All in One: Rite Aid builds out pharmacy, front end to become health-and-wellness resource
If it can be said that there is a guiding maxim in the retail business, it would be “know thy customer and know thyself” — two goals that Rite Aid has made a central part of its go-forward, stand-alone strategy in its new fiscal year, which began in March.
John Standley, the company’s CEO, said that coming out of a challenging few years, during which its near acquisition by Walgreens turned into the sale of 1,932 stores and its shareholders did not support a combination with Albertsons, Rite Aid has taken an even closer look at who its best customers are and how the chain can better serve them.
It’s an attitude that goes right down the corporate line at the Camp Hill, Pa.-based drug store chain. “Understanding our customers and their specific needs enables us to do a much better job of reaching them from an omnichannel perspective, while continuously evolving our offering to meet their needs,” said Bill Renz, senior vice president of category management, who has been leading the marketing team in advance of Erik Keptner joining the team as senior vice president and chief marketing and merchandising officer later in June. “These are customers with chronic or polychronic health conditions who are willing to speak with our pharmacists as trusted advisors during their healthcare journeys.”
As part of the company’s fourth-quarter earnings call, COO Bryan Everett highlighted Rite Aid’s “one-store, one-team” culture — something that is driving Rite Aid’s efforts to better meet the needs of its customers. This means that as it sets out on what the Rite Aid team calls its “Path to the Future,” Rite Aid is focused on enhancing its offerings throughout the store — from the pharmacy counter to the front end.
To get there, Rite Aid will invest in infrastructure to enable the company’s more than 6,300 pharmacists to spend more time providing clinical services to patients; revamp its approach to such key front-end categories as health, beauty, consumables and vitamins; and ensure that it can deliver on its shoppers’ needs wherever they are — whether that’s in the store, online or via mobile.
Building a Connection
Walking into Rite Aid’s new Innovation Center, which was developed in the company’s Wellness Store format to enable Rite Aid to be first to market with new items and programs, Renz noted that from the outset of the shopper’s journey, a hardwood path cuts its way through the store directly to the pharmacy. The store’s format reflects the importance that the company is placing on the pharmacist and the customer relationships they are able to create with patients.
“Pharmacists are the key to the relationships we have with our customers, because customers, in many cases, trust their pharmacists more than their primary care providers,” Everett said.
Indeed, in Gallup’s 2019 Poll on the public’s opinion of the ethics of various professions, only 5% of respondents said they had a low or very low opinion of pharmacists’ honesty and ethical standards — second in that regard only to nurses. It’s something Rite Aid executive vice president of pharmacy and retail operations Jocelyn Konrad said the company understands as it looks to chart a business model that can withstand increasing reimbursement pressures and growing scrutiny on patient health outcomes.
“The purpose of a pharmacist has always been at the core of our decisions,” Konrad said. “As a pharmacist, I don’t think the purpose of a pharmacist is to put medication in a bottle, but it is to take care of patients — and the value proposition of taking care of patients is at the core of what we offer.”
One such decision is Rite Aid’s investment in the company’s central fill capabilities, which are meant to empower pharmacists to take care of patients, in part, by finding an efficient way to handle increasing prescription volume. Konrad said that roughly 700 stores have patients’ maintenance prescriptions filled at the company’s central fill facility, removing that task from in-store pharmacists. That number is expected to increase to 1,100 stores during fiscal year 2020. This combined with such efforts as medication synchronization and automatic courtesy refills, means pharmacists are able to focus more on clinical services, including immunizations, which hit a record number for the company during fiscal year 2019.
To make it easier to identify when patients need an intervention, Rite Aid developed and introduced Rite Care, a state-of-the-art tool that enables pharmacists to see a broader picture of a patient’s health records when filling a medication, and it provides real-time alerts for clinical services patients may need. “Having this information at our pharmacist’s fingertips as they fill prescriptions is critical, and we’ve seen success making these important interventions to deliver clinical services patients need,” Konrad said. “I think our patients appreciate the fact that we’re looking at their overall health, not just that one prescription that they’re coming in for.”
These interventions can be particularly meaningful for patients who frequent the pharmacy — Standley pointed out that these tend to be patients with chronic conditions who drive a large portion of the pharmacy business. Rite Aid focuses on helping them manage their conditions and improve their health through three areas of emphasis — adherence, immunizations and medication therapy management, or AIM — that can both improve patient health outcomes and offer the pharmacy an opportunity for reimbursement.
“Rite Aid’s pharmacists have embraced AIM and they understand it means that there’s a higher level of care that we can provide,” Konrad said. “When looking at an attributed patient population within a pharmacy, only about 10% of patients require this higher level of care, so when we are ‘AIMing higher,’ it’s really focused on those patients and getting our pharmacists to recognize that the time they spend with that part of the population is extremely valuable.”
That’s not to say pharmacists are not spending time with other patients. “Rite Aid’s pharmacists deal with caregivers who also will eventually be in that population,” Konrad said. “It is just as important for us to build the relationship with these people, knowing that eventually they will be our best customer.”
The same approach that informs Rite Aid’s pharmacy strategy is helping to reshape its front end — namely, putting the customer first and knowing what offerings will resonate with them. “We’re looking at how the consumer shops and are using this consumer-
centric approach to determine how we build our merchandising strategy,” Renz said.
As a result, the company is focusing on both assortment and shopability of key categories like health, beauty, consumables and vitamins. “Where we’re really going to win with customers is in those four areas. We have to connect with customers in those spaces,” Renz said.
A key element of this push has been building out its own-brand offerings, from reviving its Rite Aid Pharmacy OTC brand to focusing on ingredients in other categories.
“We want to capitalize on the Rite Aid name and allow our customers to take advantage of the great value these products offer in terms of both quality and price,” Renz said. “We’re working very hard to provide better-for-you ingredients in our consumables offering, as well as cleaning up ingredients in our beauty and health products.”
Consumables are an area that can help strengthen the company’s wellness play, both from a food and beverage perspective and a tobacco perspective. Rite Aid is exiting the vaping and e-cigarette business, and raising the age for buying tobacco products to 21 years old, with an emphasis on having conversations with those consumers about smoking cessation when applicable. On the food side, the company has introduced Be Rite, a shelf-labeling program that helps shoppers identify the different functional and dietary benefits of certain products.
“What we’ve tried to do is communicate with our customers no matter where they are on their wellness journey,” Renz said. “Be Rite enables us to help our customers make informed decisions.”
In the beauty aisle, Renz said it has reinvented the space with a focus on key national legacy brands, as well as indie brands, from cruelty-free brands Kokie and Cake to e.l.f., one of the hottest names in the value beauty space. Focusing on ingredients, in particular eliminating such ingredients as phthalates and parabens from its private-label offerings, also helps build out Rite Aid’s health-and-wellness focus.
Similarly, Rite Aid’s approach to vitamins is key to expanding the health-and-wellness proposition that often begins in the pharmacy. It recently extended its more than 20-year partnership with vitamin and supplement retailer GNC through 2021, continuing to offer its products in store-within-a-store sections.
“We believe that, as we help people take control of their health and wellness, supplementation and vitamins can play a key role in that journey,” Renz said. “So, it’s important that we invest in that space, and leveraging the GNC partnership we have really enhanced our presence in the vitamins and supplements space.”
In all areas of the store — as with the path to the pharmacy — Renz said the company is focusing on shopability, from creating a beauty wall that allows for more flexible merchandising to lining the checkout queue area with healthy snacks. Rite Aid also is testing innovations like placing greeting cards and gift cards in the same section, as customers often purchase both items at the same time. “We think that the path to purchase in the store is very shopper-friendly,” Renz said. “We look at the need state, so if a customer is sick, we’ve readjusted our merchandising so they don’t have to walk all the way through the store to get what they need.”
Being shoppable for Renz really means being accessible, and delivering a seamless customer experience with a relevant product mix.
“From a merchandising perspective, Rite Aid is working to connect its front-end product assortment and innovation with the expectations of our best customers,” he said. “Innovation is about being relevant to the markets that we compete in.” Key examples of this include rolling out topical CBD products in Washington and Oregon stores.
Shopability also means checkout convenience. As the company pilots self-checkouts in certain stores, it has seen close to 50% of its transactions completed through the self-checkout offering.
All of these efforts are undertaken with the goal of creating a loyal customer base — not just to build up its Wellness+ Rewards loyalty program membership, though that is part of it, but also to make sure shoppers see Rite Aid as a resource regardless of their need state. Konrad cited smoking cessation and immunizations as prime examples of areas where the front end can drive shoppers to the pharmacy.
“Our front-end team is critical in educating customers who may not get their prescriptions filled at Rite Aid about the services we provide. Our front-end team is very comfortable having these conversations, appropriately educating the consumer, and also inviting them to go visit our pharmacist,” Konrad said. “The perception of patients is that the pharmacist is always so busy that they can’t go and ask them a question. But in 27 years, I’ve never had a pharmacist say, ‘No, sorry I don’t have time for you’ — they always find the time. So, it’s important to build that bridge so the customer is comfortable going to the pharmacist to engage with them.”
Executives at Rite Aid all concur on one thing — the company’s path forward will be characterized by knowing its customers and what they need. Standley said, “Our merchandising mix is going to continue to evolve into the wellness space, and you’re going to see us focus more on what we can do from a merchandising perspective to assist patients who are key pharmacy customers.”
Konrad said that building out omnichannel offerings — which include revamping and building on Rite Aid’s existing e-commerce and mobile strategies, plus in-store innovation — would play an important role. “We will see a very specific pharmacy patient-
centric world, where we are providing what those patients need and creating an omnichannel approach, where we can meet patients exactly where they want us to meet them,” she said.
Renz said that, in addition to all of its in-store efforts, the resolve of Rite Aid’s staff will propel it into the future.
“We’re a team that’s very gritty, and I say that in a very humble way,” he said. “This organization has been through a lot, yet we are charging ahead as a very strong retail player on both coasts, and we’ve got a great team that is going to take us to the next level — from a pharmacy perspective, from a marketing perspective, and from a category management and merchandising perspective.”
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