Re-imagining the great American drug store
How do you transform a drug store into something else? Something new. Something no one has ever seen before. And what would it look like?
To truly reinvent something, you have to be willing to let go of everything you’ve ever known or thought you knew about it; you need to erase all of the preconceptions and abandon the archetypes of what you think it is, what people told you it should be. You need to find the white space.
If you ask Joe Magnacca, Walgreens president of daily living products and solutions, that’s what the best retailers have done all over the world. The chance to be able to do that himself is what brought him to the United States, to Duane Reade and then Walgreens, after many years as one of Canada’s rising stars of merchandising, with an impressive track record at Loblaw’s and Shoppers Drug Mart.
“Drug, particularly in the United States, was an area that had seen very little advancement over the last several decades, both in the format and the content,” Magnacca told DSN in a candid and wide-ranging discussion on retailing and his vision for store and content development. “Even though at Walgreens, there had been some pretty major advancements, those had been primarily pharmacy-based.” Magnacca believed the front-end could “contribute at a much faster rate as part of that innovation.”
“What I saw when I was in Canada was an opportunity … to move away from being primarily a very specific, needs-driven reason to shop and become a place where people want to shop,” Magnacca said. “Here in the United States, and in Canada, we had become focused mainly on size and replicating the existing model — and doing a great job of it, getting the best corners in America. But even more importantly, it was basically a pharmacy-led model.”
Meanwhile, over in Europe, retailers like Boots in the United Kingdom — Walgreens’ brand-new corporate partner — were shaking up the box as if it were a giant Etch A Sketch, and creating a whole new take on the shopping experience. “We thought the European model had really progressed at a much faster rate,” he said. “What we thought they had done so effectively was just to release themselves from the traditional drug store format and become more focused on what we call the three pillars: health, beauty and convenience. They had become focused on reinventing themselves and not just living with the existing model.”
So, Magnacca and his team at the time at Duane Reade — empowered by former Duane Reade chief John Lederer, who brought Magnacca in to help create a new identity for what had become a tarnished brand with great real estate — set about on a long process of redefining the old Duane Reade, and really, the old drug store model. While that’s not exactly something you can just flip a switch on, Magnacca’s group moved fast. After decades of dusty window displays and cluttered stores, Duane Reade opened up the windows, lowered the shelves, widened the aisles, cut away at declining categories and “put more relevant content in the stores,” he explained, and rezoned the stores around three basic areas: “how I look,” “how I feel” and “what I need now.”
The results began to show up in the registers.
“Customers gave us significantly more credit across our store,” Magnacca said. “One of the things that was pretty clear was that when you began to expose the store to the street and you brought in the natural light, and even though you reduce the linear footage, you tended to get more credit from the customer for having more selection in the store.”
It was the birth of the health and daily living store — call it version 1.0. And it was a big part of why Walgreens wanted to buy Duane Reade. Besides the fact that the deal made it the market leader in one of the most important markets in America, it also spring-boarded two of Walgreens key strategic goals: to transform the drug store and elevate the customer experience.
There is no denying the influence of those early learnings in the evolution of version 2.0, Walgreens’ new Well Experience store format, which the company began to roll out slowly last year, completing its first market, Indianapolis, in late 2011. Well Experience marries the best of what Duane Reade had been doing in the front end, with the considerable work Walgreens had been doing over the past several years to reinvent community pharmacy and advance the profession beyond just dispensing.
One of the key things that the Duane Reade deal brought to Walgreens was a much more localized approach to merchandising. It’s something of a necessity in a market like New York, where the trade area and the people shopping in it literally change from one block to the next. But as a chain of 8,000 stores, to be able to move away from the one-size-fits-all approach that had defined U.S. pharmacy retailing for decades, and achieve that level of content relevance in markets all across the country, would be a decided advantage.
“Each market is about making choices,” Magnacca explained. “What we want to focus on with our merchants is: We think we can sell anything in our stores — with our traffic count and 6 million customers in our stores, you probably could sell anything. But one of the key disciplines we put on ourselves is, what’s the right product to sell in the right store, and what products do we just not want to enter at all? The toughest thing to do is to decide what not to sell as opposed to what to sell. It’s saying no to certain categories and making some very tough adjustments.”
In the Well Experience stores, it means some very tough choices in categories that were once destinations for drug stores — some are easy, like VHS tapes and film; some are harder, like batteries and greeting cards. “Those categories are less relevant today than they were years ago,” Magnacca described. “Yet our footages in these categories really didn’t change. … So now part of what we do is making sure we have the right footage in the right stores to get the right productivity — we’re very focused on productivity per SKU per store.”
That basic mindset ties in very neatly with the Customer Centric Retailing work Walgreens had already been doing prior to the Duane Reade acquisition. It’s about understanding how different categories play in different stores. Take its Chicago locations at the intersection of State and Randolph streets, and 75th and State streets, for example. “Both stores are about equal in size … only a few miles apart, but they’re very different in terms of content,” he said. Both stores feature expanded food offerings, but how that plays out in each store is dramatically different.
The store at 75th and State serves a community faced with limited access to healthy food options and medical care. In a sense, the location serves both as the local supermarket for the community, and the Take Care Clinic in it is an entry point for the many people in the area with no medical home. It is a strong example of the role Walgreens believes it can play to help fight America’s massive healthcare crisis, and provider shortage, from a total health and wellness perspective.
Meanwhile, down the road, the store at State and Randolph — one of Walgreens’ souped-up flagship locations — plays to a downtown professional. “It has expanded food,” Magnacca explained, “but it’s a very different mix; it’s got fresh sushi and a very high-end wine and spirits play. An