Walgreens is well-equipped for the future

WHAT IT MEANS AND WHY IT'S IMPORTANT — It would be no small thing to define the retail market for wellness, much less “own” it. But Walgreens is staking its future on its ability to do just that.

(THE NEWS: Walgreens chief: We want to own ‘well.’ For the full story, click here)

In a marathon meeting with some 30 Wall Street investment analysts Thursday, Walgreens' top decision-makers laid out in detail a bold course for the nation’s top pharmacy retailer: a course aimed at making Walgreens America’s top destination for retail and workplace health-and-wellness services. Said president and CEO Greg Wasson: “We’re evolving from a retail drug store to a retail health and daily living store, putting us squarely at the intersection of two great industries: retail and health care. No one is better positioned to execute this strategy.”

Wasson isn’t just blowing smoke. Behind the company’s ambitious transformation and agenda is a huge and increasingly intertwined infrastructure. It’s an arsenal that now includes:

  • More than 7,600 full-service drug stores and retail pharmacies, at least one of which is within three miles of 63% of the U.S. population, and which, combined, serve some 6 million customers a day. What’s more, 84% of those stores are freestanding with their own parking, more than 1-in-5 are open 24 hours, and 85% offer drive-through pharmacy services.

  • No. 1 drugstore market share in 28 of the 66 U.S. markets with populations above 1 million, and top market share in 49 of the top 116 markets;

  • A total of 728 worksite-based and in-store health clinics offering customers and employees walk-in, no-appointment access to health professionals;

  • A growing network of specialized and clinical capabilities, including 103 home infusion centers — making it the top U.S. provider of infusion pharmacy services — along with 119 hospital-based pharmacies;

  • Increasingly robust pharmacy automation and robotic capabilities, allowing Walgreens to migrate more and more of its pharmacy dispensing to central-fill facilities in order to free up pharmacists for counseling and other patient-care services and to reduce labor costs; and

  • The country’s largest network of certified immunizers — with more than 27,000 pharmacists and clinicians now able to provide flu shots. Last year, they immunized more than 7 million patients.

At the retail level, it adds up to “expanding our scope of services to ensure our highly trained pharmacists are viewed as a key link in the prevention and screening of chronic disease,” according to Kermit Crawford, president of pharmacy services. The migration of pharmacy dispensing administrative tasks to more central-fill centers, along with efforts to redesign pharmacy workflow, are “freeing up our pharmacists for the important work of patient care,” he added.

Besides broadening the health-and-wellness mission, Wasson and his top lieutenants in merchandising, marketing, online services and operations had plenty of other marks of progress for the investment community. Among them: the rollout of the Customer Centric Retailing initiative, which has already led to the redesign and remerchandising of 2,200 stores. Another 3,000 Walgreens units will undergo CCR transformation in fiscal 2011, said Bryan Pugh, VP merchandising. What’s more, he said, elements of CCR — including the paring of thousands of redundant and slower-turning SKUs at the front end and a more logical approach to products and department priorities — have already found their way into the whole store base.

What’s more, Walgreens is experimenting with a slew of ideas and merchandising concepts to make its stores more appealing and build the shopper basket. Among them: a new approach to fragrances and cosmetics with a new concept called “Beautiful,” now offered on a test basis in Walgreens’ Union Square store in Manhattan, a constantly evolving approach to digital photo services at the front end and the “Fresh” foods concept, with fresh fruits and vegetables, ready-to-eat meals and other grocery staples now found in some 30 pilot stores in urban markets. The fresh-foods concept will be expanded to some 400 Walgreens stores next year, Pugh said.

“CCR laid the foundation on which we’re going to grow our front end,” he said. “It’s allowed us the elbow room to expand with new initiatives.”

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