Walgreens’ Prescription For Change

The changing nature of retail has been challenging for pharmacies. Carried on the power of their prescription businesses, they’ve been consistently losing their hold on consumers for the last several years when it comes to the sale of non-pharmacy items. Sales of things like personal care products, cosmetics and various other household goods have been slipping, as consumers are increasingly stocking up online or at alternative retail venues like dollar stores for those types of items.

Given the challenging environment, it is not shocking that various players in the pharmacy space are thinking about how to do things differently. CVS Health, the second largest pharmacy group in America, is moving to purchase health insurer Aetna. Walmart (the nation’s fourth largest pharmacy retailer with over $20 billion in annual sales) has partnered with Anthem to reduce healthcare costs and make it easier to put OTC drugs in consumers’ hands.

Given the environment and the drastic nature of the moves being made, it is unsurprising to see that Walgreens, the nation’s largest pharmacy chain, is making some bigger moves of its own. The question, it seems, is whether those moves will be big enough.

Walgreens seems to have taken an interest in going more digital – though at this point, it is pursuing that plan with a little help from its friends at Kroger and Birchbox.

The more eye-catching part of Walgreens’ expansion into the digital age is the Walgreens and Kroger pairing to make the local pharmacy a place to pick up some light groceries. The pair-up will also see some private-label Kroger brands migrating onto Walgreens’ shelves.

Partnerships are an important part of Walgreens’ performance plan going forward, because the retail market is changing and consumers are looking to navigate their shopping experiences differently. Rather than trying to build to be everything for every customer, the brand is instead thinking strategically about the right end-to-end experience for the Walgreens shopper – and then figuring out what they can contribute, and when it makes sense to enlist and ally with a similar vision.

It’s clearly the same operating logic that drove Walgreens to recently announce its partnership with beauty brand and subscription box early innovator Birchbox.

That deal, also starting as a limited-store offering in 11 Walgreens locations, will essentially take up 400 to 1,000 square feet of retail floor space, which will be designed to look and feel like miniaturized Birchbox stores. The locations will carry curated skincare, makeup and hair products from a variety of brands that have been tested and approved by Birchbox.

The first six of those stores will open just in time for the holiday season in December of this year. New York City, Chicago, Los Angeles and Minneapolis will roll out as the first host cities, with additional stores opening in Chicago, Dallas, Miami and L.A. in early 2019.

The Walgreens investments of late comes as part of a recent slew of improvements and updates to its business offerings.

Since 2016, the retailer has been bringing in newer brands aimed at younger consumers, like NYX and No7. It has also introduced a loyalty program centered on beauty products and has begun adding 3,500 beauty consultants to select stores.

As Amazon is rumored to be making a move on prescription drugs, its biggest physical rival CVS will soon own one of the nation’s largest insurance companies and Walmart is digitally upgrading whatever it can get its hands on, the question remains: Are Walgreens’ efforts enough?

Maybe not, but it also seems that Walgreen is still rolling out ideas – and there may be more to come. But for now, Mesara noted, Walgreens, with its size and scale, is uniquely positioned to become a hub where consumers can fill a lot of health and wellness needs – and relatively quickly and efficiently, with a strong guarantee of quality.

It may not be enough to quite win this close race, but it is an interesting way to keep pace with the pack.