THE STORES: CCR and the best of Duane Reade
The CCR foundation has been laid. Now comes the next phase in Walgreens’ campaign to “enhance the customer experience.”
Customer Centric Retailing is rolling across the chain’s coast-to-coast store network like a tide. The effort — aimed at aligning Walgreens’ mix with what its customers really want from the stores; eliminating hundreds of redundant, slow-turning SKUs; and boosting front-end productivity — already has transformed more than 2,100 Walgreens stores. Another 3,400 are up for renovation by the end of this year.
But that’s just the beginning. CCR is ushering in a more creative and more flexible approach to the front end. Among emerging areas of opportunity are enhanced beer and wine selections, expanded fresh food assortments, a beauty aisle makeover and more private-brand items.
“We continue to expand our new beer and wine convenience category,” president and CEO Greg Wasson told analysts on Dec. 22, 2010. “We’re now in nearly 5,000 stores, up from just under 2,000 in November 2009, and that growth has contributed more than 75 basis points to the front-end comps.”
The expanded fresh foods concept thus far is aimed at “food desert” neighborhoods in urban areas. But Wasson sees “tremendous opportunity” for “food oasis” stores across the United States, and said the company could expand “Fresh” to 400 or more stores in the next several years.
Walgreens is pouring roughly $50,000 into each store it renovates to CCR standards. The return on that investment is a little slower than anticipated, Wasson acknowledged, but he said the massive merchandising overhaul is beginning to pay off. “In fact, the overall performance of our CCR pilot stores is getting better and better as we continue our refinements,” he added.
The primary goal is to boost customers’ shopping baskets. Last year, the average Walgreens shopper bought about three items per store visit, noted CFO Wade Miquelon. “If we can get that up to four or four-and-a-half items ... that would almost double the profitability of the entire company,” he asserted.
It’s about leveraging the company’s unmatched market penetration and its thousands of prime store locations, said Bryan Pugh, VP merchandising. “Once you have the best corners, it’s up to you to make sure they’re relevant,” he said earlier this year.
Walgreens’ purchase of New York-based, 257-store Duane Reade last year was a market share and expansion coup, vaulting the chain to the top of the Big Apple drug store hierarchy. But it also opened a bonanza of fresh ideas for Walgreens’ merchants. Wasson said Walgreens will “study and capture [Duane Reade’s] learnings as we go forward.”
That includes Duane Reade’s successful loyalty card program — some elements of which are being grafted onto Walgreens’ fledgling card program — and the chain’s “Look Boutique” beauty departments, which are beginning to be applied to Walgreens stores in several markets.
To see the Walgreens CCR photos, click here.