CBX

By Joe Bona
“If you’ve seen one chain drug store, you’ve seen them all.”

Such was the prevailing attitude just a few years ago. And while it is still true that pharmacy sections do tend to be fairly similar from location to location, over the past few years chain drug stores have been tinkering with their front end as never before.

Walgreens’ smaller-format “food desert” stores, which are designed to bring fresh food to underserved urban neighborhoods, are but one example. And in New York City, Walgreens’ Duane Reade stores customize offerings from one neighborhood to the next.

After data showed significant differences in customer needs in various parts of the city, Duane Reade responded by changing the front end of the store to better reflect the character of the local community. Drive across the bridge to Duane Reade’s Williamsburg, Brooklyn, location and you find a hip store replete with a beer growler section; head to Wall Street and the offerings include sushi amid sumptuous environs befitting the financial industry’s “masters of the universe.”

But as the industry looks to the future, how will its newfound flexibility — the basic willingness to abandon cookie cutter store formats and experiment with new and innovative designs — shake out? We can extrapolate from existing trends to make some loose predictions.

Given all of the overlap in food today — with dollar stores, drug stores, convenience stores, quick-serve restaurants and other businesses increasingly competing for the same customer — the national drug chains and some of the remaining regional players are almost certainly looking outside of their own sector to find new ideas. The overlap between c-stores and chain drug stores is particularly pronounced, and so it is quite possible that drug stores will make front-of-the-store improvements that echo certain innovations in the c-store sector.

For example, the c-store chain Wawa has racked up one award after another for its newly introduced store design, which strategically highlights the idea of fresh food. By making liberal use of natural materials, floor to-ceiling windows and warm colors, and by adding an open, highly visible kitchen/sandwich-making area and outdoor seating areas, Wawa is sending patrons of its newest stores (many of them in new markets, such as Florida) a clear message: “You haven’t seen this before. We are a cut above.”

Indeed, today’s shoppers can find higher-quality food offerings nearly everywhere they look. They are starting to expect better coffee, bagels, sandwiches — you name it — and even local and organic produce. And health isn’t just important to the 80 million-or-so baby boomers hitting retirement age. Members of the Millennial generation have grown up feeling that food variety and quality is virtually the price of admission. They will continue to feel this way for the rest of their lives. Looking ahead, it seems inevitable that chain drug stores will start to cater to foodie tastes by doing even more to ramp up front of the store food offerings.

Meeting the needs of increasingly time-pressed shoppers is another imperative that will continue well into the future. When people are pressed for time, they start looking for ways to save it. In a growing number of communities today, it makes little sense to brave nerve-frazzling gridlock and drive from one store to the next to meet daily needs.

Thus, chain drug stores will continue to see good reason to ramp up the convenience and product diversity of the front end. You can almost hear the kitchen table conversations that will ensue as they do so: “Wow, honey. The drug store actually had everything on my list today. It actually saved me a trip to the grocery store.”

Strategic partnerships are another important consideration for drug stores. For years now, hybrid c-stores have been pairing, say, a Texaco with a Taco Bell, or a Subway with a 7-Eleven. In coming years, drug stores could consider embracing the same idea by teaming with the likes of Starbucks, Dunkin’ Donuts or any number of other complementary businesses. When many c-store chains first jumped into the food business, they did so by exploring these types of partnerships. This enabled them to learn the food business and, eventually, strike out on their own. Conceivably, the drug store of the future could sharpen the front of the store through strategic partnerships followed by an informed approach to a proprietary food program.

And why stop at fueling shoppers’ bodies? Walgreens is already installing electric-vehicle charging stations at some of its stores. It isn’t hard to imagine a person sitting at a café table outside a drug store and watching his e-vehicle charge as he sips on a tall hazelnut latte. Can gasoline pumps be next?

Finally, one has to assume that the ongoing evolution of technology — and “omnichannel” retailing in particular — will continue to affect the way drug stores do business. Such chains as Office Depot and Staples now do nearly half of their business online. Why drive to the big-box store for a ream of paper and a printer cartridge when you can have those items show up on your doorstep?

Whether Amazon will one day deliver goods by drone is an open question. But one thing is for sure — the company is scrambling to get merchandise to people as quickly as possible by building distribution centers across the country.

Yet, nobody has a bigger real estate footprint than brick-andmortar retailers, including the national drug chains. Indeed, these “distribution centers in waiting” are already right where customers live. It is theoretically possible, then, that square footage at chain drug stores will increasingly be set aside for tech-based fulfillment programs.

Maybe it’s a staging area where associates put together orders for people who want to pick up their prescriptions, along with their milk, eggs, shampoo or other necessities.
Maybe it’s an “Amazon locker” area where urbanites, who hate the idea of packages being stolen from their doorsteps while they’re at work, can have stuff dropped off and securely stored. Thus, drug stores will continue to experiment with alternate drive-through windows and other approaches to “buy now, pick up in store” that could augment their front-of-store sales.

Notice the overlap among all these trends: One-stop shopping not only is a time-saver, but also saves fuel and is better for the environment. Online fulfillment, likewise, feeds directly into concerns over time or gas. Strategically, too, what better way to compete with your direct and indirect rivals than by giving your consumers more of what they want and need?

And while some of this might sound like pie in the sky, remember: In a certain sense, America has been here before. There used to be a place where people went to get just about anything they needed — the general store.

Read more: Chain Drug Review/August 25, 2014