The times they are a-changin’

A couple of weeks ago I talked about the upcoming National Association for Retail Marketing Services (NARMS) and the National Association of Chain Drug Stores (NACDS) conferences in the US that debate and forecast our shopping habits in the years ahead, which will certainly have an impact on the shopping experience in Australia. I try to look forward in all my commentary on retail marketing, to project the probable and the possible change based upon trends from around the world and around the corner, as we live in an ever evolving world.

Feedback on one of my previous blogs around pharmacy being attached to grocery was met by one reader comment: “you’re wrong, the law doesn’t let you do that in Australia”, and the reader was right… today. However, the forthcoming change in Federal Government legislation that was just announced will allow nurses to prescribe drugs from November this year. Does this bring us a step closer to a broadening of not just who can prescribe, but where? Not sure yet, but you can be sure that Ian Mcleod and Michael Luscombe’s teams, among others, will be following this development closely.

Over the past several months I have also talked about “category creep” as different retailers move into new areas of product offerings to allow shoppers to save time by shopping for more in their stores. For example, we’ve seen Woolworths and Coles sell mobile phones in Australia and Tesco move into banking in the UK.

At the NACDS conference you will be able to see firsthand the work that Walgreens, the largest drug store retailer in the world, has been undertaking as it morphs its product offerings that will see an increase in the sales of non-pharmaceutical/drug-related products, at “the front end of the store”. Why the “the front end of the store”? Because the prescription drugs are at the back of the store, the destination for traditional drug store shoppers.

The store layout allows convenience shoppers to drop in and shop at the front of the store, self-select and pay through the front cash registers and leave, while allowing the prescription drug shoppers to browse around the whole store and pay for everything at the back of the store. Either way the footfall is higher, as Walgreens caters for those filling prescriptions and those just shopping quickly, and both types of shoppers are able to save time.

The morphing process at Walgreens has also involved the culling of product lines to make choice easier, the lowering of shelving to improve sight lines and making the stores more open and inviting, with improved colour, lighting and signage in-store to improve the whole shopper experience.

Walgreens is a successful example of how traditional pharmaceutical manufacturers have morphed into the mainstream cosmetics, self-medication, wellbeing and beauty products space.

So has it been successful? Well CROSSMARK manages most of the stock on shelf for Walgreens as a single dedicated team that understands the Walgreens stores, its staff and its shoppers. This has taken a lot of conflicting, confusing and costly labour duplication out of managing the inventory at the shelf. It’s also allowed the store staff to focus on shoppers and provide increased and improved service.

The first 700 Walgreens stores have now been completed, tracked and scrutinised, at the most senior level. Its CEO and President Gregory Wasson, at a briefing last week, said: “This [store renewal] is an ongoing process with many checkpoints along the way to allow us the opportunity to tweak and refine as needed. As we move into the next phase, we’ll continue to build sales, take work out of stores, lower inventory and, most importantly, improve our customers’ overall shopping experience.”
Based upon the shoppers’ behavioural changes in these 700 renewed stores, and a corresponding same store sales increase over the test phase, another 2,500 to 3,000 store renewals will be undertaken over the next six months across the US. That’s an aggressive rollout plan, but the prize has now been clearly identified.

Just to give you some view of numbers on this, when the Walgreens CEO talks about the concept of “take work out of stores, lower inventory” – he means that they have gone from 240 manufacturer and merchandising companies sending staff into stores to manage stock down to about 10 per week. That frees up a whole load of time for his staff to talk to shoppers.

Tighter inventory management due to lower numbers of products lines, and lower out-of-stocks means Walgreens now operates with half a billion dollars’ less inventory supporting a higher sales base.

And most of this increase in sales and profit comes from the now 40% sales that come from the “front end of the store”, the industry term for everything that doesn’t come from the pharmacy. It’s the stuff that’s sold by every other grocer, convenience store and discount department store. So what’s the Walgreens difference? A well thought-out plan to improve shopper experience tried, tested and then rolled out as quickly as possible.

In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.

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