Success Walgreens’Sweet Path To Success
July 1, 2006
Success Walgreens’Sweet Path To Success
By Renee M. Covino
The heart of its business may be prescriptions, but this Chicago-turned-national retailing legend has always had a soft spot for treats.
It was the summer of 1922, and for Americans seeking to indulge in the latest and greatest sweet treat — a milkshake — there was only one place to go — Walgreens in Chicago. Then 21 years old, the rapidly expanding drug chain (20 stores grew to over 500 in that decade, reaching cities well beyond Chicago) already was known for its top-notch pharmacy and outstanding customer service. It was, indeed, “the pharmacy America trusts” — as its slogan promised.
What may Have Seemed a Minor Innovation Back Then Quickly Became Part of the Fuel for Walgreens’ Phenomenal Growth — and Perhaps Helped to Establish the Chain’s Reputation as a Discovery Place for Sweets and Snacks.
The instant drink/dessert classic was first concocted at a Walgreens soda fountain by Ivar “Pop” Coulson, according to company history. Until his invention, malted milk drinks were made by mixing milk, chocolate syrup and a spoonful of malt powder in a metal container, then pouring the mixture into a glass. On one especially hot day that year, Pop Coulson set off a revolution by adding generous scoops of vanilla ice cream to the mixture. Two complimentary vanilla cookies from the company bakery were served along with the shake.
“Response could not have been stronger if Coulson had found a cure for the common cold,” according to the company. Coulson’s creation was adopted by fountain managers in every Walgreens store, and before long it was not unusual to see long lines outside Walgreens stores, as well as customers standing three and four deep at the fountain.
Today that tradition continues, although in new forms. The soda fountain was gone by the 1980s, but in its place is a killer candy aisle, for starters. It is wide and deep, and it creates a well-traveled road leading straight back to the pharmacy.
“Because it is typically the widest aisle in the center of the store, customers walk down it by default to get to the pharmacy, which is brilliant marketing because it’s the perfect impulse purchase to make,” says Marilee Driscoll, an industry consultant and speaker based in Plymouth, Mass. “The amount of shelf space and positioning Walgreens gives to candy is striking — and disproportionate to other drugstores,” she adds.
Some even consider Walgreens to be setting a gold standard in candy for all retail channels. “In terms of confections, it is truly a destination compared to almost any retailer in the country, including mass, grocery, c-stores and others in the drug trade; the exception would be only a candy store,” offers one anonymous industry expert, currently working on a consumable project with the giant drug chain. “They have an incredibly deep confectionery aisle in terms of price points, variety, you name it.”
The chain also is noted for its aggressive approach to secondary category displays — theater box candy tables near the photo/video section, snack endcaps by the refrigerated section, front-end seasonal highlights, and a multitude of in-and-out promotions on speed tables, typically stationed in split cross-aisles.
“These displays tend to be opportunistic special buys; they could be socks and mittens, but there are also a lot of mouth-watering confections sold on those tables,” says Neil Stern, a senior partner with Chicago-based retail consulting company, McMillan Doolittle.
While seasonal candy has hit the entire drug trade by storm, Walgreens is credited with being “particularly early and overwhelming” in that area, according to Driscoll.
It quickly becomes obvious that candy and snack merchandising abounds in Walgreens’ stores. “There are confections in a dedicated aisle, the seasonal aisle, secondary displays and the front end,” says Stern. This does not necessarily equate to “pretty” stores, according to the consultant. “They’re not designed to be gorgeous, they’re designed to sell,” he says. “That’s very much the focus they have, and they’re very good at it.”
And that’s not all the Deerfield, Ill.-based chain of nearly 5,300 stores is good at.
It has been said that Walgreens’ success of today goes back to Charles R. Walgreen, Sr., who maintained that “success is doing a thousand little things the right way — and doing many of them over and over again.”
“Anyone can be a shooting star, but when you have the ability to replicate a good system, then that system perpetuates itself; that is Walgreens — in almost every aspect of their business,” says Tom Connellan, retail industry researcher, speaker and author. “It is their execution on hundreds of little things every single day — merchandising, promotion, operations, integration, training, values, etc. It may sound simple, but it can get lost today, and frequently does in other businesses.”
The way Stern sees it, Walgreens has probably been “the most consistent-performing retailer over the last two decades” — in terms of continuing to turn in strong store growth — comp store growth and unit growth — “the typical measures of a good retailer,” he says. “Walgreens has done this year in, and year out, and there are all sorts of reasons why they could have slowed down — such as mail-order drugs and regulations — but none of them ever seem to materialize. In spite of competition and industry challenges, the company continues to perform in an almost boringly consistent basis.”
It is also what Walgreens doesn’t do that earns it praise from Stern. “They don’t chase trends, both in-store and financially,” he says. “Five or six years ago, while everybody was busy with ecommerce and getting websites up, they took their time. Now, they have millions of users per month and they’re using their web strategy to bring costs down in their business. They tend to look slow, but in the end, they are most successful.”
Walgreens is also not one to go after large store acquisitions, believing instead in the old-fashioned “organic” way — choosing locations and building stores from the ground up. “They allow their competition to seem to grow faster, while they have a slow and steady growth,” says Stern. As a result, Walgreens stores, on average, are less than six years old and typically give off a “clean and modern” image.
This year, Walgreens did see an opportunity in a “small potatoes” acquisition, as Stern calls it — all 76 stores of Delaware-based drug chain Happy Harry’s, a transaction finalized in July. The store names have not been converted yet, as Walgreens slowly assesses this new Northeast territory.
Summing up the progressive chain as “an old-line store with a long history,” Eugene Fram, Ph.D., the J. Warren McClure research professor of marketing at Rochester Institute of Technology, assesses that Walgreens “has certainly been able to change with the times, especially in the last 10 years.
“They’ve even been able to make sense of the Medicare D provision, which a lot of other chains have been complaining about,” he mentions. “Essentially, they know how to make lemonade out of lemons.”