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Rite Aid: Remodeling effort helps focus RAD on overall health

BY Alaric DeArment

Rite Aid’s efforts to convert the chain to the new Wellness store format have been running smoothly for a couple of years now, but it was this year that the chain reached two key milestones.

In May, the company announced that it had converted a majority of its stores in the Buffalo, N.Y., area to the format, for a total of nearly 100, marking the occasion with an event featuring John Standley, the company’s chairman and CEO, and Ken Martindale, the president and COO, as well as celebrity fitness expert Denise Austin.

And in September, when announcing its second-quarter 2014 earnings, the chain said the Wellness format had passed the 1,000-store mark, with 1,019 stores converted, including 114 converted to the updated Genuine Well Being format, which features a remodeled interior, an expanded product selection and, in some stores, amenities like the Vision Center, a kiosk that allows customers to order prescription glasses and contact lenses and shop for frames using photos of themselves. Genuine Well Being was unveiled at a Lemoyne, Pa., store in October 2012; the chain expects to have 1,200 locations converted to Wellness stores — including Genuine Well Being and the original iteration of the format — by the end of fiscal year 2014. According to the company, a key to the former is that it is replicable in Rite Aid markets across the country. Executives refer to its Wellness stores as an evolving concept versus a standard prototype.

“Two key ways our Wellness store format has evolved are product flow — location and placement of merchandise — and easier way-finding — navigation — throughout the store, both of which enhance the customer experience by creating a shopper-friendly environment,” Martindale told DSN earlier this year.

But the remodeling effort, a major part of the chain’s $400 million capital expenditure program for fiscal year 2014, isn’t just for aesthetics. Early on, sales at the remodeled stores were tracking ahead of the older stores, and as of second quarter 2014, front-end same-store sales were 3.4% higher than non-Wellness stores, while same-store prescription count was 0.9% higher.

The company has cited the Wellness Ambassadors — who walk store aisles with iPads and provide information about products and pharmacy services — as another key reason for the Wellness store format’s success. At the end of second quarter 2014, the company had trained more than 1,700 of them.

The chain’s innovations go beyond store formats. For example, while many of its competitors develop an in-store clinic model, Rite Aid has put its investment in a telehealth model, partnering with NowClinic. Originally introduced at nine stores in Detroit in 2011 and expanded in March 2013 to 58 more stores in the Baltimore, Boston, Philadelphia and Pittsburgh markets, NowClinic allows patients to consult via a secure webcam chat session with a doctor or nurse who can diagnose certain ailments, answer health questions and even write prescriptions. A similar initiative now available at some stores allows customers to chat with pharmacists through an iPad provided by the store’s Wellness Ambassadors. This is all happening at a time of tremendous expansion in telehealth. According to the research firm IHS, 1.8 million patients worldwide will access health-and-wellness care through electronic and video links by 2017, marking a sixfold expansion over a five-year period.

In a broader sense, the new formats and telehealth initiatives are part of an industry-wide trend toward store formats that make smarter use of space and focus on niche aspects of retail pharmacy, with the focus of Rite Aid’s Wellness stores being self-evident.

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Rite Aid: Building a health business around wellness

BY Alaric DeArment

One year after DSN’s groundbreaking ‘Gets Well’ issue, Rite Aid keeps growing profits and cred with shoppers and Wall St.

One year ago, DSN featured an exclusive report, “Rite Aid Gets Well,” on the cover of the Dec. 10, 2012 issue, examining how the company’s core strategy built around wellness empowerment was helping it turn around its business.

One year later, Rite Aid isn’t just “well” — it’s even better than that.

In September, Rite Aid reported its fourth-consecutive quarter of earnings growth, as the company continues to grow sales and gain momentum around its core wellness-based initiatives, including its Wellness+ loyalty program, its Wellness and Genuine Well-Being format stores and the growing cadre of Wellness Ambassadors that are helping to transform the experience of shopping a Rite Aid store.

Importantly, Wall Street also has begun to reward the company for its efforts. At press time, Rite Aid shares were hovering above the $5 mark, having hit a 52-week high of $5.44 — the last time its stock traded that high prior to that was September 2007. And analysts seem to expect that the momentum will continue.

“Rite Aid reported excellent quarterly results buoyed by strong sales growth and expanding margins. Earnings estimates have thus surged, sending this drug store chain to Zacks rank No. 1 — “Strong Buy,” noted an Oct. 16 update from Zacks Investment Research.

To be sure, there is an undeniable stickiness to the results Rite Aid is putting on the board these days. While the yearlong feud between Express Scripts and Walgreens has long been over, it appears that Rite Aid has been able to hold on to a large number of the customers it picked up in the fray. “Prescription same-store sales of 0.9% tracked ahead of our 0.6% forecast, suggesting Rite Aid is maintaining its share of [ESI] scripts, estimated by the company at about 75%,” noted Goldman Sachs analyst Robert Jones, of the company’s recent second-quarter results.

Just as the program has been a major driver of Rite Aid’s overall growth, Wellness+ also has been a major component of the company’s strategy to retain ESI patients — the loyalty program rewards members 25 points per script where state laws allow.

Here, DSN takes a brief look at two of the most critical factors behind the ongoing turnaround at Rite Aid — its Wellness stores and the Wellness+ card.

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Take ‘Dark Horse’ — to win

BY Rob Eder

“If you want to know why we may not pick up some of your brands, it’s because it’s not where we’re going in our journey.”

That’s a snippet of a story about a vendor meeting gone bad that Walgreens group VP beauty, personal care and seasonal Shannon Curtin shared during a recent presentation, “Co-creation and Innovation,” she gave at an event DSN co-hosted with the Mack Elevation Forum, “Seven Ideas to Create the Future.” You can watch it at DrugStoreNews.com/Video.

Critical to success are the need to bring emerging insights, ideas that fill “white spaces” where products and solutions do not exist and ideas for how to execute that vision.

The great brands — big and small — are built that way.

That’s more or less the focus of a new book, “Dark Horse: How Challenger Companies Rise to Prominence,” by Dan Mack, EVP strategic business development for The Swanson Group and managing director of the Mack Elevation Forum.

“From the humble and beloved Wiffle ball and bat to the highly stylized line of Method soap, Purell instant hand sanitizer, Ricola and Amy’s Kitchen organic foods … there is no shortage of dark horses to root for,” Mack noted.

The best companies, Mack explained, bring more than unique products or services to the market; they consistently tap into 10 growth enablers:

  • Their business is personal — it’s their identity and it’s about more than profit;
  • They listen and are aligned with top customers;
  • They use hidden assets to create differentiated value;
  • They create a clear business blueprint and share it openly;
  • They carefully and wisely pick customers and partners;
  • They co-create innovation with customers;
  • They move quickly to meet consumer shifts to create new experiences;
  • They influence the influencers who help build their brand;
  • They are very agile, nimble and seize new opportunities much faster than competitors; and
  • Corporate culture operates with a spirit of grace and honor.

To learn more, read the book. Visit DarkHorseBook.com.


Rob Eder is the editor in chief of The Drug Store News Group, publishers of Drug Store News and DSN Collaborative Care magazines. You can contact him at reder@lf.com.

MORE ARTICLES FROM ROB EDER >

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