Personal touch pays off for Lewis Drug
Over the past 75 years, Lewis Drug has come to epitomize the best of regional drug store retailing. Based in Sioux Falls, S.D., the company has become deeply embedded in the life of many Upper Midwest communities, and the go-to resource for pharmacy and front-line healthcare services in dozens of towns scattered throughout eastern South Dakota, Minnesota and northwest Iowa. Its largest stores wield a remarkably wide assortment of products and generate in excess of $10 million annually.
The company now owns and operates 54 stores, including 10 Lewis Drug units in and around its central Sioux Falls, S.D., market area, and more than 40 smaller drug stores under the Lewis Family Drug logo within a 200-mile radius of Sioux Falls. “We have two concepts — a smaller, traditional-sized drug store serving rural communities, and Lewis Drug, which has been around for 75 years,” said Mark Griffin, president and CEO.
Large-scale Lewis Drug stores in Sioux Falls and larger towns in South Dakota feature the kind of broad-based selection that could rival that of some supercenters, and range up to 50,000 sq. ft., although that format is being replaced by a more condensed and more efficient prototype of 25,000 to 30,000 sq. ft. in newer stores. On the other hand, Lewis Family Drug units feature a much tighter mix of pharmacy services, prescription and OTC medicines, HBAs and basic drug store offerings in a much tighter format of 3,500 to 4,000 sq. ft.
“We’re a two-pronged entity,” said Nikki Griffin, corporate VP. “We want people to think of us as a top pharmacy provider they trust with their prescription, and as a great retailer where you … can find basically anything you could need.”
In some towns and rural areas, Lewis is the sole resource for many health products and services. “If it’s not us, it’s probably not going to be anybody,” said Scott Cross, EVP and CFO. “We probably have 15 or so communities where we’re the only pharmacy in town.”
Through an innovative alliance with Sanford Health, a major regional health system, Lewis has further extended its reach as a health services destination in two of its large-format stores, which are co-located, side-by-side, with a Sanford health clinic. “The side-by-side retail/clinic has been a really strong model for us,” Cross told DSN.
The home team
Lewis’s combination of high-touch health services, personalized customer care, broad-based merchandising and community involvement have pushed total revenues well past the $200 million mark — and kept Lewis front and center with Midwestern consumers despite repeated assaults on its home marketing turf from some of the nation’s most powerful drug store and big-box chains.
How does any regional drug chain forge seemingly unbreakable bonds to dozens of far-flung communities and generate enduring, cross-generational loyalty among the consumers within its reach? For Lewis, long-term success has been the byproduct of decades of patient relationship building and a nimble, willing-to-try-anything approach to marketing and merchandising. The chain promotes a family-friendly, community-involved image and prides itself on the neighborhood activism of its employees.
Those efforts have made Lewis virtually indispensible in many upper Midwest communities — both with generations of consumers who depend on the 54-store chain for pharmacy services and a broad range of everyday household needs, and with local health providers who have come to rely on Lewis’s pharmacists as extensions of their own patient-care activities.
Lewis always has put a premium on a close connection between its pharmacy and front-end staff and the customers they serve, Griffin continued. “Personalized [customer] care is one of our hallmarks. One thing we’re finding out is that’s important to people, even among millennials,” which has emerged as one of Lewis’s strongest consumer segments, he said. “There was a period when that wasn’t important, when the big boxes opened up and the message was just price, price, price,” Griffin added. “Now, people value the home team and the home businesses.”
A great niche
Hewing close to the shifting needs and shopping patterns of its customers, and promoting a family-focused image and a deep connection to the communities it serves, the company has fended off or held its own against waves of competitive challenges from much bigger chains.
In its central Sioux Falls operating area, for instance, Lewis faces off against four Walmart supercenters, three Target stores with CVS pharmacies, and at least five Walgreens locations in a trade area of roughly 250,000 inhabitants, Griffin said. Lewis also can attribute its success to ongoing efforts to “read the marketplace, and be out front with expectations of the clientele,” Griffin added.
To stay abreast of shifting consumer needs and expectations, Lewis conducts ongoing surveys and focus groups. “Our niche, how we fit, is we’re recognized as a high-value retailer. We don’t try to be a Walmart or Costco, but we’ll offer 80% of what they offer in their large stores. And we offer convenience that’s unmatched,” Griffin noted.
‘Prudent’ but determined growth
Griffin describes Lewis’s expansion strategy as “prudent.” The company is building three new stores in its home Sioux Falls market, including a new, 25,000-sq.-ft. Lewis Drug store that will replace a larger, 25-year-old Lewis store downtown; a new 7,000-sq.-ft. unit near the site of its very first store that will cater to the growing population of downtown Sioux Falls residents where they live and work; and another large-scale drug and general merchandise store in partnership with Sanford Health, adjacent to a large Sanford clinic.
Besides its development pact with Sanford, Griffin added, “we finance internally, and therefore our growth is controlled. And it’s been pretty successful: I think we’ve closed one store in 75 years.”
Internal development aside, Lewis has generated the bulk of its expansion through the purchase of independent drug stores within its operating sphere in South Dakota, Iowa and Minnesota.
There are strong incentives for independent drug store owners — particularly those nearing retirement — to join Lewis, Cross added. “What they’re looking for is a company to take away all the administrative headaches, all the human resources issues they have to deal with, all the compliance and contracting issues, … and just let them practice pharmacy,” he said.
“That’s really our selling point: ‘You don’t have to work a 10-hour shift and then come back and work four or five hours at night trying to do your books and work on contracts and all those things. You can practice pharmacy and let us take on all the headaches,’” Cross said.
Griffin added, “There are quite a few of those independent folks still out there. That’s been our growth opportunity for the most part — being able to partner up with independents and have them work as long as they want while we take over the ownership.”
Lewis’s ongoing efforts to court independents points to a determined, if carefully controlled, growth plan. “We definitely are looking for expansion,” said Bob Meyer, SVP of merchandise and marketing. “There are a lot of smaller communities of 1,500 to 5,000 people [where] there’s ample opportunities.”
The company now owns and operates 54 stores, including 10 Lewis Drug units in and around its central Sioux Falls, S.D., market area, and more than 40 smaller drug stores under the Lewis Family Drug logo within a 200-mile radius of Sioux Falls. “We have two concepts — a smaller, traditional-sized drug store serving rural communities, and Lewis Drug, which has been around for 75 years,” said Mark Griffin, president and CEO.
Large-scale Lewis Drug stores in Sioux Falls and larger towns in South Dakota feature the kind of broad-based selection that could rival that of some supercenters, and range up to 50,000 sq. ft., although that format is being replaced by a more condensed and more efficient prototype of 25,000 to 30,000 sq. ft. in newer stores. On the other hand, Lewis Family Drug units feature a much tighter mix of pharmacy services, prescription and OTC medicines, HBAs and basic drug store offerings in a much tighter format of 3,500 to 4,000 sq. ft.
“We’re a two-pronged entity,” said Nikki Griffin, corporate VP. “We want people to think of us as a top pharmacy provider they trust with their prescription, and as a great retailer where you … can find basically anything you could need.”
In some towns and rural areas, Lewis is the sole resource for many health products and services. “If it’s not us, it’s probably not going to be anybody,” said Scott Cross, EVP and CFO. “We probably have 15 or so communities where we’re the only pharmacy in town.”
Through an innovative alliance with Sanford Health, a major regional health system, Lewis has further extended its reach as a health services destination in two of its large-format stores, which are co-located, side-by-side, with a Sanford health clinic. “The side-by-side retail/clinic has been a really strong model for us,” Cross told DSN.
The home team
Lewis’s combination of high-touch health services, personalized customer care, broad-based merchandising and community involvement have pushed total revenues well past the $200 million mark — and kept Lewis front and center with Midwestern consumers despite repeated assaults on its home marketing turf from some of the nation’s most powerful drug store and big-box chains.
How does any regional drug chain forge seemingly unbreakable bonds to dozens of far-flung communities and generate enduring, cross-generational loyalty among the consumers within its reach? For Lewis, long-term success has been the byproduct of decades of patient relationship building and a nimble, willing-to-try-anything approach to marketing and merchandising. The chain promotes a family-friendly, community-involved image and prides itself on the neighborhood activism of its employees.
Those efforts have made Lewis virtually indispensible in many upper Midwest communities — both with generations of consumers who depend on the 54-store chain for pharmacy services and a broad range of everyday household needs, and with local health providers who have come to rely on Lewis’s pharmacists as extensions of their own patient-care activities.
Lewis always has put a premium on a close connection between its pharmacy and front-end staff and the customers they serve, Griffin continued. “Personalized [customer] care is one of our hallmarks. One thing we’re finding out is that’s important to people, even among millennials,” which has emerged as one of Lewis’s strongest consumer segments, he said. “There was a period when that wasn’t important, when the big boxes opened up and the message was just price, price, price,” Griffin added. “Now, people value the home team and the home businesses.”
A great niche
Hewing close to the shifting needs and shopping patterns of its customers, and promoting a family-focused image and a deep connection to the communities it serves, the company has fended off or held its own against waves of competitive challenges from much bigger chains.
In its central Sioux Falls operating area, for instance, Lewis faces off against four Walmart supercenters, three Target stores with CVS pharmacies, and at least five Walgreens locations in a trade area of roughly 250,000 inhabitants, Griffin said. Lewis also can attribute its success to ongoing efforts to “read the marketplace, and be out front with expectations of the clientele,” Griffin added.
To stay abreast of shifting consumer needs and expectations, Lewis conducts ongoing surveys and focus groups. “Our niche, how we fit, is we’re recognized as a high-value retailer. We don’t try to be a Walmart or Costco, but we’ll offer 80% of what they offer in their large stores. And we offer convenience that’s unmatched,” Griffin noted.
‘Prudent’ but determined growth
Griffin describes Lewis’s expansion strategy as “prudent.” The company is building three new stores in its home Sioux Falls market, including a new, 25,000-sq.-ft. Lewis Drug store that will replace a larger, 25-year-old Lewis store downtown; a new 7,000-sq.-ft. unit near the site of its very first store that will cater to the growing population of downtown Sioux Falls residents where they live and work; and another large-scale drug and general merchandise store in partnership with Sanford Health, adjacent to a large Sanford clinic.
Besides its development pact with Sanford, Griffin added, “we finance internally, and therefore our growth is controlled. And it’s been pretty successful: I think we’ve closed one store in 75 years.”
Internal development aside, Lewis has generated the bulk of its expansion through the purchase of independent drug stores within its operating sphere in South Dakota, Iowa and Minnesota.
There are strong incentives for independent drug store owners — particularly those nearing retirement — to join Lewis, Cross added. “What they’re looking for is a company to take away all the administrative headaches, all the human resources issues they have to deal with, all the compliance and contracting issues, … and just let them practice pharmacy,” he said.
“That’s really our selling point: ‘You don’t have to work a 10-hour shift and then come back and work four or five hours at night trying to do your books and work on contracts and all those things. You can practice pharmacy and let us take on all the headaches,’” Cross said.
Griffin added, “There are quite a few of those independent folks still out there. That’s been our growth opportunity for the most part — being able to partner up with independents and have them work as long as they want while we take over the ownership.”
Lewis’s ongoing efforts to court independents points to a determined, if carefully controlled, growth plan. “We definitely are looking for expansion,” said Bob Meyer, SVP of merchandise and marketing. “There are a lot of smaller communities of 1,500 to 5,000 people [where] there’s ample opportunities.”