Drug chains gamble on Las Vegas-and win

Lisa T. Fried

Two years ago, Walgreens opened its first store in Las Vegas. By year end, it will operate 21 stores in Clark County, which encompasses Las Vegas, Henderson, North Las Vegas, Boulder City, Mesquite and 13 unincorporated towns.

American Stores, the largest chain pharmacy operator here, has 27 stores in the market.

Rite Aid, which entered the market via its acquisition of Thrifty PayLess in 1995, has plans to nearly double its store base this year to 23 stores.

Longs Drug Stores' first Las Vegas store opened last year. The chain already has added five more in the county.

Medicine Shoppe entered the market in 1986. It has one store in Las Vegas and one store in Mesquite.

"As far as the drug channel class of trade, the whole market is a hotbed of competition right now," said Mark Panzer, senior vice president of marketing for American Drug Stores. "It's the fastest-growing community in the United States," said Panzer. "The economy is very healthy, and there is still a lot of land and a lot of corners.

Skyrocketing population growth in Clark County is clearly the major draw for the chains. Between 1992 and 1997, the population in Nevada's largest county has swelled a whopping 25 percent to nearly 1.2 million, and it shows no signs of slowing down. This year, another 60,000 to 75,000 new residents will find a home in the region. By the year 2003, the population is expected to grow to nearly 1.6 million. By 2018, it is expected to reach 2.6 million.

While it's likely that the Lion's share of the 30.5 million visitors who come to Las Vegas every year are drawn to the strip and all the glitz and gambling it has to offer, Clark County's resident population is soaring for completely different reasons. For many of the families and retirees moving here, the attraction to Clark County is the availability of reasonably priced housing, safe neighborhoods and accessibility to outdoor activities, according to executives operating in the market.

The median price for a new home in the last quarter of 1997 was $141,263, quite affordable for the average home buyer here who has an annual household income of $49,000, according to the Center for Business and Economic Research at the University of Nevada, Las Vegas.

"This community is not all about the strip," explained Larry Prato, Longs Drug Stores' district manager for Las Vegas and Colorado. "The people who come here for the gambling life and that mentality don't last. People are moving [to family-oriented communities, such as Summerlin and Henderson, sites where Longs operates stores] because it is affordable and there is a lifestyle that is conducive to families, believe it or not.

"There is a community involvement here that I haven't seen in a long time, whether it comes to raising money for the cancer society or getting involved with schools and Little League," Prato continued. "There are parks and all kinds of activities for kids that go on way past dark. And, the employees are really happy to go to work. You don't always see that."

Las Vegas is also becoming more attractive to retirees, a key customer for drug stores. "You have a Phoenix with the entertainment industry here," notes Greg Wasson, district manager for Las Vegas for Walgreens.

New housing of all types is exploding in the region, and job opportunities outside the casinos are growing as high-tech and other companies establish operations here. Other benefits of the region: there is no personal income tax or corporate income tax, and the sun shines 320 days per year.

Retail jackpot

As the population has swelled, so has retail development in the region. New malls and shopping centers are popping up in both established regions and the scores of brand new housing developments being built.

And, retailers are prospering here. In Clark County, sales from drug stores, liquor stores, gift and novelty stores and other miscellaneous retailers grew 5.8 percent to approximately $1.4 billion for the 12 months ended March 1998, according to the Nevada Department of Taxation. On average, each Walgreens in the region produces revenues between $6 million and $8 million, according to Wasson.

While Longs operates two stores a few miles from the Las Vegas strip, its other four stores are located in suburban communities known more for Little League games and family outings than the bright lights of Vegas. Walgreens and Rite Aid are also actively scouting out sites in these new communities. Sav-on stores are located in more mature areas.

Drawn by the huge influx of new residents without established shopping patterns and a large supply of undeveloped land, the drug chains in the market, like other retailers here, are competing fiercely for new sites and new customers.

"When we studied the market, it was underchained, and it was clear people were looking for service," said Wasson. "There were not a lot of drug stores out here, so people in this town were not treated the way they wanted to be treated in a drug store, when it comes to things such as wait times and being in stock on items."

By aggressively pursuing prime real estate locations, focusing on service and opening mostly 24-hour stores, Walgreens is having off the chart success here in this city of hope. In the two years Walgreens has been in the market, the chain has quickly developed a reputation as a daring and aggressive retail operator here. the chain has been scouring the region for prime locations and, according to players in the market, shown a willingness to pay a premium for them.

Its most notable feat of late: securing the chain's second site on the coveted Las Vegas strip. The actual location: a center next door to the MGM Grand hotel, the largest hotel in the world. Rite Aid, Sav-on and Longs operate stores within a few miles of the strip, but not on the strip itself.

"It's important to have a presence on the strip," said Wasson. "When you are on the strip, you are advertising, not just to Las Vegas, but the world," he said, referring to the huge influx of foreigners that visit the city.

Casino employees and visitors are regular customers in Walgreens' store on the strip, which is located on Las Vegas Boulevard and Charleston. The store stocks a large assortment of T shirts, souvenirs and gifts targeted at tourist customers. And, its store personnel know that the casino workers who get off after midnight expect as good a service experience as the shoppers who come to the store earlier in the day.

"The challenge is giving the tow the service it expects and deserves," Wasson said.

Walgreen's success in the market notable for another reason. Of all the chain drug store operators here, it is the only one without slot machines in the stores. Indeed, a Walgreens store is one of the few places in Las Vegas and its surrounding communities in which one won't find a slot machine.

Slot machines are in the airport terminals, the grocery stores and even a gas stations. "It was a good decision [not to put slot machines in the stores]," said Wasson. "I get calls and letters all the time from people who are glad that we don't have them. They don't want to fight the clientele that's there or hear them clanging. And, the fact that we have done so well say we don't need them."

Most retailers with store in the region do not share Walgreens' sentiment. "Everyone has their complement of slot machines," said Prato of Longs. "It's a given." All six Longs stores in Clark County, even the four located far from the strip, have slot machines in them.

Slot machines do increase revenue at the stores, noted Panzer of American Stores, which operates slot machines in all 27 of its Sav-on drug stores here. "It's an income generator," he said. "It's like having a vending machine at the front. We have gumball machines for kids. This is a vending machine for adults."

Like them or not, retailers with stores located off the strip, which is officially called Las Vegas Boulevard, will have to remove slot machines from these stores if Las Vegas Mayor Jan Laverty Jones has her way. The Mayor wants to prohibit gaming in neighborhoods outside the strip as part of an effort to improve the quality of life in Las Vegas. At press time, the Mayor was planning to meet with community groups to discuss her plan.

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