Walgreens is competing to be the newest one-stop-shop to offer urban customers what they can usually only get in the suburbs or at the mall.

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Walgreens is competing to be the newest one-stop-shop to offer urban customers what they can usually only get in the suburbs or at the mall.
With 10 new flagship stores situated in the heart of cities including Chicago, Washington, D.C., New York and Los Angeles, the drugstore chain has transformed into a luxurious shopping experience featuring self-serve froyo, sushi, a juice bar, beauty advisers and manicure and brow-shaping stations.
More than a drugstore, Walgreens wants customers to be able to grab a smoothie, pick up a prescription, find a bottle of wine for dinner and get a mini makeover — all on their lunch hour. The flagships are reminiscent of a cross between Target and Sephora, but in locations you wouldn't normally find either of those stores.
And not all the enhancements are exclusive to the flagships. They're part of an overhaul Walgreens is implementing across many of its stores in an effort to emphasize overall health and wellness. Part of the strategy involves making pharmacists more accessible, offering health care such as immunizations and chronic condition management, and providing access to fresh food."It's really important to be rooted in health care," says Beth Stiller, vice president of category strategy, innovation and space management for Walgreens. "We continue to innovate around how to increase the role of community pharmacy, become a destination and help with health care in our communities."
The company's new vision makes sense, given the imminent changes to the nation's health care system under the Affordable Care Act and the growing concentration of the coveted Millennial consumer in urban areas, says Ken Nisch, head of retail design firm JGA."This is where the money is," he says. "I think their strategy is to take advantage of the benefits of convenience and efficiency and to say, 'I can go there and basically take care of a lot of things at one time.'"And that's a proposition that especially appeals to the Millennial, Nisch says. "This is a customer who I think doesn't have a problem buying a Red Bull, a blush, birth control pills and a bottle of Champagne in the same basket."
NOT YOUR FATHER'S WALGREENS
On the ground floor of the flagship in Washington, D.C.'s Chinatown neighborhood, customers are greeted by a wide bare aisle almost entirely free of product save for a display of fresh flowers against the far wall where the escalator takes you downstairs. To the right, customers can serve themselves froyo in flavors like red velvet and white chocolate mousse. Further back they can browse a selection of salads, wraps and sandwiches and order a fresh-pressed juice or coffee.
Despite locating in dense urban areas, the flagships like this one are nearly twice the size of a regular Walgreens, at 20,000 to 23,000 square feet, compared to 13,000 to 15,000 square feet for traditional stores. Aisles are spacious and well-lit, with entire floors dedicated to product categories like pharmacy, makeup and fresh food. "What makes these stores unique is their size," Stiller says. "As we started to push ourselves a little more in terms of what we can offer customers, we started to take a look at stores that were much larger than we're used to. We now had the content to fill them."
At the Chinatown store, which opened in April, the top floor houses beauty, with displays of makeup bags, nail polish, fragrance and hundred-dollar hair straighteners. Walls of makeup products are organized by brands, including Cargo and Gosh Cosmetics. High-back chairs sit next to counters where customers can meet with beauty advisers for tips. And a mini nail salon offers manicures for $12.With an expanded product line and urban locations, Walgreens is hoping to both attract more customers and get them to buy more."They have such great transaction counts," Stiller says of the urban stores. "You've got so many customers coming by these locations; 20,000 to 30,000 people walk by every day. You get great visibility."
Some question whether customers will be willing to pay more for the expanded, and more expensive, products in flagship stores, though."The flagship stores are dependent on higher prices for consumers to be profitable because they have all these bells and whistles," says Nell Geiser, research director for Walgreen Strategy Watch, an independent group that advocates for greater transparency and accountability from Walgreens, and is part of the labor federation Change to Win."That's a concern," she says. "People are looking for value and convenience when they go to a drugstore, more than sushi."
Walgreens says daily sales at the flagships are typically more than double those of its traditional stores because of the larger space filled with more products. Paramount to Walgreens' changes are the ones implemented in its pharmacies, where Walgreens is capitalizing on several trends coming to a head in the health care industry: millions of people joining the health care system under the Affordable Care Act, lack of access to primary care physicians, aging Boomers and more instances of chronic disease.
More than 400 stores, including the flagships, are part of what Walgreens calls its "well experience" model, which includes the fresh food offerings, enhanced beauty departments and upgraded pharmacies, where a self-serve screen lets customers check in for or schedule an appointment. The stores have private rooms and nurse practitioners on staff for everything from flu shots and health testing for things like cholesterol and blood pressure and to help manage chronic conditions."What we have found in the health care system is that there are numerous unnecessary ER visits because of a lack of ability to get to a primary care physician," says Nimesh Jhaveri, executive director of pharmacy at Walgreens. "It's costing the system billions of dollars for simple acute care. So how do we create an accessible, low-cost, high-quality health care for patients to go to potentially five minutes away without having to make an appointment?"
Self-serve kiosks are available next to the pharmacy counter for customers who need to pick up prescriptions they've already called in or ordered online. They can pay through the kiosk. Pharmacists are also getting more face time. Thanks to technology that allows them to manage medical charts and prescription fulfillment remotely from a tablet or computer, pharmacists are spending more time at the front counter answering customer questions or discussing treatment plans. At a level that is "unheard of in the industry," about half of Walgreens' patients are speaking to their pharmacist about health care and lifestyle habits, Jhaveri says."Two years ago you never would have thought going into a drugstore was your answer," he says.A comprehensive rollout is likely a ways off. Walgreens has more than 8,000 stores, so bringing the wellness format to all of them is "a long-range plan," Stiller says.
A GROWING RETAIL TREND
Walgreens follows in the footsteps of retailers, including Target and Walmart, as the latest in typically large suburban chains entering urban markets with more targeted high-end stores in an attempt to not only provide more convenient access to city dwellers but to also become the fresh food solution to underserved communities — often called food deserts.
Target started opening smaller CityTarget stores last summer, and now has six stores in Chicago, Seattle, Los Angeles and San Francisco, with two more opening later this year in Portland, Ore., and another in San Francisco. Walmart has been testing Walmart Express stores since 2011 and has 17 open to date in North Carolina, Arkansas and Illinois. They cover just 15,000 square feet — a Walmart supercenter is 12 times that size — and are focused on offering pharmacy and grocery to rural and urban areas.
Walgreens calls its stores that are being upgraded with fresh food options a "food oasis," and they carry fresh produce, dairy, meat and to-go options, such as salads and wraps. There are currently a couple dozen in areas around Chicago and elsewhere, but Walgreens hopes to have 1,000 of these stores by 2016."There's a push to make sure we're identifying those neighborhoods," Stiller says.
Offering fresh food is a key part of Walgreens' health and wellness focus, especially given how important access to healthy food is to overall health, says Judith Bell, president of PolicyLink, a research and action institute working to bring more retailers into communities without grocery stores nearby."The communities without access to healthy food are the places with some of the highest issues around obesity," Bell says.
Walgreens is also embracing the communities it's entering with specific design elements and tailored product assortment. At the flagship in Washington, D.C., the ceiling has a rotunda like the one in the Capitol building, and the makeup department displays a replica of the gates to the White House. The store in Los Angeles sells an assortment of yoga gear, including mats and towels, and is experimenting with offering free yoga classes in an outdoor space the store surrounds."Like all flagships, they create a scale like this as a barrier to entry for competition," Nisch says. "This is throwing the gauntlet down and telling anyone else who wants to do this that they need to have their game on."