The rendering above shows the store’s expanded offerings.
When I visit my local neighborhood pharmacy, I can’t help but notice that there is never more than a handful of cars in a very large parking lot, and some of them may belong to employees. Sure enough, when I walk in, there’s usually one person at the pharmacy counter and maybe one or two others navigating the aisles of the front end.
I am always amazed at this. Along with convenience stores, drug stores occupy most of the best corner retail sites across the United States, with large parking lots, easy access, often a convenient drive-through window and a generous store footprint. Why are they not more often a destination for the non-pharmacy customer?
It is certainly not for lack of need. As we all know, the traditional drug store business model is under unprecedented pressure, even as the number of prescriptions being dispensed continues to rise, due to industrywide reimbursement rate pressure on pharmacy profitability. At the three largest chains, the front end has been relegated to a support role, generating from one-fourth to about one-third of the top line. But a vibrant frontend business that can draw customers on its own has never been needed more, to make up for the profitability challenges facing the pharmacy.
Obviously, chain drug retailers are exploring ways to increase the appeal of their front end. But the front-end same-store sales and customer traffic trends of the publicly held drug chains tell the same story I see being played out in my local pharmacy. The unpleasant truth is that there is far too much sameness in the front-end offerings from one drug chain to another and, in fact, little to differentiate them from what can be found at Walmart, Target or the nearest supermarket — often at a lower price.
So, the question is, “Is now the time for chain drug retailers to step outside the comfort zone and consider nontraditional, even radical, ideas?” And perhaps one way to do that is, in effect, to go back to the future, to think back to a time when the drug store served as a community hub with its iconic soda fountain and lunch counter.
If we look around the world of retail now, we see that more and more retailers are experimenting with food to enhance the overall customer experience but also to provide another trip driver. Most recently, Restoration Hardware partnered with famed Chicago restaurateur Brendan Sodikoff to open a 100-seat restaurant on the top floor of its downtown Manhattan location. For customers who might want to relax and enjoy a beverage without making it a meal occasion, there is also a wine terrace and coffee bar.
And this movement has even extended to financial services, where Capital One has collaborated with Pete’s Coffee. By offering free Wi-Fi, a comfortable co-workspace, local coffee and food, as well as access to free financial advice, Capital One has given its customers a completely different perspective on what a bank can be.
Of course, offering food in a nonfood retail environment is nothing new. Over the years, department stores have incorporated food halls or cafes to give customers a pleasant break from shopping without having to leave the store. And Ikea is as famous for its Swedish meatballs as it is for bed frames and kitchen cabinets.
Nor is food in drug stores a recent innovation; consumables are an important part of the assortment at both CVS Pharmacy and Rite Aid, and Walgreens is expanding its unique and intriguing pilot with Kroger Co. CVS has used its private label consumables to reinforce the company’s health care positioning, and Rite Aid has recently introduced its iconic Thrifty Ice Cream brand to the coolers of selected stores in the East.
To be sure, offering packaged food is an entirely different game, and foodservice in a contemporary drug store environment is no slam dunk. But there are ways to explore its potential without a huge capital investment or incurring risk to the retail brand.
The rendering above shows the store’s expanded offerings.
One way would be to partner with a reputable foodservice operator who has the expertise — and perhaps a strong consumer franchise — to execute at a high level. To manage risk, consider starting with a modest assortment of beverages, perhaps anchored on a coffee offering, and eventually expanding to include a selection of healthy juices.
The menu could be easily adjusted on a seasonal basis. For example, offering antioxidant rich juices and organic teas at the onset of the cold/flu season, or chilled/iced coffee and tea in the summer. A limited menu of drinks could be supplemented with a curated offering of healthful food/snack offerings, such as bran muffins.
The approach would essentially be to learn to walk before trying to run, to master a beverage-based offering before attempting anything more operationally challenging, such as actual food preparation. In fact, the convenience store industry provides a useful analogy. Many of the c-store chains that are now the best foodservice operators started cautiously — they quickly learned that if they couldn’t serve a decent cup of coffee, customers would not give them a second chance by ordering a sandwich.
In today’s highly competitive retail landscape, in-store experiences are being elevated across all channels of trade in order to meet customer expectations.
However, just placing a sign over the front door won’t necessarily be enough to give customers adequate reason to believe or even understand what they might expect to find once inside. This is where store design can play a leading role in signaling change from the outside and visually provides customers with an easy way to interpret and understand that something new and different has happened inside. Taking inspiration from other food related channels such as convenience, QSR, or cafes, visual cues like an open storefront where the customer can actually see inside, exterior awnings, a small outdoor patio area and limited indoor seating will provide credibility about the seriousness of the expanded offers and also provide a richer and more authentic experience — perhaps even adding some life and energy to the overall store environment. And, what better way to wait the 20 minutes to have a script filled than enjoying a New Age antioxidant elixir while getting health and nutritional information digitally presented at one of the iPads connected to the tables.
More importantly, if executed properly and curated in a way that brings to life the basic principles of personal care and healthier living, this could be a way to attract more customers, more often for those daily occasions when they just need a quick break.
Now it might be too ambitious to envision the drug store soda fountain returning in all its glory, although there are certainly ways to reinterpret it in a way that reinforces the new mission of healthy living. And it really isn’t too great a stretch to imagine the drug store as once again a community gathering place, especially if chains are willing to be disruptive, break out of the largely identical boxes they operate and create spaces that give people a reason to drop in once or twice a week, even if they don’t have a prescription to fill.
With that, the front end becomes a destination on its own. And it just might happen that some of those empty parking spaces could start to be filled more of the time.
- Joseph Bona
- Originally published October issue of Drug Chain Review