- We took a look at a Walgreens store where the drugstore giant pilots some of its new strategies to see what the future of the pharmacy might look like.
- Inside, we saw a makeup counter, shelves of over-the-counter medication and toiletries, and medical services like an eyeglasses store.
- One big goal is to create new reasons for customers to shop in stores, as more and more shopping moves online to competitors like Amazon (NASDAQ:AMZN).
- "We're in transformation mode," Richard Ashworth, Walgreens' president of operations, told Business Insider.
On the edge of a suburban lot in the Chicago area, next to a Whole Foods and across the way from a Barnes & Noble (NYSE:BKS), sits a Walgreens.
At first glance, it seems like any other drugstore. But upon closer look there are some differences.
For one, there's a large beauty section right at the front of the store. For another, candy and other tempting snacks have been relegated to the back, along with seasonal decorations. There's more over-the-counter medications, supplements, and toiletries in the first few aisles, too.
Another big change: the store offers lots of health services, such as hearing screenings, eye exams, and lab tests.
Walgreens is using this store — not more than half a mile from its corporate headquarters — as its pilot for what future pharmacies might look like around the US. In a world where more and more shopping happens online, Walgreens is trying to figure out what it'll take to get you to visit one of its 9,560 US stores.
"We're in transformation mode," Richard Ashworth, Walgreens' president of operations told Business Insider.
Ashworth is doing all this to keep up with customer behavior, which has been changing much faster than it has in past decades. From 2010-2018, he said, "Everything has changed."
Ashworth says customers want to be able to shop more quickly and conveniently. And they're making lots of their purchases online, and having them delivered.
Walgreens is up against stiff competition for customers, facing off against the likes of Amazon, which is getting into the pharmacy business through its acquisition of online pharmacy PillPack, CVS Health (NYSE:CVS), which is making a big bet on the healthcare aspect of its business through the pending acquisition of insurer Aetna (NYSE:AET), and of course retail giant Walmart (NYSE:WMT).
For its part, Walgreens might be looking to strike up a closer relationship with a health insurer as well. On Tuesday, The Wall Street Journal reported that Walgreens and Humana (NYSE:HUM) were considering taking equity stakes in one another. Walgreens is already partnering with Humana to run primary care clinics out of some of its stores in the Kansas City area.
"The pharmacy business model is under more direct attack from disruptive players than are health plans," Jefferies analyst Brian Tanquilut noted Wednesday. A stronger partnership with Humana, he said, could help Walgreens with its market share, while Humana could benefit from better branding and marketing that comes from being seen inside the retail pharmacy.
The pharmacy giant is hanging on — the stock of its parent company is up 5.6% over 2018. But same-store sales of things like snacks, toothbrushes and laundry detergent were down 1.9% in the company's fiscal fourth quarter. Prescription-drug sales did better, up 1.3%.
As competition heats up, Ashworth has faith that going to an actual store will still be a part of that picture.
"I think customers very much will enjoy brick and mortar retailing if we make it modern and experiential," Ashworth said.
How Walgreens is trying to improve your experience in the store
On the left side of the store as I walked in, I was greeted by a make-up display presenting kits filled with bath bombs, brushes, and lip balm. There's a designated beauty consultant who staffs the section. Across they US, Walgreens has hired 3,500 beauty consultants, Ashworth said.
On the right side, next to a FedEx (NYSE:FDX) counter, was an optical store. There, I could browse for eyeglasses or pop into an eye exam room. The optometrist had previously worked at the Sears Optical in Niles, Illinois. That Sears is among the locations the company announced in October it would close.
There was a place to get lab results as well. In October, Walgreens made an agreement with lab-testing giant LabCorp to open at least 600 locations.
All of the health services — including lab services, the pharmacy, and optical — are nestled under what Walgreens calls its health corner alongside a hearing station. Within the hearing station is a room built to test how well people can hear, which could dictate whether they might need a hearing aid.
The pharmacy counter is in the back right corner, which looked standard apart from the express lane. Through the Walgreens app, you're able to check out remotely and then scan the QR code for a quicker check-out process. Here's a closer look at the counter:
As for whether it'll all look like the storefront in Deerfield, Illinois: "Jury’s not out on that," Ashworth said. What works for one community might not work for another.
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