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Shoppers seeking easier grocery store experience, Phononic study finds

BY Deena M. Amato-McCoy

Shoppers want more from their grocery stores.

Americans, who shop at traditional grocery stores 3.9 times each month, have some very definite opinions about how the outlets could improve. And a more convenient shopping experience heads the list, according to “The Store of the Future” study from Phononic.

Eighty-nine percent of Americans (89%) reported they want to shop in a grocery store that understands how to make buying an easier/more efficient experience, the study found. Eighty-five percent said grocery stores should make it easier to find merchandise.

In other findings, 50% of consumers said supermarkets haven’t figured out how to use technology like other retailers. More than half (56%) said if grocers don’t enter the modern age, people will look for other ways to get their food.

In response to these criticisms, grocers are dabbling with new services, such as food and meal delivery programs. Based on the retailers that are offering food or meal delivery services, one-third of customers have tried it. However, 47% would be more likely to try it if there was a way for the grocer to control the temperature of the food.

In fact, customers want grocers to deploy more “smart” solutions that can help deliver more value and improve customer service. Grocers’ first priority should be to use technology to preserve food quality. Ninety two percent of shoppers said it is important for consistent temperature control of all cold products they sell. More than three-quarters (79%) of consumers said they should consider smart technology in a refrigerated unit to find recipes, or the right pairings for cheese and other foods.

They should also focus on convenience. In addition to technology that makes it easier to pair items and remove friction from the shopping experience, customers also would prefer more strategic merchandising.

For example, better store layouts could improve the shopping experience. Over nine in 10 consumers feel it’s important that the layout of the store makes it easy to find merchandise, and 85% believe grocers should be making it easier to find items.

This includes positioning new impulse items at checkout. For example, 68% of shoppers said if grocery stores had new products at checkout, they would be more likely to try them. Meanwhile, 59% said they would like to see healthier options, and 46% said there should be more frozen or refrigerated options at checkout, with ice cream and wine and beer heading the list.

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Albertsons-Rite Aid combo ranks No. 4 in vie for pharmacy patients

BY Michael Johnsen

With the Albertsons-Rite Aid merger, the combined operation is poised to become the No. 4 retail pharmacy operator in terms of pharmacy sales. Walgreens Boots Alliance’s U.S. operations are expected to generate $66.7 billion in annual pharmacy sales (an estimate that includes its recent acquisition of more than 1,900 Rite Aid stores); CVS Health recently reported $59.6 billion in annual pharmacy sales, making them No. 2; and Walmart’s annual pharmacy sales come in at an estimated $19.1 billion.

According to Rite Aid and Albertsons, that combined company’s retail pharmacy footprint should generate in excess of $16 billion in pharmacy sales. Kroger follows that Rite Aid/Albertsons one-two punch at No. 5 with an estimated $10.2 billion in annual pharmacy sales.

“From an Albertsons point of view, it’s a reflection of them remaining competitive with Amazon and Kroger,” Brian Owens, vice president at Kantar Consulting said. “They’ve made a lot of moves lately. This helps them extend their reach and improve their health and wellness offering. The challenge is what do they do with that smaller format, the 12,000-sq.-ft. box. … Now they have the ability to scale the Rite Aid offering across a bigger franchise and all of the different banners Albertsons has.”

The move, if it closes, would effectively create a pharmacy network of 4,345 locations that’s much deeper  across the West Coast (70% of the locations are in markets where the combined entity will be the No. 1 or No. 2 pharmacy provider) and generates greater access and convenience for customers in such major markets as Philadelphia and Boston. Today, those stores serve more than 40 million customers per week and fills more than 323 million prescriptions per year.

Beyond the pharmacy counter, the deal would create a retail health and wellness company that successfully pairs the acumen of a pureplay retail pharmacy company with the supermarket operator’s built-in generator of frequent trips. With the exception of Jewel-Osco in the Chicago market (where there are no Rite Aid locations), the companies said that all Albertsons pharmacy banners will be converted to the Rite Aid banner in an effort to better leverage that brand identity.

“When you think about the new Rite Aid strategy, this clearly expands on what we want to do but enhances that strategy,” Kermit Crawford, Rite Aid COO, told Drug Store News. These companies complement one another, Crawford added. “It’s just natural that Rite Aid, as we look to grow forward, to have Rite Aid branded stores within grocery stores. It’s a great combination.”

And with the addition of grocery, the Albertsons/Rite Aid combination likely will be included in more restrictive pharmacy networks, Owens suggested. The merger is set to create a “differentiated food, health and wellness company,” John Standley, who will be CEO of the combined company, said.

“This is a company that’s going to have amazing capabilities to help customers and patients, significant opportunities for growth and it’s going to add a lot of value to our shareholders,” Standley said.

There are several factors that will really be accretive to the success of this merger. Beyond the increased leverage both pharmacy operations will have, Rite Aid, as a result of its sale of 1,932 stores to Walgreens, has access to its generic purchasing option, allowing the combined company an extra option in the pursuit of lowest cost generics. “This puts in a great spot,” Standley said. “We have a lot of different directions we can go here and it’s important to us to have competitive drug costs. We’re in a competitive marketplace and we want to deliver great value for our customers and our patients.”

Also on the pharmacy operations side, Rite Aid brings with it its EnvisionRx pharmacy benefits manager, which consulting firm Cowen, when marking Rite Aid as a prime acquisition target for Amazon in January, pointed to as a key asset — a sentiment that Standley shares.

“EnvisionRx … will be out there with an offering bringing these bundled services together to the marketplace to sell to employers and other health plans looking for that kind of integrated offer,” Standley said.

On the front-store side of the operation, Owens said the two retailers’ loyalty programs coming together will prove to be significant — particularly with regard to Rite Aid’s 65+ Wellness program. The merger will pair Rite Aid’s roughly 12 million loyal shoppers with Albertsons estimate 13 million loyal shoppers. Crawford is optimistic that the combination will strengthen and expand both retailers’ customer base.

“Think about Albertsons grocery customers who don’t get their prescriptions at Rite Aid, [with the merger] driving Albertsons customers into Rite Aid pharmacies, both in-store and free-standing,” Crawford “And then think about Rite Aid customers who currently don’t shop everyday at Albertsons, driving our customers into Albertsons. Then add the PBM EnvisionRx driving customers into both Rite Aid and Albertsons. That’s a powerful combination when you start thinking about our loyalty program.”

Additionally, the merger will mean that Rite Aid’s subsidiary health offerings — including RediClinic and Health Dialog — can now be extended across a much broader network. Placing RediClinic inside of Albertsons stores, where there is plenty of floor space available, is an exciting growth opportunity, Standley said.

“Health Dialog has some fantastic care coaching [and] population management capabilities,” he said. ”So when we start to think about how we bring together diet and food, the dietitians that Albertsons has, together with our capabilities, a linchpin of that could very well be resources that come out of Health Dialog.

When it comes to nutrition, Albertsons’ dietitians and its recently acquired Plated meal kit service, in combination with Rite Aid’s efforts, has the potential to add another dimension to the combined company’s enhanced offerings.

“There’s … an opportunity to use [healthcare] expertise on both sides,” Crawford said. “Albertsons has dietitians. We have health coaches. There’s a natural complement between those two. How we put these together in the future will certainly be a part of our vision.”

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Walmart’s online growth slows in Q4 as earnings miss mark

BY Marianne Wilson

Walmart reported mixed results for its fourth quarter as promotional activity and ongoing investments in its digital operations took a toll on earnings, and online growth slowed dramatically from the previous quarter.

The nation’s largest retailer reported net income of $2.17 billion, or 73 cents a share, in the quarter ended January 31, down from $3.76 billion, or $1.22 cents per share, in the year-ago period. Excluding one-time items that included restructuring charges and an impact from a one-time bonus to employees, Walmart earned $1.33 a share, four cents short of analysts’ estimates.

Neil Saunders, managing director, GlobalData Retail, said he was not overly concerned about the slump in net income because Walmart remains comfortably profitable, and because much of the deterioration is down to the various investments Walmart is making in future-proofing its business.

“We applaud this long-term view, especially as it is now being coupled with some rationalization and streamlining initiatives,” Saunders said.

Walmart’s same-store U.S. sales rose 2.6%, the 14th consecutive quarterly increase, and higher than projected. Same-stores sales at Sam’s Club division increased 2.4%.

Total sales increased 4.1% to $136.3 billion, topping Wall Street projections, amid a 1.6% rise in traffic at U.S. stores and a 1% increase in average ticket value. Online sales grew 23%, compared to a 50% increase in the prior quarter. The retailer said its online slowdown was expected as sales growth on Jet.com, which it acquired in 2016, cooled. It also cited operational snags related to inventory replenishment.

“The majority of this slowdown was expected as we fully lapped the Jet acquisition as well as creating a healthier long-term foundation for holiday,” stated Walmart CEO and president Doug McMillon. “A smaller portion of the slowdown was unexpected, as we experienced some operational challenges that negatively impacted growth.”

McMillon noted that, overall, the chain finished the year with e-commerce sales growth of more than 40%. “So, we feel better about the year than the quarter,” he said.

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