The ‘what, where and when’ of e-commerce
What product she wants. Where she wants the product. When she wants the product. Delivering on those promises is what multichannel retailing means to Walgreens. “We believe consumers want choice,” noted Sona Chawla, Walgreens’ president of e-commerce. “People will shop online one day, [and] they’ll shop the store the next day; it depends upon events and what they’re looking for.”
And it’s through that customer engagement that Walgreens has perhaps most visibly transformed its relationship with its consumer base.
“I call it an additive transformation because what we’re really doing is staking out core assets — our stores — and adding to them in a way to make them more convenient, more relevant, more accessible,” Chawla said. “Our overall strategy really has been to be a health and daily living destination across all of our channels. It’s about that crossroad of happy and healthy.”
The first piece of Walgreens’ e-commerce package flows around pharmacy with the capability to refill prescriptions and do much more through a platform-agnostic shopping app called, simply, “Walgreens.” The app also allows patients to choose to receive medication reminders and print photos in a variety of ways.
And while smartphone and tablet users skew younger overall, there is a significant senior population of smartphone users that’s growing. According to a Nielsen survey of some 20,000 subscribers that was published in February, 22% of all mobile subscribers were older than 65 years. Of those, 43% had jumped on the mobile bandwagon in the three months prior to the survey. Among those ages 55 years to 64 years, 33% were mobile subscribers and 56% had signed on in the previous 90 days.
“You look at people using pharmacy online. Those do tend to skew older than the average online customer because [they are] people who have meds, and it’s an incredible convenience for them to manage their prescriptions online,” Chawla said. “Then you get into photo, which is Mom. … We’ve got Drugstore.com [and] we’ve got Beauty.com, so we’re spanning a number of different segments that are definitely shopping and using our sites,” she said. “With mobile, we’re certainly seeing a younger demographic coming [to us and via] social [media] as well. There’s no doubt. What’s fascinating is to watch their behavior evolve and knowing that in many ways we’re serving almost every segment, just differently in terms of what they find important to [them].”
These efforts are clearly gaining traction with customers. According to another Nielsen survey conducted in June, Walgreens’ shopping app ranked No. 6 that month, with 2.8 million unique visitors who spent, on average, a little more than eight minutes on the app. Of brick-and-click operators, the only other retailer that made the list was Target, which ranked No. 7.
Beyond pharmacy, there’s photo. With many retailers who exited the one-hour photo processing business following consumer migration to digital cameras — and more recently to the camera apps on the ubiquitous smartphones and tablets — photo has become a core Walgreens offering that can be accessed by the consumer wherever they are.
“Now more and more people are taking pictures with their smartphone, and you can very quickly capture them and print them at your local store,” Chawla said. Walgreens enables that through the QuickPrints function on its shopping app that was launched in February. And the company recently opened that code to any developer looking to include the ease and convenience of finding a local Walgreens, shooting that store a photo processing order and picking up the prints in an hour. “This is added revenue for us, because you know a lot of these pictures are floating in this ecosystem,” Chawla said.
Last month, Walgreens hosted its first Mobile Photo Hack Day at its downtown Chicago office to spawn creative implementations of QuickPrints within other apps. The single-day “hackathon” attracted 30 developers who designed 14 photo apps integrated with QuickPrints.
In addition to pharmacy and photo, Walgreens is folding its front-of-store goods into that multichannel solution and is creating new options for its customers to shop Walgreens across channels as it serves their immediate needs. “On Walgreens.com, more than 30% of our traffic is coming from mobile devices,” Chawla noted. To offer more options to this group, Walgreens launched its Web Pickup service in the Chicago and San Jose markets last year and has since expanded the offering to its Well Experience stores in the Indianapolis market. “We believe consumers value convenience, they value choice and we are providing them all the combinations they want, so they can pick and shop the way they want,” Chawla said. “It literally is what you want, where you want it, when you want it. People have been talking about that for a long time. We are truly making that happen.”
Beyond e-commerce, Walgreens is a very strong participant in social media. Last year, Walgreens launched a campaign with Foursquare that allowed patients to donate flu shots for checking in. The campaign resulted in more than $4 million worth of flu shots being donated and netted Walgreens four Shortys, the Oscar equivalent for the social media industry chosen by the Real-Time Academy of Short Form Arts and Sciences panel of judges, including Best in Show! and Best Use of Foursquare in a Campaign.
“It really is a compelling use of social [media]. It gets back to engagement, and it adds a new dimension to the brand,” Chawla said. So Walgreens is not only giving consumers the what, where and when, but also the why.
NYC teaches content relevance one store at a time
In a way, Walgreens has always been woven into the fabric of New York City culture — its Times Square location served as the backdrop for Life magazine’s iconic V-J Day photo in 1945. And while Walgreens hit snooze on The City That Never Sleeps for decades, nearly exiting the market in the 1970s, between its grand return to One Times Square in 2008 and its subsequent acquisition of New York’s top regional chain Duane Reade in 2010, it’s almost like it never really left at all.
Walgreens began its Manhattan revival in 2001, with its Empire State Building store opening. Today it operates more than 340 stores throughout the city, including 253 Duane Reade stores. But Walgreens bought a lot more than just a bunch of great stores and the No. 1 market share in one of the most important retail markets in the entire world. Not only did the transformation to the health and daily living store grow out of the Duane Reade acquisition, but Duane Reade also has helped inform how Walgreens merchandises its stores in urban markets across the country.
Today, as Walgreens pharmacy expertise is leveraged by Duane Reade, the influence of Duane Reade can be seen all across the Walgreens operation, from how it sources fresh locally — particularly in densely populated urban downtowns and residential neighborhoods — to how to elevate the private brand and how to create a more upscale shopping experience in beauty. It also has helped inform Walgreens’ “go-local” strategy that aims for content relevance on a store-by-store basis.
Really, in New York you don’t have much of a choice; the trade area can change from one block to the next, Walgreens’ market VP for New York Jeff Koziel told DSN. “Especially in New York, you have the tourist … you have your workers and you have people where they live. When you take those three into consideration, you have to figure out wherever that store location is, does it touch all three of those points? Two of those points? One of those points? And then you determine what makes sense in that particular store,” he said.
Getting the mix right requires a new way of managing local markets that aligns operators like Koziel with Walgreens’ merchandising teams.
More and more, Walgreens’ ability to be different and relevant in its local markets is driven by its 2009 decision to move its regional VPs of operations out of Deerfield, Ill., and into the markets they oversee. They are the boots on the ground, and the change is helping not only to shape its assortment from one store to the next, but also to forge more local partnerships, such as its official sponsorship of the New York Giants.
It’s proven to be more than just a marketing ploy, noted Koziel, who negotiated the deal on behalf of Walgreens. The relationship also has helped bring heightened awareness to key health issues, a core part of its mission to become the destination of choice for health and daily living. Last season several star players from the team made personal appearances in select Walgreens stores to help drive flu shots.
Koziel also has worked with city health officials on public health programs. Its response to the H1N1 flu outbreak in 2009 helped establish a strong relationship with the Department of Health. Thomas Farley, commissioner of the New York City Department of Health, recently received his flu shot at a local store, as did New York City mayor Michael Bloomberg, at a Duane Reade location in the Bronx. “[We’ve been] working with their team on different initiatives, and letting them know our capabilities and what we have out there with regard to health and wellness,” he said.
More than just market share, DR an ‘accelerant’
When Walgreens snapped up Manhattan-based retailer Duane Reade back in 2010, it was a significant move for the Deerfield, Ill.-based pharmacy giant as it gave Walgreens — essentially overnight — a leading presence in New York City.
Under Walgreens’ organic growth model, it would have taken many years to achieve that type of footprint in New York City. But this was a new Walgreens. A transformative Walgreens.
Indeed, top Walgreens executives regard the Duane Reade acquisition — and more recently the Walgreens-Alliance Boots transaction in June — as an accelerant of its five core strategic initiatives. Duane Reade was attractive not only because of its strong foothold in New York, but also because the retailer already was on a transformational journey of its own that involved a revamping of the store design, re-examining the product mix to weed out slower-moving items and a rebranding of the 253-store chain.
While Duane Reade had done a great job securing real estate over the years, its older stores and service levels had earned the chain more than its share of detractors. It has been reported that at the time former chairman and CEO John Lederer joined the company in 2008, the top result on Google Search for the company was a blog called “I hate Duane Reade.” That the blog today has been quiet for almost a year now is a reflection of just how far Duane Reade has come in its own transformation.
Fast-forward to today, and Duane Reade’s evolution — now under the watch of Walgreens’ management — continues to impress and undoubtedly to revamp the landscape of the U.S. drug store industry.
“For some time now, we’ve been fine-tuning our product mix and making it very relevant for the neighborhoods in which we operate, ultimately giving our customers exactly what they are looking for,” said Paul Tiberio, Walgreens divisional VP regional procurement and inventory strategy.
For Duane Reade, content relevance is a moving target as the neighborhoods, and the customers who shop in those trading areas, can change radically from one block to the next.
For example, the impressive flagship store at 40 Wall St. caters to a mix of financial market traders and nearby residents, and features an in-store sushi chef, a juice/smoothie bar, food from local New York gourmet retailers and eateries like Zabar’s and the Carnegie Deli, and self-serve coffee. It also plays host to a full-scale LOOK Boutique, where it has been testing higher-end beauty services, such as its Essie Nail Salon, a Ramy Brow Bar and a PhytoNation blow-out bar, which has begun recently to offer men’s haircuts.
Just 100 yards away, at 100 Broadway, Duane Reade’s new store, which opened in July, caters to a slightly different mix of cus- tomers. Its clientele includes local office workers whose tastes tend to run a bit less posh from the Wall Streeters around the corner at 40 Wall St., and a very steady stream of tourists on lower Broadway, the stretch known as New York’s “Canyon of Heroes.” This Duane Reade location doesn’t have the full LOOK Boutique, but it does feature some important variations that can’t be found in 40 Wall St., such as a chopped-salad bar, self-serve soup, a barista bar and a full-serve bakery.
“We feel we have that ability and need to tailor our offers, especially when it’s a store across or down the street from another. Grab-n-go foods and consumable goods are where you typically see varying offers from one store to the next,” Tiberio said.
Then there’s the pharmacy. Today, all 253 Duane Reade pharmacies are “Powered by Walgreens Pharmacy Network,” linking the Duane Reade stores to Walgreens’ pharmacy system so New Yorkers, out-of-state residents and visitors can have their Walgreens pharmacy information available at a Duane Reade location for a seamless patient experience. The new look of the pharmacy departments and the addition of Walgreens’ back-end technology are helping Duane Reade capture more pharmacy business. Most important, the transformation of Duane Reade didn’t just produce a fleet of pretty stores — the investment and all the hard work are producing real results.
“We solved the commuter’s morning needs with coffee and Danish along with their lunch needs — all areas of which we did not have a lot of play in before,” Tiberio said. “So, we have in fact taken our average order size up and ultimately increased our customer count. We started bringing more people in more often.”