By  on July 1, 1994

NEW YORK -- A drugstore chain has to be sharp when its beauty competition includes Bloomingdale's and Saks Fifth Avenue. Duane Reade, based in Long Island City, N.Y., has stepped up to the challenge.

The 46-store organization, which has almost as many stores in midtown Manhattan as The Gap, is New York's largest drugstore chain. Only three of its stores are outside Manhattan -- one each in the Bronx, Brooklyn and Newark, N.J.

With the kind of foot traffic it generates, it isn't surprising that Duane Reade is also the most productive retailer on a sales-per-square-foot basis in the entire drugstore industry -- by far.

An average 6,300-square-foot Duane Reade store pumps out sales of $1,300 per square foot, according to market estimates. The industry average is $300, according to the National Association of Chain Drugstores.

Among Duane Reade's local rivals, there is no major competitor in New York that has the same traditional drugstore format. Love's is primarily a discount drugstore, with pharmacies in about half of its 25 stores. It does $1,200 a square foot in an average 2,000-square-foot store.

The nearest comparable drugstore chain is the Long Island-based Genovese Drug Stores of Melville, N.Y. Its 105 stores include units scattered throughout New York, but only one in Manhattan.

Genovese generates sales of $450 per square in stores that average 10,000 square feet, according to the company's 1993 annual report.

Duane Reade posts annual total sales estimated at $300 million, making it the 25th largest drugstore chain in the U.S.

Cosmetics, according to manufacturers familiar with the operation, account for 8 percent of total store sales, significantly higher than the industry average of 4.6 percent.

According to cosmetics manufacturers, Duane Reade has learned to efficiently manage inventory and put together the right cosmetics and fragrance assortments to appeal to its New York consumers. The success of its cosmetics category is typical of the entire store, according to vendors in other categories.

However, it is only within the last two years that Duane Reade registered such a lofty beauty volume.

The chain has gone from treating cosmetics as an afterthought to making it a focal point, manufacturers say. Indeed, cosmetics has been a major push for Duane Reade since the chain's founders sold it two years ago to the Boston-based Bain Capital, an investment firm.

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