Gildenberg to Marketplace business session attendees: Being smart helps retailers grow
BOSTON — There’s a tremendous upside for retailers and suppliers, but that upside will come from doing things differently than in years past, as well as grappling with fragmentation. Those were a few of the key messages Bryan Gildenberg, chief knowledge officer of Kantar Retail, had for attendees of Monday morning’s business session at NACDS Marketplace in Boston.
“The challenge today is this: The core issue those under 43 are going to be grappling with for the rest of your career is not an issue of concentration, which was the issue people over 43 dealt with. The issue you are going to be dealing with is fragmentation,” Gildenberg said during his presentation titled “Retail Economics: The Operational Skills Required to Deliver in a Changing World.”
When ranked by sales added through 2016, it is estimated that the top five retailers experiencing the greatest growth will be Walmart, Amazon.com, Kroger, Walgreens and Costco — all of different retail channels.
“Those of you that have growth channels in your job title or portfolio, you have to think about this a little bit. There is no such thing; there are growth customers within channels,” Gildenberg said.
Nonstore retail, which includes all of the dot-com businesses, will experience significant growth, representing an estimated 30% to 35% of retail growth in the United States over the next five years.
Digital integration and creating an experience for customers will be important, which already is beginning to take shape in the form of interactive surfaces that complement products and purchase decision assistance with the benefit of product availability to help shoppers make better decisions in a digital way.
“For those of you with loyalty cards, one of the most interesting areas of work is going to be figuring out how the loyalty card and the mobile phone interact together, because that is going to be foundationally game-changing,” Gildenberg said.
Gildenberg also explained that “new convenience,” particularly for the bricks-and-mortar retailers, is comprised of four key attributes:
Immediacy (why the store?);
Smaller, proximate stores (to the store);
Operational excellence (in the store); and
Frictionless payment (through the store).
In order to succeed, retailers and suppliers also must recognize that younger generations are driving diversity. “If you are going to sell to people under 30 [years] and ethnic marketing is not a part of your world, then you are going to be missing an enormous part of the population,” Gildenberg told attendees.
Underscoring this point, the U.S. Census Bureau recently released data that indicated the nation’s Hispanic population grew four times faster than the total U.S. population between 2000 and 2010, with Mexicans representing the largest Hispanic group.
The recently released 2010 Census brief showed that the Hispanic population increased by 15.2 million between 2000 and 2010, and accounted for more than half of the total U.S. population increase of 27.3 million. Between 2000 and 2010, the Hispanic population grew by 43% — four times the nation’s 9.7% growth rate.
“The core thing to keep in mind: There is absolutely no correlation at all in the United States at the retailer level between your size today and your ability to grow. … Being big as a retailer doesn’t help you grow — being smart does,” Gildenberg said.
Walgreens rolls out Web pickup to Chicagoland stores
DEERFIELD, Ill. — Walgreens is making online shopping more convenient for its customers with its new Web pickup service.
The drug store chain said Monday it has rolled out the service to more than 300 stores in the Chicago market. The service allows customers to shop online at Walgreens.com’s Web Pickup, build a cart of any size and dollar amount, then pick up their orders at a Walgreens store in less than one hour. The full market rollout of Web pickup, which will include more than 480 Walgreens locations, is expected to be completed by August.
Walgreens president of e-commerce Sona Chawla said that the company also eventually will implement curbside delivery, where stores offering the service will have designated parking spots for Web pickup customers. A $20 minimum order will be required for curbside delivery.
“Our customers value choice, control and convenience, and Web pickup brings all of these together to cater to on-the-go shoppers,” Chawla said. “We’ve developed many innovative ways to engage our growing numbers of online shoppers and to make Walgreens.com a great shopping experience. By adding the convenience of in-store pickup — and soon curbside delivery — we’re making shopping easier than ever before.”
Chawla added that traffic to Walgreens.com has grown 50% over the last two years.
Does Walgreens need Express Scripts? Maybe not
WHAT IT MEANS AND WHY IT’S IMPORTANT — Walgreens certainly has the clout to pull off a Mexican standoff with Express Scripts. Some might think all of the tough talk last week is just the kind of posturing one puts on for negotiations and that this will all blow over, similar to last year’s standoff between Walgreens and CVS Caremark. So why is it different this time?
(THE NEWS: Walgreens to walk away from Express Scripts in 2012. For the full story, click here.)
Walgreens sold its own pharmacy benefit management business because the pharmacy operator believed that its Walgreens pharmacy, Take Care Health operations, specialty pharmacy, home infusion services and other programs can be bundled as a comprehensive healthcare-services package directly to the largest employers. And they’re right.
So Walgreens may really not need Express Scripts as much as Express Scripts may need them, after all.
Another difference between now and last year: Express Scripts doesn’t have to prove its business model is economically viable, or that it’s pharmacy network doesn’t artificially steer patients to one pharmacy over another. Because as a pure-play PBM, Express Scripts equally sticks it to all pharmacies.
Separately, the National Community Pharmacists Association is using these discontinued negotiations as an opportunity to highlight just how much community pharmacy is caught between a rock and a hard place in its support of legislation that would give independents the same kind of negotiating heft that Walgreens has. A company the size of Walgreens can afford to face off with a PBM like Express Scripts — in other words, if Walgreens and Express Scripts did part ways, Walgreens will still be filling prescriptions. But what happens when a community pharmacy operation reaches its 127th hour in dealing with PBMs? They either stop filling prescriptions or learn how to adjudicate those prescriptions with just the one arm they have left.