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Woolworth’s Rx Place: Fitting the Market

NEW YORK -- Many retailers talk about tailoring their stores to individual markets, but Woolworth Corp. is actually doing it.

Working through its Rx Place subsidiary and acting on the concept that urban and suburban markets are different,...

NEW YORK — Many retailers talk about tailoring their stores to individual markets, but Woolworth Corp. is actually doing it.

Working through its Rx Place subsidiary and acting on the concept that urban and suburban markets are different, Woolworth’s has created two distinct formats: The Rx Place and The Rx Place Drug Marts.

The Rx Place, founded in the mid-Eighties, is a chain of 25 deep discount drugstores developed for suburban sites, where units of 25,000 square feet and larger can be built.

For urban markets, the company has created the Drug Marts, a pared-down format with more compact stores, each measuring 6,000 to 10,000 square feet.

While utilizing smaller spaces to fit into urban confines, the Drug Marts also stock different merchandise to cater to the city crowd. The stores sell to more ethnically diverse consumers than the Rx Place units, as well as to more men, according to the company.

The Rx Place currently operates in five states: Connecticut, New York, New Jersey, Pennsylvania and Massachusetts.

According to Joe Dickerson, vice president and general manager for The Rx Place, “We’re looking forward to becoming a principal player in the New England-Atlantic region with both our deep discount and discount convenience drugstores.”

The first Drug Mart was opened last May in Jersey City, N.J., in what had been a Woolworth store.

Woolworth has identified the discount drugstore format as a more lucrative growth opportunity than its own general merchandise stores. The company has closed 35 of its general stores in Manhattan, with 400 more units across the country scheduled to close this year.

To date, three closed Woolworths in New York as well as the one in Jersey City have been converted into Rx Place Drug Marts. In March, nine new Drug Marts will open simultaneously throughout the New York metropolitan area.

Beauty takes center stage in both Rx Place formats and is set to become even more important as the chain embarks on a torrid growth pace, according to Gina Russo, cosmetics and fragrance buyer.

“Cosmetics and fragrances account for between 7 percent and 10 percent of sales,” she said. “We’d like to get it higher in both formats. Our goal is 15 percent.”

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The industry average for cosmetics as a percentage of sales in drugstores is only 4.6 percent. Additional cosmetics sales would bring healthier gross margins, Russo noted.

To increase beauty’s contribution, the company is experimenting with several tactics in a new Rx Place in Holmdel, N.J., that opened last September.

“We’ll take the best of it and use it in other stores, especially Rx Place Drug Marts,” she added.

As a percentage of total sales, cosmetics are already moving toward the 10 percent mark in the new store, thanks to some fine-tuning, including moving the department to a more prominent location.

The entrance to older units sends customers down an aisle that eventually leads to cosmetics, but in the new format, it is the first department they encounter.

The store also features glass cases highlighting prestige fragrances. The selection includes a 2-oz. eau de toilette of Revlon’s Ciarra for $12.88, a price compared by a sign on the shelf to J.C. Penney’s offer of $25 for the same item. Also highlighted are a 1.7-oz. eau de toilette of Giorgio’s Red, priced at $26.99 versus $32.50 at Abraham & Straus.

To entice customers during store openings, Russo said she typically offers $5 off any prestige fragrance over $25.

Prestige fragrances have been so successful for The Rx Place that Russo has also started operating a sleeker version of the department in the Rx Place Drug Marts.

The city stores stock only about one-fourth of the selection at the larger stores. Still, Russo hopes to find additional showcase room in the newer urban units for prestige scents.

Both stores have an array of mass fragrances, too.

“Mass does well for us, and the addition of prestige hasn’t taken away from it,” Russo said.

She has high expectations for Cosmair’s pending launch of a new Vanderbilt women’s scent, called V, as well as Procter & Gamble’s addition to Navy, which will be a cream.

The color cosmetics selection is vast in both Rx Place formats and includes Maybelline, Revlon, L’Oreal, Coty, Bonne Bell, Del Laboratories, Cover Girl, Cabot, Almay and Physician’s Formula.

The smaller city stores carry most of the same lines, but with fewer stockkeeping units.

“We let sales determine the mix,” said Russo.

As do many other mass merchants, Russo hopes to add more upscale cosmetics lines, too.

“Our strengths are our locations, merchandise mix and hours of operation. You can find an 84-cent lipstick or a $100 perfume in one location,” Russo explained. “We want to be the Home Depot of cosmetics.”

Another new wrinkle at the experimental Holmdel store is a bath department.

“We’re testing different bath items. I think a shakeout is coming and you have to find the five or six brands right for your customer,” said Russo.

Among the lines carried are LaLoren’s Sarah Michaels, Yardley’s Bath Shoppe, Sherwood by Applewood and Avalon’s Simply Bath.

Another hot category for the chain is salon-inspired nail care.

“We have a large selection at Rx Place, and we’ve put in a smaller department in the Drug Marts,” she said.

The Rx Place and Rx Place Drug Marts are in the enviable position of being scanner-equipped at checkout counters. Buyers review scan information on a weekly basis, which allows Russo to test new products easily.

Currently, she is testing a counter display of lipsticks from Cosmania, a mass cosmetics manufacturer in Chatsworth, Calif. According to data, the display has sold through briskly, so it will most likely be added to the mix.

Scanning has also allowed The Rx Place to understand the dynamics of its diverse markets. The mix in every store is tailored to the local demographics. For example, more lines for African-American women are carried at a Drug Mart location at 135 West 50th St. in New York than at the unit in Holmdel.

The New York store has Revlon’s ColorStyle, Maybelline’s Shades of You and Pavion’s Black Radiance. Russo said she also selects the darker shades of cosmetics lines that don’t market an ethnic version.

An ethnic skin care line called Black Opal also sells more rapidly in New York stores than in units in more rural spots, she noted. She did say that a niche market she tries to please in Holmdel is that of women of Indian descent.

“In certain stores, we also carry Pavion’s Solo Para Ti for Hispanic women,” said Russo.

The Rx Place has noticed that the urban stores attract more male customers while the suburban units lure females. The merchandise mix has also been adjusted to reflect that trend. Urban units, for example, stock more men’s colognes.

Scanning data is particularly crucial in the brutally competitive Manhattan market, where Rx Place Drug Marts lock horns with Duane Reade Drug Stores, Love Stores, McKay Drugs and Genovese Drug Stores.

Russo said she thinks the beauty competition extends to department stores, as well as to Century 21, which has added a fragrance and cosmetics department, and “even the corner bodega.”

Because of the fierce competition, the Rx Place chain has put a guaranteed-lowest-pricing strategy into effect.

“We’ll meet any competitor’s price,” said Russo. “We’ve brought the deep discount strategy to New York.”

Deep discount drugstores such as Drug Emporium and Phar-Mor have grown rapidly outside New York, but the huge space needed to carry enough merchandise to achieve the high volume required to offset lower gross margins has stopped many from entering urban markets.

With its experience with The Rx Place, however, Woolworth can bring the best of deep discounting to smaller spaces, according to Russo, who claimed the strategy appears to be working in New York as well as the more suburban locales.

Woolworth will continue to examine shuttered general merchandise stores to determine whether to convert them to Rx Place Drug Marts. There could be as many as 25 of the smaller units and possibly an additional six to eight new full-sized Rx Place units this year.