PHARMACY

Loyalty cards explain how three pharmacy operators are bullish around winning the same patient

BY Michael Johnsen

WOONSOCKET, R.I. — CVS Caremark reported strong numbers on both the retail and PBM sides of its business — but the real bombshell for analysts on the call was the news that the company has raised its estimate on the number of Express Script patients that CVS feels it can keep from going back to Walgreens.

That’s a big boast. But Rite Aid, too, likes its shot to keep the ESI customers who at one time frequented Walgreens’ pharmacies to fill their prescriptions. And Walgreens, for its part, reminds analysts that there was a reason those ESI patients were filling their prescriptions in the first place. So the Chicago retailer is confident that they’ll be able to entice many of their former patients to return to the pharmacy fold. But in the end, who’s really going to capture that coveted ESI patient? Will they stay, or will they go?

And that all depends on what each of these retailers do to grow their respective businesses going forward. The one big difference between CVS, Rite Aid and Walgreens before the Walgreens/ESI split, and after? Loyalty cards. That’s where we think the battle for the customer might be won or lost. 

It’s certainly a big issue, as outlined by DSN’s recent coverage of the loyalty wars raging between the pharmacy operators

Champions of today’s best-in-class loyalty cards — and that would include each of the drug store chains mentioned here — are looking well beyond using simple discounts to drive shopper behavior. That’s low-hanging fruit. The good stuff, the high-up-top stuff will only be reached with the greater adoption of big data mining tools and predictive analytics. Ascertaining what a customer is going to buy before even she knows to put it on the shopping list, and then propositioning a deal on that knowledge, that’s what’s going to shake out the winners and losers. Because armed with that kind of knowledge, the best-in-class retailers will be able to construct a steady stream of personalized offers catered to their highest-profit customers and enticing them to walk into their respective stores.

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PHARMACY

The synergies to flow between Boots, Walgreens have only begun to be tapped

BY Michael Johnsen

LONDON — As part of its multi-channel strategy, Boots UK is currently testing the use of iPads to support in-store ordering across 30 stores, the London-based drug store retailer recently announced

Sound familiar? Borrowing a page from the Walgreens playbook is evidence that the sharing of best practices will flow in both directions across the Atlantic. What else could Boots borrow from Walgreens? Creating a pharmacy business that better interacts with the neighboring community is one strength at Walgreens that Boots may successfully plug into. 

And how about clinics? While the United Kingdom has universal health care, you can’t just walk into a doctors office in London without an appointment. And Walgreens has plenty of experience not only operating a retail clinic as part of a pharmacy format, but also experience in leveraging that clinic against surrounding healthcare providers and employers in an effort to realize the best healthcare value. 

That link between Walgreens and Boots will very quickly become a superhighway with best practices flowing in both directions. Joe Magnacca, Walgreens president daily living products and solutions, recently sat down with DSN regarding the big picture in developing successful retail pharmacy formats. 

"[Boots] clearly looks at each category differently," he said. For example, Boots is very health- and beauty-focused when it comes to seasonal merchandise, as opposed to the general merchandise fare that stock the seasonal aisles of many American retailers. Other service models that Boots has instituted across the Pond that might be explored by Walgreens include optical and hearing aids. 

“We think there are a lot of great learnings that will come our way and we think similar things will happen the other way, as well, in terms of some of our strategies in private label and innovation,” Magnacca said. “I think the way we approach fresh is different than they do today. We think they have a great infrastructure from a supply chain point of view, but we believe we have some very dominant brands that can be heavily leveraged, including our DeLish and Nice! brands," he added.

Both Walgreens and Boots will have increasing opportunities to leave their respective atypical drug store models behind and be more aggressive with a cross-polination of drug store retailing for the future.

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PHARMACY

Drugs for a penny? It’s all about volume

BY Alaric DeArment

Earlier this week, DSN reported that members of a prescription drug program offered by Humana to Medicare beneficiaries will soon be able to obtain 10 generic hypertension drugs from Walmart for a penny.

It’s certainly good news for people with high blood pressure, but it also has big implications for the pharmacy retail industry.

In a recent interview with DSN for a company profile to appear in the December issue of the magazine, Rite Aid EVP pharmacy Robert Thompson said that with the drops in sales that retail pharmacies are seeing because of generics, they will have to replace sales with volume — that means chains getting more customers into the store and distinguishing themselves through service.

Walmart made a big splash when it launched its $4 generics program in 2006, whereby patients could get 30 days’ worth of certain generic drugs for that much, a program later expanded to include 90-day supplies of drugs. At the time, critics said it would take the profitability out of generics, but it wasn’t long before drug, supermarket and mass merchandise chains from coast to coast were offering nearly identical programs of their own.

The latest initiative from Walmart is part of an evolution that’s been happening in the whole idea of generic discount programs. While it’s unlikely that any chain will institute a broad price reduction of its $4 generics to 1 cent, several chains have selectively offered huge price reductions — or eliminations, to be more specific — on certain generic drugs. At the beginning of September, Meijer announced it would offer generic versions of Pfizer’s cholesterol drug Lipitor (i.e., atorvastatin calcium) for free. That’s in addition to the many other chains giving away supplies of antibiotics and prenatal vitamins.

Obviously, a store doesn’t make anything by selling drugs for a penny, let alone giving them away for free, but as analysts have suggested to DSN, that’s not the point. As with vaccinations and pet medications, super-cheap or free generics are more about getting more customers, which ultimately means better sales overall. It’s not a race to the bottom — retail pharmacies just have to start climbing a different hill.

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