Merger of WAG, Alliance Boots creates global Rx, HBA giant

BY Jim Frederick

It’s a marriage of industry icons. In June, Walgreens finally made a long-awaited leap across the Atlantic to acquire British-based Alliance Boots, one of the world’s premier retailers of pharmaceuticals, health and beauty aids, and beauty care products. 

The merger creates a global giant in drug store retailing, pharmacy services and wholesaling. Launched with a single store selling herbal remedies in Nottingham, England, in 1849, Alliance Boots operates more than 3,200 units with pharmacies, and services more than 170,000 pharmacies, physicians, health centers and hospitals throughout the world through its wholesale businesses and allied ventures. 

Combined, the two companies are the global leader in pharmacy-led health-and-wellness retailing, with more than 11,000 stores in 12 countries. Walgreens/Alliance Boots also comprises the world’s largest purchaser of prescription drugs.

Walgreens president and CEO Greg Wasson said the deal created unmatched economies of scale as “the first global pharmacy-led healthcare platform.”


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Which area of the industry do you think Amazon’s entry would shake up the most?

Rite Aid finds the magic words: Wellness empowerment

BY Michael Johnsen

The entirety of Rite Aid’s marketing message can really be broken down to just two simple, yet powerful words: 
wellness empowerment. 

It is those two words that have helped inform Rite Aid’s entire wellness platform, from the introduction of its wellness+ loyalty card program in 2010 to the rollout of its new Wellness stores, beginning in 2011. It is those two words that have helped reinvigorate Rite Aid’s business — from how the store is formatted and how it looks, to the energy that pops among Rite Aid’s Wellness Ambassadors. 

“Wellness empowerment is providing the information, products, resources and/or tools that are going to help customers make smarter decisions,” John Learish, SVP Marketing, said. “It’s bringing the pharmacist out from behind the counter and helping our customers make informed decisions about the front-end products. It’s providing proactive health screenings. It’s giving customers tools to easily manage their prescription regimens.” It’s the interactive and engaging services that help Rite Aid patients make better, informed health decisions, Learish said. 

When developing Rite Aid’s loyalty program, the program needed to deliver on one aspect really well: the ability to bring expertise from the pharmacist and value from the manufacturer and actually place it in the consumer’s hands at the shelf — readily available information that the consumer could access in an effort to make the best wellness decision for them. That is how Rite Aid defines wellness empowerment. 

“When you look at the loyalty programs that are out there today, they’re discount programs,” Learish said. “We said, in order for this to really support our brand positioning, this had to be more than a discount card. This had to be a brand card as well. So, as we carefully conceived the benefit design of the program, we also spent a lot of time testing, doing conjoint analysis on different combinations of benefits.”

The truth is Rite Aid’s wellness+ loyalty card broke some new ground in the drug channel. It was the first card to fold experiential health services into a loyalty program, and after only two and one-half years on the market, the program boasts 25 million active members. 

For example, one of the first benefits for customers who signed up for Rite Aid’s wellness+ loyalty program was 24/7 telephone access to a pharmacist. That was soon expanded to include chat functionality accessible online or from 
a smartphone. 

And, at a relatively low-point threshold, Rite Aid wellness+ members were able to take advantage of a free health screening. “We partnered with Quest Diagnostics and were able to give customers a free blood-glucose and cholesterol screening when they got to 500 points,” Learish said. “What we wanted to do was to make sure we provided real value and the services that customers wanted.”

And wellness+ members are heavily rewarded for their pharmacy business — one point is earned for every dollar on the front end and 25 points for every prescription filled (in states where allowed by law). “All of our communication from the beginning has been prescriptions are the fastest way to get to a 20% discount,” Learish said. “When you look at the value equation that we offer, it is by far the richest program in the industry.”

It’s a program that encourages cross-shopping between the front end and pharmacy. The age-old industry problem, or what was perceived to be a problem, was the customer would fill their prescriptions and not shop the front end. “Really, what we found is quite the opposite,” Learish said. “We have many customers who shop our front end but not our pharmacy. What we learned from the [loyalty] data was they were buying things on the front end that would indicate they do fill prescriptions,” he added. So, from the beginning, the loyalty program was designed to entice a front-end shopper to fill prescriptions at Rite Aid and vice versa. 

And it was the first retail pharmacy loyalty card to segment its customers across a “good, better, best” spectrum with a tiered status — plus, bronze, silver and gold. Rite Aid’s better and best customers are visiting the store more often — approximately half of those customers with silver or gold status walk through Rite Aid’s doors at least once every week. And they’re spending significantly more. 

The point threshold for a bronze member is 250 points, and wellness+ members who reach this threshold realize a 10% savings on all store-brand purchases for a year. Silver members, a threshold reached with the accumulation of 500 points, realize a 10% savings on most anything in the store for one year and can take advantage of a wellness reward of their choice, such as a gym membership, a health/fitness magazine subscription or a health screening. Gold members with more than 1,000 points are afforded 20% off all purchases for one year. 

“The payout at the gold level versus what we’re investing has proven to be worthwhile,” Learish said. “When you look at a wellness+ member versus a nonmember, regardless of what tier they’re in, every single metric is dramatically higher, whether you’re looking at front-end basket, units per basket, prescriptions per basket or margin. And, as wellness+ members climb the tiers, those metrics grow increasingly higher,” 
Learish added. 

Those tiered members also contribute to greater consumer learnings from the shopping data aggregated by the program. “Supplier partners are working with us to really develop targeted communication programs,” Learish said. “They can identify target segments. They can set up test marketing campaigns through us to be able to send relevant communications, and they can stagger the offer based on the value of that customer. They’re able to really get a lot smarter about the way they’re incentivizing customers.”

And Rite Aid’s doing the same thing, of course, creating a new level of experience for the wellness+ member: personalization. “Our emails are dynamically populated. We are taking transaction data and populating the most relevant offers against different customer segments,” Learish said. “What the data gives you more than anything is the ability to be relevant to your customers.”

As discussed during the company’s September earnings call, Rite Aid’s wellness+ loyalty program boasts 25 million active members — members who have used their card at least twice in the past six months — representing an 8% increase as compared with a year ago. Additionally, wellness+ members accounted for 74% of Rite Aid’s front-end sales for the chain’s most recently reported second quarter and 68% of 
prescriptions filled. 

And like Rite Aid’s Wellness store formats, the company is continually evolving its offer. In January, it introduced Load2Card, a new coupon management program that allows all wellness+ members to save, manage and redeem Rite Aid and manufacturer coupons available throughout the internet via their wellness+ card. And in September, Rite Aid introduced a new feature that loads its +UP rewards directly to the cards of wellness+ members who earn them. 

That continual evolution of the card is important, Learish added, because, on average, customers have as many as 14 loyalty cards in their wallet at any given time. Rite Aid wants to make the short list with its customers — it wants to be the one card they use in the 
drug channel. 

How does it intend to get there? Two words: wellness empowerment.


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Which area of the industry do you think Amazon’s entry would shake up the most?

Partnering with suppliers to create a rich, innovative experience for customers

BY Michael Johnsen

The success of Rite Aid’s Wellness store is in the experience. It’s welcoming. It’s engaging. And across various touchpoints throughout the store, it helps guide Rite Aid customers toward however it is they define “well.” That’s as much a function of design of the stores as it is the people and the products in those stores.

“We’re not trying to tell people what wellness is,” Tony Montini, Rite Aid EVP Merchandising, told DSN in discussing the intricate design of Rite Aid’s Wellness stores. “We’re trying to expose them to what wellness can be and then empower them to make the decisions to determine what wellness is for them.” 

The latest rendition of the Wellness store — which the company unveiled in October in Lemoyne, Pa., literally just down the road from its Camp Hill headquarters — seizes on that idea of wellness empowerment. Helping to guide the experience are specially trained Wellness Ambassadors — as of this fall, Rite Aid had trained 815 associates for the new position — who proactively engage customers, helping them find products in the store or linking them back to the pharmacist for questions and discussions on health and wellness and 
product recommendations.

“Our Wellness Ambassadors really, really take their position seriously,” Montini said. “They want to be involved. They want to help our customers, and they want to transition the front to the back,” he said. “If they don’t have that passion — then they really are just a greeter. And that’s not the intention of this position.”

Another key element of the Rite Aid Wellness experience is ever-changing innovation — not product innovation necessarily, Montini explained, but 
merchandising innovation. 

“New items are the life blood of our business. But innovation in product is nondifferentiating,” Montini said. “Everybody gets the same product. … It’s what we do with that product in the store on the shelf that differentiates us. Right now the biggest thing is interaction and information. How do we help educate our customers in the store? And, how do we get them to better understand what that product is?”

Innovation is about being fearless. It’s about taking risks. But it’s also about being smart, especially with the comprehensive data at the fingertips of Rite Aid category managers courtesy of Rite Aid’s loyalty card program, wellness+. Now well into its third year, the program is not only driving sales and growing the customers’ market basket, it’s also delivering critical information about its customers’ shopping habits that is informing multiple aspects of Rite Aid’s business. “Data is power. The more you know about your business, the more you can adjust toward what you need to do to change,” Montini said. “Change has to be constant, and you have to 
embrace change.”

Rite Aid helps foster that at-the-shelf innovation through a combination of speedy decision-making and a mindset that the “store format” isn’t really a format at all but an ever-changing retail laboratory — a place to constantly test new ideas. In Montini’s book, the pace of innovation has to happen fast; his personal mantra, “Speed wins,” has become the marching orders for Rite Aid’s 
merchandising team. 

Given the pace of Rite Aid’s remodeling efforts, at any one time, company officials are able to select a small group of stores where it can test a new concept. Montini shared with DSN a recent example of a meeting with a supplier that wanted to pitch a new merchandising concept. “I told the supplier, ‘Partner with us. We’re going to do 15 stores next week. We can test it in 15 stores,’” Montini said. That’s a quicker turnaround between decision-making and execution than most, he noted. “Who moves as fast as we do? Nobody, because we will make a decision and we will test it immediately. And if it works, we’ll roll it out. If it doesn’t work, we’ll stop it.”

However, a successful test market can present a whole new set of challenges, Montini acknowledged — challenges, incidentally, that he’s all too happy to have. “Our challenge is, how do we go back and put that successful concept into the stores we’ve already done?” he said. “That’s the challenge to me. It’s constantly trying to find what’s new, what’s different, and what’s going to help our consumer. But that’s also the fun part,” he explained. 

In Rite Aid’s next-generation Wellness store in Lemoyne, there are several examples of merchandising innovation at play, including:

A new interactive Vision Center kiosk that allows customers to try new frames in the store and order prescription glasses and contact lenses for home delivery;

Unilever’s new men’s grooming set with an interactive Axe display where customers can use an iPad to sample new looks;

Hands-on product displays in personal care appliance — such as blow dryers and curling irons, diagnostic meters and even in home care — so customers can see and feel products before purchasing;

GlaxoSmithKline’s new smoking-
cessation endcap; and

A vastly enhanced GNC department that feels more like an actual GNC store versus just stepping into the vitamin aisle.

Montini also noted the company’s partnership with Procter & Gamble, which created Rite Aid’s first “him/her” grooming display concept.

Engaging its supplier partners to think creatively of ways to differentiate the experience at Rite Aid and help support its Wellness Empowerment mission remains a major priority for the merchandising team. So much so, in fact, that “Inspiring Innovation” was the theme of the company’s Annual Supplier Conference in September. “Our commitment to innovation demands that we continually refine and develop our Wellness store concept,” Montini shared with suppliers. “The format is dynamic and responsive rather than static — each iteration of our Wellness store will build and improve on the last. This commitment to dynamic design means that the Wellness stores we convert at the beginning of the year will be substantially different from the stores we convert at the end of 
the year.”

Rite Aid also shared with suppliers that future renditions of the Wellness store model could include vision care centers and upscale wine selections in select locations, where appropriate. 

Rite Aid is even looking into ways to further enhance interactions within the beauty sections of certain stores. It’s another example of not defining “well” — in this case, beauty — but providing resources that the beauty customer can tap for additional information or guidance. Merchandising beauty in the old days was just that; it was to help the beauty customer look good, Montini said. “Beauty blends into health much differently than it did 10 or 15 years ago.”

One key new aspect of its newest Wellness store in Lemoyne is the nail bar display, which pulls nail polish off the shelf and creates a stage for the category.

Today it’s all about preventative care, and it’s all health-relevant. “Regimentation and understanding what you can do to stay healthy and to keep from having problems down the road is a big deal today,” Montini said. “It’s information. That’s health.”

Rite Aid also is dedicating resources against fresh foods. The company in 2010 partnered with Supervalu’s Save-A-Lot on 10 grocery/drug store hybrid stores in the Greenville, 
S.C., market. 

And more innovation across fresh foods can be expected soon with the recent hire of 25-year Giant Food vet Bob Serafin, Rite Aid’s new senior director of grocery, who will work with Rite Aid’s VP of Consumables Bill Renz to further strengthen Rite Aid’s bench strength and offerings in this important category. Serafin has focused on making Rite Aid a strong “fill-in” food source since joining the team in April. “I see grocery as a growth vehicle for us, especially with healthier fare,” Montini said. “We’ve recently put a line in called Wholesome Goodness. It’s exclusive to us right now. And we’re going to continue to look for opportunities where we can expand upon offerings that offer additional choices for 
our customers.”


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Which area of the industry do you think Amazon’s entry would shake up the most?