WALGREENS ROLLS INTO CLEVELAND IN ALL-OUT BLITZ
Byline: FAYE BROOKMAN
MAPLE HEIGHTS, Ohio — Walgreen Co. doesn’t tiptoe into a new market.
The 1,968-store chain, based in Deerfield, Ill., has set its sights on Cleveland as its next major market, and on Nov. 4 will attempt to blitz the city with a grand opening for 15 units in the greater Cleveland market.
“This is our biggest entry into a new market, other than by acquisition, in our 92-year history,” chairman Charles R. Walgreen said last year when he announced the strategy.
In Cleveland, Walgreens will encounter the strong presence of Revco, as well as competition from Rite Aid. Still, the chain has set its sights on being number one or two in the market, which, with annual sales of $933.2 million, is the nation’s 11th largest drugstore market, according to research from Metro Market Studies.
Walgreens has recently made similar market invasions, such as in Indianapolis, and is planning assaults on Philadelphia and Buffalo.
As for the Cleveland project, five stores in the metropolitan area are already up and running, including a 13,000-square-foot unit here that features the chain’s latest approach to beauty, a look that has made Walgreens stand out as having one of the mass market’s best beauty formats.
Walgreens is the nation’s top-performing drug chain based on dollar volume, with sales of $9.2 billion in the fiscal year ending August 31. And its same-store sales increased 5.5 percent, validation that the chain is reaping greater dividends from existing units, not merely growing thanks to a plan of rapid new store development.
As for cosmetics and toiletries, they accounted for 9 percent of the chain’s total sales, according to the company’s annual report. This share would mean approximately $830 million.
The store in Maple Heights makes a major beauty statement. The category receives an estimated 10 percent of the total selling space of the store and is visible from most locations.
Upon walking in the main entrance, skin care is the first department a customer encounters. Skin care, in fact, has been moved from the aisles to the wall — a change from the Walgreens prototype that was first implemented in 1992 in Kenosha, Wis.
The chain felt very strongly about the synergy between cosmetics and skin care, which is why it moved the treatment area to this high-visibility location, according to a Walgreens spokesman.
To make room for treatment, Walgreens moved its cosmetics peg wall further back into the store. In older stores, pantyhose had commanded the opening spot.
After skin care comes the pegged cosmetics selection, including Cover Girl, Max Factor, L’Oréal, Almay and Revlon. The store also offers many ethnic choices, including Black Radiance, Posner, Eboné and ColorStyle.
Overhead signage alerts customers to the various brands that are carried. In addition to the mass market names in the Maple Heights store is a sign touting Elizabeth Arden.
Across from the pegged area is a service counter staffed by trained cosmeticians, or, as Walgreens calls them, beauty consultants.
“We found that when customers know what they want, they like self- service, but when they need help, they want someone there,” explained Steve Lubin, the chain’s divisional merchandise manager, in an earlier interview with WWD.
Walgreens beauty consultants attend four vendor-sponsored cosmetics schools per year. In addition to hourly pay, the consultants are eligible for bonuses.
Walgreens is also experimenting with secondarily sourced skin care, with the store offering Elizabeth Arden’s Ceramide Eyes, Eye-Fix, Visible Difference and various Spa products.
The new cosmetics look is cleaner and more open than the presentation in older Walgreens units and reflects requests by customers, according to store executives. They said shoppers had asked for wider aisles, better lighting, cleaner stores and a better selection.
Current hot sellers at Walgreens, according to the spokesman, include Revlon’s ColorStay lipstick, as well as its Age Defying makeup. The chain’s executives are also optimistic about the upcoming holiday selling season, particularly Coty’s Longing and Revlon’s Fire & Ice fragrances.
As far as gift sets, Walgreens is planning to sell about the same amount as last year, when, according to Lubin, the chain had a good, but not great, Christmas. The results were hurt by an overall lack of excitement in the fragrance category, with the exception of Coty’s Vanilla Fields.
Lubin said he also felt pressure from competing mass market outlets that entered the prestige fragrance business last year, often selling the same scents as Walgreens. In addition, he attributed the slowdown in sales to aggressive pricing by department stores.
To combat the increasing competition, Walgreens has been installing systems to make it able to react to market forces quickly.
Point-of-sale scanners have been installed chainwide so Walgreens can have up-to-the-minute reports on what is selling. The company also has the Strategic Inventory Management System, or SIMS, which is being rolled out chainwide.
The completion of the project will provide inventory management advantages extending from the buyer’s desk all the way to the customer in the store.
The chain also hopes to become more efficient by reducing the time between the placing of an order and its delivery. Currently, Walgreens is down to the second day; if an order is placed on Monday, the store will have it by Wednesday.
Walgreens’ understanding of what is selling and at what price also affords it flexibility. According to Lubin, district management has the authority to alter pricing to compete better with local retailers.
Another crucial vehicle for growth, executives noted, will be additional freestanding units like the store in Maple Heights, as opposed to those situated in strip centers next to a grocery store.
The supposed advantage of freestanding units is that customers will view them as “easy in and easy out” stops. By the mid-Nineties, Walgreens expects at least 75 percent of its new locations to be freestanding stores.
The Maple Heights unit includes the latest trend in drugstore retailing: a drive-through window. Beauty products, however, are not yet available for purchase through the window, which is reserved for pharmacy and over-the-counter needs.