front-end inventory glut that was sapping turn rates.

“We need to be smarter with our inventory dollars,” Pugh explained last summer. “There’s not a single retailer…worth their salt if they’re not working on increasing their turns and decreasing their stock days and inventory.”

In line with the ongoing CCR initiative, Pugh helped lead a top-to-bottom rationalization of the entire store mix in an effort to weed out outmoded and slower-turning items, group product categories more intelligently and appeal directly to consumers’ needs according to local market demand.

Using CCR, he told Drug Store News, “the better sellers get more space, and we’ll make decisions around things that don’t need to be in the store. That’s going to help us with our turns, our stock days and our inventory reduction.”

Pugh also realized that, based on his experience at Walmart and Tesco, Walgreens needed to more effectively tap its suppliers’ expertise as it reconfigured every category in the store. The goal, he said, was to “unlock [suppliers’] resources and jointly understand how our customers shop.”

“Trying to leverage their resources and expertise in understanding how the customers shop, and utilize that in the…planograms and adjacencies,” has been a positive, Pugh said. “Every 3-ft. section is worked tediously hard to get the best possible result.”

Based on customer focus groups and other research, Pugh drove a new approach to merchandising that groups the front end of the Walgreens store into four major segments: Signature, Power, Staple and Complement.

Core essentials like OTC medicines and beauty fall into the “Signature” category, where Walgreens aims for “best-in-class” status. The chain also needs to offer a deep selection and be consistently in stock with “Power” category products, such as hair care, and offer a reasonable selection of such staples as household cleaners, paper products and other commodity items for the sake of customer convenience. And Walgreens will continue to provide such “Complementary” products as picture frames, shoelaces and humidifiers, as well as a big selection of seasonal items, in-and-out special buys and “treasure hunt” types of products that lure more customers and spur impulse sales.

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