Making convenience a cornerstone

Drug Store News,  March 25, 2002  by James Frederick

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Like the city in which it was born more than a century ago, Walgreen Co. makes no little plans. That certainly goes for its exploding pharmacy business.

As the nation's top pharmacy provider, Walgreens has reached the point of critical mass. Fueled by the powerful momentum of massive store expansion and market in-fill, an aging population, near-universal name recognition, constant technological innovation, a well-oiled marketing machine and highly efficient drug distribution, the chain's pharmacy business is now virtually feeding itself.

Walgreens filled a mind-boggling 323 million prescriptions in fiscal 2001, or 11 percent of the total U.S. retail market, as it served 37.5 million patients in its pharmacies last year. Its average of roughly 270 prescriptions per store per day is far above the industry average, reflecting the chain's ability to pull 3 million customers a day through its more than 3,650 drug stores. Within five years, say company leaders, that average daily prescription volume will swell to more than 400 per day as the company improves dispensing technology, training systems and its pharmacy workflow to increase efficiencies and compensate for the ongoing shortage of pharmacists.

Walgreens' continuing ability to expand its store count, market penetration and geographic reach to the tune of hundreds of new locations each year also has given it a major competitive edge in the battle for customers covered by third party prescription payment plans. 'With stores in 43 states and Puerto Rico, we have a base of customers that covers more of the United States than any other drug store chain," noted a company report. "Our national coverage is a major advantage in negotiations with managed care pharmacy companies."

What's more, the company's Internet pharmacy operation now generates more than 10,000 prescription refills a day, doubling its daily volume in one year. Its Web site, walgreens.com, now has more than 2.5 million registered users--the company sends e-mail refill and compliance reminders to more than 20,000 customers each day.

Dennis O'Dell, Walgreens' vice president of health services, has described the chain's Internet strategy as simply that of offering consumers another choice in where and how they can obtain prescriptions and interact with the company's health care services. The success of that approach is measured by the fact that 95 percent of the chain's Internet pharmacy customers ask to pick up their prescription refills at their local Walgreens store.

Walgreens bills itself in advertising as "The Pharmacy America Trusts." Trust is certainly a key factor in the chain's marketing efforts, but it's only part of Walgreens' image as a neighborhood pharmacy provider. Much of its success in building long-term customer loyalty at the prescription counter--and in replicating that success, over and over, in both newer and older markets--lies in its ability to package convenience and easy access.

The convenience mantra

Indeed, convenience lies at the heart of the chain's brand-building effort to maintain its position as the nation's top pharmacy provider. Pursuing the convenience mantra, the company has spent billions of dollars in an effort to make its stores and pharmacy services the most accessible of any drug chain. Those billions have gone into building and relocating thousands of free-standing drug stores in prime, high-traffic corner locations in hundreds of major, medium-sized and smaller U.S. markets. They've given the chain more than 2,600 stores with drive-through pharmacy windows--far more than its nearest competitor. And they've made Walgreens the market leader both in all-night pharmacy and in Internet prescription refills.

"We've pumped all kinds of convenience into our business," noted newly installed president and chief executive officer David Bernauer at the company's annual shareholders' meeting. "Over two-thirds of our stores now are freestanding with drive-throughs, and 835 of them are 24-hour stores. That's more than all of our competition combined."

Over the next five years, Bernauer said, Walgreens will spend billions more to add another 1,700 drug stores to its current base of more than 3,650 units, and to strengthen its grip as the nation's most convenient prescription outlet. "With the aging population and a 40 percent prescription sales increase forecast by 2006, this is the best time in our history to expand," said Bernauer. By 2007, he added: "Almost 90 percent of our chain will be freestanding with drive-throughs," and more than 1,300 will be open 24 hours.

"Why do we need all that convenience? Well, you need it. I need it," he added. "Just about everybody I know is going to be in that baby boomer wave rolling forward. It's full of people that are going to need prescriptions for high blood pressure and high cholesterol, or things like low bone density. We're chasing those baby boomers."