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The CCR workout: Toning down, muscling up stores

BY Jim Frederick

In one big sense, the massive rejuvenation campaign under way at Walgreens is about finding better ways to connect with the more than 3 million customers who shop its 7,162 drug stores each day.

Walgreens, said president and CEO Greg Wasson, is working “to enhance the customer experience in every way we can.” Much of that process is driven by the ongoing Customer Centric Retailing initiative, now in full rollout after an extended development and trial period last year.

CCR is a bid to rationalize, streamline and rejuvenate the merchandise mix storewide. The effort has been based both on customer feedback and on closer partnerships with Walgreens’ suppliers, allowing category managers to tap more deeply into the vendors’ huge trough of industry sales data.

“It’s not simply about SKU reduction, but about prioritizing categories and items within categories,” Wasson told Drug Store News early on in the process.

CCR has led to a 4,000-item reduction in redundant and slower-turning products at the front end “so we can focus more on those fast-moving items,” Wasson said, while reducing clutter in both the stores and in circular advertising.

“The company is updating its store interiors, improving product selection and reducing the number of items to make it easier for shoppers to find what they need,” Wasson noted in January. “More than 600 stores now operate with the new format, and as many as 3,000 conversions are planned by late fall of 2010.”

Walgreens completed the rollout of its CCR format in 400 stores in Texas before the end of 2009. “Customer response to the initiative, designed to improve the overall shopping experience and increase both the number of customer visits and basket size, has been positive,” the company noted.

Along the way, Walgreens’ CEO said, “we’re making adjustments to CCR so that our stores more closely fit the locations where we operate across the country.” One example: adding more products and signage that cater to the needs of Spanish-speaking consumers in such areas as south Florida and the Southwest. Walgreens also is beefing up its assortment of fresh foods and prepared meals, and is adding a new beer-and-wine selection to most stores.

The ultimate objective, EVP and CFO Wade Miquelon said, is “to understand how to better serve our customers and what they want.” If successful, he added, CCR will unleash “a virtuous cycle” by creating “a better experience” for customers, which in turn will lead to higher sales, faster turns, lower inventories and lower costs. “That equals increased cash flow and profit…as long as we’re in that virtuous cycle of business,” Miquelon said.

There’s still plenty of room for improvement, added Walgreens’ CFO. In 2009, he noted, the average Walgreens shopper bought just 1.3 items at the front end. Creating “a better and more relevant shopping experience” could significantly boost that average and add billions of dollars to the top line, he said.

“Clearly, with the more than 7,100 phenomenal corners we occupy…getting more items in the basket is the best thing we can do,” Miquelon recently said.

CCR also has spawned a broader store redesign, now in test in several markets across the country. “Beginning in March with the next wave of CCR conversions, the company will introduce a new store decor package,” Wasson said early this year. The package “has received good feedback” from consumers in test markets, he added.

“It complements CCR very well,” observed spokeswoman Tiffani Washington, with improvements in directional signage and shelf-tagging to further simplify the shopping experience.

Even before that rollout, however, CCR resulted in big changes in stores that were part of the first wave of the conversion process. The changes have yielded an open, less-cluttered front end, softer colors, lowered fixtures and improved sight lines, and easier-to-find categories and products. Gondolas have been lowered to 66 in., and by removing the high-stacked products that often topped those shelves, Walgreens’ store design team opened up the interior and made it easier to see perimeter departments.

Also aiding visibility: lighter wall colors, accented by departmental highlights and improved signage. Walgreens also has made it easier for customers to find what they’re looking for through the more intelligent grouping of product adjacencies.

To give more space to such key health-and-wellness categories as vitamins, OTC remedies, beauty and first-aid products, Walgreens’ CCR team also reduced such noncore departments as auto supplies and hardware—in some cases to “must-have” items as a convenience to shoppers.

As it reworks its merchandising strategy and front end, the chain also has launched a new, national branding campaign with the tagline, “Walgreens. There’s a way.” A new series of TV ads carries the message that Walgreens is the accessible, convenient and nearby solution for Americans’ health needs and household necessities. “Our research told us our customers want Walgreens to help them simplify their lives,” Wasson explained. “Consumers today want convenience and choice, regardless of channel.”

In addition, Wasson said, “we inspire them to lead a healthier life.”

The changes in the store have extended to Walgreens’ online offerings. The chain unveiled a redesigned Web site last fall, offering its customers a fresher image online and a broader, easier-to-access selection of healthy living and product resources. The new Walgreens.com also provides more shopping tools and services that the company said will make it easier for customers to shop online.

The Web site overhaul means “an easier way to manage prescriptions online, new photo service enhancements, new mobile applications, additional product resources and thousands of health products available exclusively online,” as well as “interactive tools to help consumers better understand and manage their health,” Walgreens noted.

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Bashas’ rejects Albertsons’ buyout bid

BY Alaric DeArment

NEW YORK Bashas’ has turned down a nearly $300 million buyout offer from Albertsons, according to published reports.

According to an American City Business Journals article, the Chandler, Ariz.-based Bashas’ was uninterested in a buyout offer of $290 million for the chain.

Bashas’ filed for Chapter 11 bankruptcy protection in July, announcing the following month that it would close 14 stores. Still, the published reports quoted an attorney representing the company as saying that the reorganization plan would ensure Bashas’ remained in the hands of the Bashas family, which has owned it since 1932.

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Shoppers’ new initiatives sets chain up to become retail giant

BY Michael Johnsen

WHAT IT MEANS AND WHY IT’S IMPORTANT While the decision to move in this direction may have been made before Chong Bang crossed the border, there is no questioning that industry watchers will be focused on what SDM’s new top merchant will do to further improve the stores.

(THE NEWS: Shoppers Drug Mart takes a page out of CCR playbook. For the full story, click here)

That has a lot to do with Bang’s pedigree — he’s directed a significant merchandising program at Walgreens, one of the leading pureplay pharmacies in the United States. And now he’s at Shoppers, the leading drug store retailer north of the border.

Bang will be armed at Shoppers with the sales data generated by 9.7 million members of the pharmacy’s Optimum loyalty program, 80% of whom are women. When you consider that there are only 34 million Canadians, that means that almost 1-in-3 Canadians are members of Shoppers’ loyalty program, and almost 1-in-2 Canadian women.

Presently, Shoppers plans to grow its square footage at a clip of 8% to 9% with a new distribution center slated to open in 2010 to help support that growth. And that’s really going to be Bang’s merchandising challenge — finding a way to slip one more item into that Shoppers marketbasket in a saturated marketplace. Bang certainly can’t build front-end sales by attracting new customers. There just aren’t that many Canadians who don’t already shop at Shoppers.

For Bang, it’ll be a question of optimizing categorical synergies and in doing so help drive impulse purchases. Similar to Walgreens, Shoppers is on a mission to make a good shopping experience better, and Bang’s expected to help realize that goal.

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