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The Road to Happy and Healthy

With its aggressive expansion, localization strategy and commitment to wellness and design innovation, Walgreens is on a mission to transform the corner drugstore – earning it the 2014 VMSD/Peter Glen Retailer of the Year award

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“This is not your grandmother’s Walgreens,” said Chicago Mayor Rahm Emanuel, in response to the 2012 opening of the pharmacy giant’s flashy flagship, located in a historic, restored former bank in the city’s trendy Bucktown/Wicker Park neighborhood.

The upscale store features a sushi bar, 24-hour drinks café, an in-house eyebrow beautician and a “vitamin vault” that houses the store’s large selection of vitamins in the original bank vault. It’s one of the chain’s several progressive stores, which include a multi-level flagship in downtown Chicago and a massive concept store on L.A.’s Sunset Blvd., reports The Huffington Post.

Walgreens (Deerfield, Ill.) is on a roll. Just last month the nation’s largest drugstore chain (8000-plus U.S. stores) announced its intention to fully acquire Swiss pharmacy chain Alliance Boots in a deal valued at about $8.4 billion. The union will create a company with 11,000 stores in 12 countries and the world’s largest pharmaceutical distribution network.

Notwithstanding the challenges it faces in the form of reduced margins as the costs of generic drugs rise and lower reimbursements from government and private insurance programs, the alliance will pack a powerful punch and serves as testament to the company’s history that dates back to 1901, when its first store opened in Chicago.

With stiff competition from other drugstore chains, supermarkets and online retailers, Walgreens is positioning itself as the neighborhood destination for health and wellness products and services, building stores with a smaller, customer-friendly footprint “at the corner of happy and healthy,” as its cheerful tagline suggests. The key element in the strategy is “mass localization,” or targeting customers in every market by offering a carefully curated assortment of items, based on intelligence gleaned through its Balance Rewards customer loyalty program and sales data. “The challenge for us is tailoring 8000 stores to their neighborhoods,” says Jeff Gormanous, director, store format & layout design, Walgreens. “We’re leveraging our loyalty program data and market research to examine the competitive landscape of the neighborhood, its customers and what they want to purchase.”

The company’s14 flagships have become experimental laboratories for merchandising and services not seen in a typical location. The more successful initiatives might find their way into your neighborhood drugstore in the near future, if they haven’t already, such as the Look Boutique beauty store within a store, frozen yogurt stands and other fresh grab-and-go fare. “Our flagships are a unique format in that we push the edge of innovation,” Gormanous says. “They act as brand ambassadors for the entire chain with higher-end furnishings, fixtures and finishes.” And, while most of the higher-end design elements featured in these flagships might not scale to stores across the country, some will, like energy-saving LEDs used in the company’s net-zero energy store. (See sidebar.)

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REDEFINING THE DRUGSTORE

Walgreens enlisted brand strategy and marketing consultancy Jackman Reinvention Inc. (Toronto) in 2010 to help drive its transformation, unifying its healthcare and retail operations and optimizing newly acquired assets after Walgreens purchased the New York-based Duane Reade chain. “In some ways, Walgreens is redefining what it means to be a drugstore,” says Joe Jackman, ceo. “Walgreens’ ability to provide a broader range of services in a smaller footprint, conveniently, is really exciting, with lots of opportunities there.

“The approach we took with them was to integrate with the community,” Jackman says. “Store by store, we learned how to develop an exciting proposition that the customer would value as different from other choices.” For example, Jackman points to his company’s work with Duane Reade to develop its Up Market Fresh offering of prepared salads and meals, which Walgreens has translated to some of its stores. “Once they proved the quality of the proposition – and the care the store took to deliver it – the customers came in droves. And Fresh is one of the ways to help get customers well; it’s a healthy alternative.”

A Walgreens store’s overall design should reflect that commitment to health and well-being, asserts Jackman. This is achieved through “opening up walls to create windows to let in more natural light. Giving some space back to the shopper to allow for a more efficient, comfortable shopping experience. We thought carefully about flow and aisle width, sightlines and [providing] a healthy and positive environment,” he says.

GREENING WALGREENS

Last fall, Walgreens debuted what it claims is the nation’s first net-zero energy retail store in Evanston, Ill. Sporting two wind turbines, nearly 850 solar panels and a geothermal system, the store is anticipated to produce energy equal to or greater than it consumes. Thomas Connolly, Walgreens’ vp of facilities development, says, “We are investing in a net-zero energy store so we can bring what we learn to our other stores and share what we learn with other companies.”

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The project is the latest of many green initiatives for the company. Walgreens claims to currently operate two stores that have achieved a gold LEED certification level; 150 stores utilizing solar power and 400 locations with electric vehicle charging stations. In addition, Walgreens distribution centers have achieved net-zero waste, which means revenues from recycling exceed waste expenses.

THE ROAD TO WELLNESS

Fancy cosmetics and fresh food aside, pharmaceuticals are still the brand’s bread and butter, accounting for approximately two-thirds of its revenue. Walgreens’ new Well Experience store format features pharmacies designed to encourage greater interaction between pharmacists and customers. At the core of the format is an effort to bring the pharmacist out from behind the counter to provide counseling and clinical services to patients. The Well Experience pharmacy features an “Ask Your Pharmacist” desk, consultation rooms and an Express Rx kiosk for swift checkout.

Moving pharmacists from behind the high counters to consult with customers in a more open format, working at desks in high-traffic areas of the store, has also opened Walgreens to claims of patient privacy violations such as medical histories left visible on desks or drugs left unattended, raising flags by the U.S. Department of Health and Human Services, according to The Wall Street Journal.

Tim Welsh, senior director, store design & planning, Walgreens, acknowledges both the great challenges and opportunities that have arisen out of a rapidly evolving healthcare system. “As designers, seeing a problem and coming up with a design solution is what intrigues us,” he says. “We’re tasked with rethinking the way we’re getting healthcare.” So how can Walgreens have a more critical role in the patient experience? “Beyond [interacting] with the pharmacist when getting drugs, integrating new technology and becoming a healthcare provider is a huge design challenge, but very exciting.”

Speaking to the scale of the enterprise he and his team are a part of, Welsh says, “Sometimes we’re like a massive, [slow-moving] ocean liner, other times like a speed boat. Lately, we’re more like a kayak navigating rapids and obstacles … and yet we’re always on a clear course.”

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