Walgreens continues overhaul with purchasing, store changes
DEERFIELD, Ill. When Walgreens embarked on a sweeping revitalization campaign last October, the drug store giant promised to overhaul and clean up its merchandise mix, dramatically upgrade its front-store appeal, cut its bloated operating structure and fully integrate its core strengths in pharmacy, health and wellness. Now, those changes are beginning to work their way through Walgreens’ purchasing department and the stores themselves.
On May 6, the company parted ways with three high-profile veterans of its purchasing department — underscoring just how serious it is about shaking up and revitalizing its product mix — and revealed it was on the hunt for fresh thinking in front-store merchandising. Almost simultaneously, Walgreens announced the unveiling of some 35 new or redesigned drug stores by early summer. By this fall, some 400 of the company’s more than 6,700 drug stores will sport the new, slimmed-down prototype, SVP and CFO Wade Miquelon told analysts.
Those departing Walgreens were Bill Hubbs, divisional VP and general merchandise manager for seasonal and sundry; Arnie Silver, DVP and GMM consumables; and Kathy Steirly, DVP and GMM beauty. Their exits are not part of Walgreens’ ambitious plan to cut $1 billion in annual operating costs, spokeswoman Tiffani Washington told Drug Store News, adding that the chain is looking “both internally and externally” for their replacements.
In the meantime, the consumables, beauty and seasonal categories will be overseen by VP purchasing Dave Van Howe and DVP and GMM Robert Tompkins, “who will help oversee the purchasing divisions until replacements are named,” said Walgreens president and CEO Greg Wasson. Wasson praised the three merchants in an internal memo to managers announcing the changes. “These three have all worked very hard to make Walgreens successful, and we appreciate their years of service,” he noted.
Walgreens also hired Rachel Bishop as DVP and GMM strategic planning and analysis. Bishop last served as an associate principal at McKinsey & Co. in Chicago, and “has already started working closely with Chong Bang on the Customer Centric Retailing initiative,” the company announced. Bang, a DVP, was tapped to head that initiative as part of Walgreens’ effort to overhaul its product presentation and build additional customer demand.
The abrupt exit of three key category managers signals more changes ahead in the look and feel of the Walgreens drug store. As the sweeping Customer Centric Retailing project works its way through every nonpharmacy department in the store, customers will see new approaches in everything from beauty and wellness products, to toothpaste, to batteries. Wasson and others say the changes will yield a product mix more trimmed down and condensed, and geared more to the “affordable essentials” Walgreens now says it must do a better job of offering the nation’s consumers in a time of economic belt-tightening.
“It’s everything from reviewing our merchandise selection and our department adjacencies, our profile, our look and feel and so forth within the stores,” Wasson explained in an earlier interview. “I think the fortunate thing about the industry we’re in is that we sell a lot of what people need,” he added. “So we’re focusing on all we can do to meet the new consumer needs and make sure we’re relevant in their everyday lives, by offering high-value … products and services.”
Walgreens merchandisers and category managers are going through every department within the store and have “spent the last seven or eight months really understanding what the shopper wants,” Miquelon said. The first results of that effort are being seen in the 35 or so test stores Walgreens is debuting over the next few weeks. The new format features a pared-back product selection — with SKUs down by 15% to 20%, according to Miquelon — and gondola heights lowered to improve department visibility and sightlines.
Walgreens is scrapping many slow-moving and redundant product facings and offering more “affordable essentials,” such as detergent, mouthwash, skin care products, shampoo and batteries. The company also is emphasizing more promotional items in both its product selection and advertising, and grouping those products thematically to make it easier for the 5.3 million customers who shop its stores each day to find what they’re looking for.
The goal, say company leaders, is to create an easier and more exciting shopping experience for customers and boost average shopping baskets by at least one more item. The result could be billions of dollars in additional revenues, more productive and profitable stores and additional customer visits, as the company works to restore its sales and profit momentum in a recessionary economy.
One Wall Street analyst who has toured the new Walgreens experimental format, Mark Miller of William Blair & Co. Equity Research, called the early result “a good first effort,” adding, “management has improved the aesthetics in its new store format by reducing the SKU count … and keeping the merchandise presentation below its standard 5-ft., 6-in. risers.”
CVS opens Beauty360 No.3 in one of its original Project Life stores
NEW YORK — If anyone thinks that CVS has recast itself solely as a healthcare company, given its string of acquisitions in recent years — particularly, Caremark and MinuteClinic — they probably haven’t seen a Beauty360 store yet. In fact, standing in the middle of one of these 3,000 sq.-ft., high-end beauty boutiques, you might have a hard time recognizing you were in a CVS store at all.
Beauty360 is the culmination of the long-time vision and an awful lot of hard work on the part of several key individuals, most notably, CVS’ top merchant Mike Bloom, VP beauty merchandising Cheryl Mahoney, senior beauty category manager Mary Lou Gardner and Mike LePage, director, retail innovations and store design. Importantly, it is also a very bold statement that, for as much energy as CVS Caremark devotes to driving solutions that save lots of money for big payers of health care, it is very much still focused on its stores, and using other areas beyond health and wellness to spark innovation and create reasons for customers to shop their stores.
You want to talk about growing the market basket? How about adding a whole other basket? With prices on many items topping $100, Beauty360’s contribution to overall store profitability is palpable. According to CVS executives, sales in the two other locations the company operates in Mission Viejo, Calif., and Washington, D.C., are well ahead of expectations.
And why wouldn’t they be? No woman in her right mind, with at least a minute or two to spare, isn’t going to check out Beauty360 — particularly in the ritzy neighborhoods the chain is putting the stores in. The average household income in Mission Viejo is roughly twice the national average; in terms of shopping, Fodor’s calls Dupont Circle “a younger, less staid version of Georgetown — and almost as pricey”; and the newest Beauty360 in Ridgefield, Conn., is surrounded by seven-figure homes. Bloom says CVS is planning to a whole bunch of them into the former Longs stores it is currently converting, which includes many more posh areas to pick from.
With just 30 of the stores planned by the end of the year, and about 50 by this time next year, it likely will be a while before the impact of Beauty360 begins to be seen in CVS’ earnings. In the meantime, you can expect sales per square foot to balloon in the stores that share a roof with a Beauty360.
Beauty360 is an important message to its competitors that CVS hasn’t forgotten about the importance of creating excitement in its stores.
SDI launches iPhone, iPod application for allergy sufferers
NEW YORK The addition of SDI’s Pollen.com allergy applications to the growing number of iPhone/iPod touch-friendly, health-related applications is just the latest example of how an e-health evolution is more and more becoming a part of America’s daily lexicon.
Already, there are more than 100 health-related applications available for the Apple products, including FDA for iPhone and WebMD Mobile. According to Apple COO Tim Cook, those apps are available to some 37 million users — that’s how many iPhones and iPod touches are currently on the market.
Concerned about what exactly those food additives in your favorite snack are? There’s an app for that. Worried about your blood pressure or heart rate? There’s an app for that. Want to know what your blood-sugar level means? There’s an app for that, too.
Indeed, while SDI was preparing for its official Pollen.com iPhone app launch, two Northwestern University teams took home the top two prizes awarded in the Diabetes Mine Design Challenge last week. The challenge? Develop an iPhone app that diabetics could use to help manage their condition.
Next month, Apple plans to release an updated iPhone 3.0 with support for Bluetooth-enabled medical peripheral devices, like Johnson & Johnson’s LifeScan glucometer. And while Apple is updating its iPhone capabilities, Palm will be introducing its Palm Pre, slated to debut June 6 on the Sprint network. The Palm Pre is expected to give Apple’s iPhone a run for its money, but at the very least, it’ll open the door of health-related mobile apps to that many more users.