Segmentation strategies add up
The 19th century British writer William Hickson may have written, “If at first you don’t succeed, try, try, try again,” but he only had half the story. By all means, try again, but don’t do the same thing over and over and expect different results.
For the past couple of years, Rite Aid has made that a fundamental element of the way it does business with its store-segmentation efforts. The 4,700-store chain has abandoned the cookie-cutter model that chain retailers have long used and created innovative new formats designed to turn the requisite trip to the drug store into a more convenient and rewarding experience.
Last September, the chain inked a deal with Supervalu’s Save-A-Lot Food Stores chain of discount supermarkets to create co-branded Save-A-Lot/Rite Aid stores in South Carolina. The segmentation effort started as a 10-store test, whereby existing Rite Aid stores would be converted to combine Rite Aid’s pharmacy and its usual mix of front-end products with fresh meats and produce.
Rite Aid president and CEO John Standley said during Rite Aid’s first quarter 2012 conference call with investors on June 23, front-end sales at the stores were up 68% year-over-year, while sales at the chain’s small-format Value stores were up 140 basis points.
More importantly, despite being confined to a small area of the country, the stores have allowed Rite Aid to latch on to the growing trend of retail pharmacies offering fresh foods to customers. “We believe this new co-branded concept meets the needs of today’s consumers, who continue to search for value, quality and convenience, and we’re excited about the chance to offer our customers high-quality grocery products, including fresh meats and farm-fresh produce at great prices,” COO Ken Martindale said when the Save-A-Lot/Rite Aid deal was announced.
But the new wellness store format offers a glimpse of the Rite Aid of the future. The company opened six remodeled stores in New Jersey and Pennsylvania earlier this year, followed by additional stores in Newport Beach, Calif., and Harrisburg, Pa. The stores offer an airier interior with lower shelves, brighter lighting and wider aisles, as well as new products like all-natural and organic foods, a special men’s grooming section and a staff of iPad-wielding Wellness Ambassadors to assist customers, in addition to long-standing features like the GNC LiveWell store-within-a-store, which dates back to 1999. As of June 23, the stores were trending about 100 to 200 basis points better than the rest of the chain, Standley said.
But the lower shelf heights aren’t just to make things look nice; they also help increase visibility for the stores’ most important element: the pharmacy. “I’m a big fan of the clean-store policy,” Rite Aid group VP category management Bill Bergin said at Drug Store News’ 11th Industry Issues Summit in November 2010. “It never really made sense to me to have … toys stacked within 6 in. of the ceiling so when a woman comes into the store, she can’t see the pharmacy and can’t see the aisle markers to navigate her way around.”
“This is positioning us for future opportunities down the road,” Martindale told Drug Store News during a tour of a wellness store in Harrisburg on June 21. Indeed, as CFO Frank Vitrano said during the conference call two days later, the company plans to renovate 500 stores this year with components of various new formats, including the wellness, Save-A-Lot/Rite Aid and Value stores.
Future Shop: DR’s new flagship is major leap for drug store retailing
It’s like stepping into a time machine and jumping ahead a decade or more. Housed in a historic 1930s property that once was the tallest building in the world, Duane Reade’s newest flagship store at 40 Wall St. in New York — the first co-branded Duane Reade/Walgreens store — offers a glimpse of how retailers will use technology and develop new in-store services to create a much more interactive shopping experience.
“We are taking the best of Walgreens and the best of Duane Reade and bringing them together, and this store really exemplifies that,” Joe Magnacca, president of Duane Reade and president of daily living products and solutions for Walgreens, told Drug Store News. “And it takes a lot of innovation that we have been working on at Duane Reade and gives it a real chance. This becomes an incubator for new ideas and new concepts … and whatever works here, we have a chance to apply that to other locations both in Duane Reade and Walgreens.”
There’s no doubt that the shopping experience within this 22,000-sq.-ft. Duane Reade location, which officially opened on July 6, is like no other.
“I think what they’ve brought to the U.S. market … is obviously a lot of work and a lot of research and diligence on global best practices,” said Ken Nisch, chairman of JGA, a retail design and brand strategy firm. “I always think of a drug store as a bit of a kit of things if you’re not feeling well, if you’re having a tough day, having a minor home disaster relative to bits of do-it-yourself products — and I think they’ve totally transcended that. They created a store that’s about looking your best, feeling great and eating well … in a very upscale, fresh sort of way.”
This co-branded store marks the first time that Duane Reade has introduced to its consumers the “Powered by Walgreens Pharmacy Network” concept, which links the system to the Walgreens pharmacy system. This enables out-of-state residents and visitors to have their Walgreens pharmacy information available at this Duane Reade store. By mid-October, all Duane Reade locations will be “Powered by Walgreens.”
However, is the seamless connection of pharmacy data on the back-end just the beginning? While Duane Reade has made no such announcement, it isn’t so far-fetched to imagine the industry at large leveraging such technology in the future.
Duane Reade partnered with Lawrence, a Tensator Group Co., to employ at 40 Wall St. the industry’s first Virtual Assistant. Using the latest in holographic imaging and audio-visual technology, the Virtual Assistant creates the illusion of a real person who greets customers when they enter the store.
Virtual Assistants already are in place in the United Kingdom at London Luton and Birmingham airports, conveying to travelers pre-screening information. At 40 Wall St., the Virtual Assistant provides guidance on everything store-related, including making suggestions and recommendations on products available to shoppers. The reality, however, is that these Virtual Assistants are fully customizable, and the functionality could go well beyond simply greeting shoppers.
“This thing is fully customized. The reiteration of a HIPAA-compliant virtual assistant, I could visualize her sitting behind a ‘desk’ so it would almost be like a … virtual pharmacist sitting behind a desk,” said Keith Carpentier, senior business development manager for Lawrence. “You could approach it and hypothetically [if] you engaged your [loyalty card] or prescription, it could then speak to whatever personal health information the enterprise needed to convey. The fact that the enterprise can control the message is huge.”
The Virtual Assistant also could feature a menu of frequently asked questions and/or an embedded barcode scanner so customers could scan a product or a prescription to receive, for example, drug information or pricing. Have trouble understanding English? No problem. The Virtual Assistant also could be embedded with an unlimited number of languages to further assist non-English speaking customers. Have a loyalty card? Scan your card and she will greet you by name.
And then there’s the food. In recent months, several pharmacy retailers have made a much greater push into “fresh,” but this store completely redefines what it means to sell food in a drug store. The overall food selection balances national brands with local, well-known vendors. There are in-store sushi chefs, a juice/smoothie bar and partnerships with local New York gourmet retailers and such eateries as Zabar’s and the Carnegie Deli. It also features a Coca-Cola “Freestyle” machine, dispensing 130 combinations of Coca Cola-owned fountain drinks.
“We have really pushed the envelope hard on food,” Magnacca said. “A lot of the inspiration comes from Europe, where we’ve seen people push the envelope, to be quite honest.”
Europe also served as the inspiration for beauty within this location, which has an expanded Look Boutique with several European beauty brands that are newcomers to Duane Reade.
Technology and an increased focus on customer service also make a play in beauty. There’s an automatic fragrance sampler so shoppers can try more than 40 different scents on their wrists, as well as a virtual makeover tool so beauty mavens can “try on” makeup before they buy. The store also offers beauty services, such as an Essie/OPI manicure bar and a hair styling salon provided by Phyto Universe, typically not found in a U.S. drug chain.
For more photos of the flagship store:
New drugs to alter HCV treatment, outcomes
A phrase like “silent killer” sounds creepy enough on its own, but it’s an often-used one for a virus that, according to the Centers for Disease Control and Prevention, infects 1.3% to 1.9% of people in the United States.
New hepatitis C infections have fallen dramatically over the last decade, according to the CDC, from 28,000 in 2003 to 18,000 in 2008. However, the virus, which is mostly spread through unprotected sex and sharing of needles by drug abusers, remains dangerous, and as many as 3.2 million Americans may be infected. According to the C. Everett Koop Institute at Dartmouth Medical School, hepatitis B and C account for 75% of all cases of liver disease around the world, but unlike its cousin, more than 80% of infections by hepatitis C, also known as HCV, become chronic and lead to liver disease.
But HCV has one silver lining: It’s curable. The standard of care for HCV infection is a combination of the generic antiviral drug ribavirin with a biotech drug known as a pegylated interferon, usually Genentech’s Pegasys (peginterferon alfa-2a) or Merck’s PegIntron (peginterferon alfa-2b). The treatment can produce a sustained virologic response, or SVR, meaning that the virus is rendered at least undetectable and thus considered cured, though cure rates are lower in patients with genotype 1 of the virus, at 40% to 50%, while cure rates for genotypes 2 and 3 are much higher.
But in May, the Food and Drug Administration approved two drugs that could be the start of a new trend in HCV treatment: Vertex Pharmaceuticals’ Incivek (telaprevir) and Merck’s Victrelis (boceprevir), both protease inhibitors. “It’s going to have a major, huge, big impact — pick your favorite superlative,” analyst Seamus Levine-Wilkinson of healthcare market research firm Decision Resources told Drug Store News.
What’s significant about the two drugs is that, taken in combination with ribavirin-interferon alfa therapy, they greatly increase the cure rate for patients with genotype 1, bringing it up to 65% or more. “These drugs are a huge advance,” Levine-Wilkinson said. “They’ll really up the treatment rates.”
The drugs aren’t perfect, however, and they include side effects, such as rashes and anemia. But they could be a taste of the future of HCV treatment. Tibotec, a division of Johnson & Johnson, is developing TMC435, a protease inhibitor that may have fewer side effects than Incivek and Victrelis. Meanwhile, Pharmasset is working with Roche to develop RG7128 (mericitabine) and with J&J to develop PSI-7977. The latter two drugs are polymerase inhibitors, which differ from protease inhibitors in that they have the potential to work against all genotypes of the virus rather than just one. Levine-Wilkinson sees the new drugs launching as early as 2015. In addition, he said, they could even lead to the elimination of the need for interferons.
The development of new drugs is particularly significant for specialty pharmacy providers, for which genotypes are an important aspect of treatment. Recently, Accredo Health Group, the specialty pharmacy division of pharmacy benefit manager Medco Health Solutions, said it was able to drive down the cost of HCV treatment by $13,000 per patient by using genotype information, as well as by increasing medication adherence, as patients must be at least 80% adherent for their HCV treatment to be effective.