CVS Caremark may be highly focused on driving medication adherence, curbing rising healthcare costs and improving the health outcomes of its patients, but there’s no doubt that its retail segment remains a critical part of its business, as evidenced by the innovative initiatives playing out at the front end.
CVS/pharmacy always has prided itself on convenience, but the retailer clearly is raising the bar with its Urban Cluster store concept, which is in its second year of rolling out and is helping to fuel both top and bottom lines. According to CVS, it plans to complete more than 200 stores this year, on top of the roughly 200 it completed last year.
“Our urban stores continue to post very strong results, and our test earlier this year in California yielded especially exciting results. We expect California to be a key expansion market for our urban layout later this year,” Larry Merlo, president and CEO, told analysts during the second-quarter conference call in August.
The Urban Cluster store concept can include slight variations to appeal to the local area. For instance, at the CVS Urban Cluster store in New York’s Union Square area, a more extensive wine selection appeals to tourists and guests staying at the W Hotel a few blocks away.
The key element of the Urban Cluster concept is a significant focus on consumables, which in the reset was expanded and moved closer to the door — a prominent location that makes the section impossible to overlook and easy to access. There’s also an expansive Grab & Go prepared foods section; a greater offering of grocery items, such as cereal and pasta; household items; and baby products. The Urban Cluster format is how CVS will play in food desert markets.
As for its pharmacy dominant cluster, the retailer is focused on re-merchandising stores that are primarily shopped for pharmacy and related products. “We’ve seen exciting results from our first wave of test stores that we completed late last year, demonstrating that it is possible to significantly reduce SKU comp inventory while growing sales and margin,” Merlo said during the first-quarter conference in May. “We are being very careful and deliberate to find the right balance. We’re conducting lots of customer research, so we’ll test this format longer than others. We’re going to be expanding the tests to an additional group of stores in the second half of this year, and we hope to scale the model beginning in 2012.”
Meanwhile, the company’s highly successful ExtraCare Rewards loyalty program, which is in its 10th year and has more than 67 million active cardholders, continues to be a major focus to help drive profitable sales, as opposed to what the company refers to as “empty sales,” or sales without a profit flow-through.
The company recently has bolstered the program by launching a new digital coupon option for ExtraCare and the ExtraCare Beauty Club for its beauty shoppers. With the new “Send to Card” digital savings option unveiled in August, cardholders can send select ExtraCare coupons received by email directly to their ExtraCare card for automatic, digital in-store redemption. This eliminates the need to print those coupons at home and submit paper copies at the register.
In January, CVS launched its ExtraCare Beauty Club, which provides ExtraCare cardholders who register their cards with additional rewards on beauty purchases and other beauty-specific benefits. CVS/pharmacy Beauty Club members receive a 10%-off-beauty shopping pass upon enrollment, $5 in ExtraBucks rewards with every $50 beauty purchase and $3 in ExtraBucks rewards on the member’s birthday, as well as special beauty offers throughout the year. Members also receive monthly email newsletters with exclusive coupons, tips from experts and new product information.
To further enhance member benefits, CVS introduced in late June its “Beauty Board,” a panel of beauty and style experts who provide interactive content and advice for the CVS Beauty Club Facebook page. As of late June, there were more than 8 million ExtraCare Beauty Club members.
Speaking of beauty, CVS continues to add to its exclusive product offerings and now has partnered with actress Salma Hayek to offer the exclusive beauty collection Nuance Salma Hayek. The collection is comprised of more than 100 products within four categories — skin care, cosmetics, hair care and body — and marks the first complete beauty line developed by an actress in partnership with a national retailer.
Then, of course, there’s the Beauty360 concept, which, aside from its high-end beauty offerings, makes a major statement with its upscale decor and layout, which includes a separate entrance. As of press time, there were 25 Beauty360 stores in operation, primarily located in California. The first location was unveiled in November 2008 at a Capitol district CVS store in the center of Dupont Circle in Washington, D.C.