Navigation

Wall Drug Store

It's about fundamentals. Back to basics.

These are the words that were dropping out of the mouths of Brooks executives as they began to absorb the challenge of corralling and redirecting a wayward pharmacy chain.

In terms of merchandising, Eckered seemed to have lost its way. The chain hitched its success to strong consumables promotions in an effort to drive traffic. Eckerd's deals on soda and chips were great--so good, in fact, that Eckerd couldn't make any money off those transactions--and its prices on items like toothpaste and Tagamet, for which customers actually shop at drug stores in the first place, were not so good.

This was a critical factor in the final analysis of what went wrong for Eckerd. Too much emphasis in the store and in its circulars had been on these classic supermarket product categories, feeding a downward spiral that, ultimately, crippled the chain. Eckerd drew the wrong type of customer and watched that customer walk out of the store with nothing else but a 12-pack of soda in each arm.

"The consumables strategy--designed to revitalize the chain--took the focus off pharmacy," said David Morocco, senior vice president of marketing. "[It] took the focus off the strength of this company--classic health and beauty aids. All the other stuff is nice, but your classic health and beauty aids are the bread and butter of your drug store business."

Fundamentals. Back to basics.

"It's just a question of mindset," explained Michel Coutu, Brooks-Eckerd president and chief executive officer. And for the Brooks-acquired Eckerd stores, it's about bringing the focus back to a pair of core drug store categories: health and beauty.

First and foremost, Brooks executives want customers to understand that Eckerd is a destination for health and beauty aids. "Even if customers still recognized Eckerd as a chain of drug stores, it was not always focused on drug store needs," Coutu noted. "Look at the Eckerd circular. Do we have good prices on health and beauty? Is HBA a draw? On the front page of [Brooks' Eckerd] circulars, you are going to see really strong prices on health and beauty. Why? Because we want people to shop our stores for health and beauty--we want to be a destination for that customer," he said.

And that means a serious de-emphasis on consumables, particularly in the circulars, but also in the store and on the shelves. One thing that is certain to change in the Eckerd stores is the dominant, wide-open consumables drive, stacked high and wide with palette-sized displays of soda, chips and other high-commodity items. Those will be remerchandised to accommodate more conventional drug store businesses. Certainly, this incredibly important instore real estate could be more effectively used to better present categories with greater ROI, like seasonal categories that help pad margins and spark unplanned purchases.

There is no question that the highly promotional, grocery-first strategy cost the chain big time; prior to the deal, the gap in sales between Eckerd and Brooks stood at about $200 per square foot. The disproportionate focus on this kind of low-margin/low-ticket business did not help Eckerd. It drove a lot of traffic to the store, but generated no profit.

And that presents a significant challenge for Morocco's team of merchants--a challenge and a whole lot of upside, because in reality, the stores are in much better shape than Brooks executives first thought. More important, Eckerd brings more to the table than most realize.

That is why for Brooks the key to turning around Eckerd's front-end business lies in marrying the best of both concepts--even if Eckerd's front-end had consistently under-performed on a comp-store basis relative to its three biggest competitors. And if Brooks executives are correct in their assessment, what works for Eckerd will work for the Brooks stores, as well.

In Eckerd, there is a lot for Brooks to work with, starting with beauty. Eckerd's beauty team put together one of the strongest beauty care programs in drug, anchored by one of the sleekest-looking--and perhaps most upscale in appearance--cosmetics walls in the Northeast, even if it was undersupported by upper management. Over 1,000 of the Eckerd stores Brooks acquired have the new cosmetics wall.

"My hat goes off to this beauty group," Morocco told Drug Store News. "The beauty group remained relatively untouched by management's directives, so they continued to produce and build in spite of all of the obstacles that were placed in front of them. Particularly in health and beauty aids they did a great job."

The cosmetics wall is likely a design element that Brooks will look to incorporate with a broader merchandising strategy for the entire chain. In addition, Brooks also inherits Eckerd's exclusive beauty care brand Mira--a rare positive exception to a broader private label program that, Morocco suggests, lost its way (see related story below).

Of course, Brooks has been an innovator in beauty care, as well, having been the first chain in the United States to feature a high-end, department store-style service counter for skin care. The in-store boutiques, located adjacent to the pharmacy, stock upscale skin care brands Vichy by L'Oreal and Avene by Pierre Fabre and are outfitted with trained skin care consultants and state-of-the-art, computerized equipment to analyze shoppers' skin.

With the purchase of the Eckerd stores, Brooks now finds itself in a lot of new markets, including many affluent ones that make excellent candidates for expansion of the Derma Skincare Center concept, including northern New Jersey, New York City, and New York's Westchester County and Long Island. Brooks executives have confirmed that they will look to roll the concept out to stores where the investment seems justified.

That says a lot about the way Brooks plans to pursue the merchandising opportunities that await them in the Eckerd stores--this team is not afraid to get out into the market and chase down those opportunities on a store-by-store basis. "Think big, act small," Morocco explained. Call it old-school micro-merchandising. It's about hitting the road, getting in the stores and seeing what really makes the stores tick, rather than scanning a print out. It means leaving the cookie-cutters in the kitchen.

"[Eckerd] got so big they had a one-size-fits-all mentality. [They focused on] one-size-fits-all so much they couldn't take care of the customer," Morocco explained. "They missed that whole thing."

Morocco said that Eckerd also was testing some programs to target the rapidly growing Hispanic consumer population, but that investment is of a lot less value to Brooks. Those programs were conceived with Eckerd's Texas and Florida stores in mind. "In Florida and Texas, the Hispanic population is 25 percent larger than the population of Canada. But there is a whole other country out there," he said. "There are tremendous regional opportunities that we're going to have to tackle planogram by planogram, region by region, looking at what are all those products that make a difference."

It starts with adopting a basic program for all of the stores, and then trimming and tailoring the assortment to account for the regional differences. Morocco recalls a trip to a store in Somerville, Mass., about 20 years ago, where he met an old Italian-American woman who helped him understand the importance of regional differences as they relate to brand choices. "We're walking around the aisles. The store looks great, everybody's happy," he said. Spotting the woman up front, Morocco thought to ask her what she thought of the new store. "It's an awful store. I don't like it," she shot back.

"What's the matter?" Morocco asked.

"This is an Italian neighborhood," she said. "Where's my Brioschi?"

IRI or ACNielsen numbers might suggest otherwise, but a store operating in that neighborhood had better carry Brioschi. "She's used it, and you have to know those kinds of things. And I think you have to do them systematically. You've got to stay focused on them, and you've got to make sure that the Brioschi is where it needs to be. It sends little signals to the customers in those stores that we know who you are, and we welcome you, and we'll take care of you."

In Manhattan, at a former Genovese-turned-Eckerd store on the Upper East Side, knowing the customers' needs means stocking replacement fuses and electrical cords. In Marietta, Ga., where Brooks is inheriting a store about to open in that market, it means understanding how the rapid population growth there should impact assortment. "The population between 1980 to 2000 has doubled there," Morocco explained, noting that in 1980, the market was about 80 percent white. "It's now 60,000 people--the same number of white customers, but the rest are Hispanic and African-American. So, I'm looking at the blueprint of the stores, and I said, 'Wait a minute--they've only got six feet of ethnic hair care and skin care in there. Does this make any sense?'"

Another critical area for Brooks as it addresses issues in the front end of the Eckerd stores is bringing the focus back to health care and away from grocery, which means a strong reliance on OTC remedies, both in terms of assortment and in-stock, as well as from a promotions standpoint. It's all a part of recasting Eckerd as a pharmacy chain first and as a destination for health and beauty.

"So it's about making sure that all the complementary products to pharmacy are in place," Coutu said. "It's about making sure you are in stock in the stores on these items; it's making sure that all the advertising, all the operational protocols are set up to complement your pharmacy business and that the stores are organized to fulfill a pharmacy customers' needs.

"During flu season, you make sure that you have enough OTC cough-cold products," he continued. "In the summertime, you have enough first-aid products; in the spring, you have enough allergy; 12 months a year you have stomach aids--this should all be basic. But if you don't have the proper focus, if your whole modus operandi is not geared toward fulfilling these basic drug store needs, then you might have some issues with in-stock levels in the stores. You might have some issues with the overall layout of the store."

One thing that will help the Eckerd stores make more of an impression on the customer as a health and beauty aids destination, will be the rollout of Brooks' "New At Brooks" endcap program into the Eckerd stores. Strategically placed opposite the main entrance, the special endcap is often the first piece of merchandising a Brooks customer sees. Managed properly and updated regularly, the What's New endcap not only communicates to consumers the chain's commitment to health and beauty, but also tells them they can find the latest products at the new Eckerd.

Photo processing is another area that was well-developed at Eckerd--although not necessarily to the chain's benefit.

"They had built a lot of their name on photo processing, maybe even at the expense of pharmacy," Coutu said.

Unfortunately, because Eckerd was so well-developed in photo, when the paradigm shift took place from film to digital, the chain was hit pretty hard. "That is probably one of the key factors as to why Eckerd has seen more deterioration in their front-end sales than many other chains," Coutu added.

Brooks plans to take those labs and redistribute the equipment to locations where it makes the most business sense, driving the most return out of Eckerd's investments. Former parent J.C. Penney took the lumps; Brooks plans to reap the benefits.

Certainly, it seems that the trend in photo processing is beginning to reverse itself, with customers turning to retail outlets to get prints of their digital photos. In the right stores, the photo labs could really have an impact on front-end comps in Eckerd stores.

The biggest change in the stores will come from the overall change in focus, with the emphasis once again placed on pharmacy and core drug store categories instead of the heavy reliance on grocery favored by prior Eckerd management.

That doesn't mean Brooks will look to pull back too much on consumables. "We're not taking food out of the mix," Coutu told analysts in a conference call last month. It is about scaling back merchandising programs in consumables to be more in line with traditional drug store industry standards and to ensure that food no longer competes with core drug store categories. It's about bringing a balance back to the merchandising mix, highlighting the categories that customers expect drug stores to carry and the items they expect to find in stock.

It's really quite basic in theory. "If I'm out of ketchup-flavored potato chips it's no big deal," Coutu posited. "But if I'm out of Prilosec, that's a problem," Coutu said. "Because there are people that are going to need Prilosec today, and they are going to expect us to have it," he said. "Customers aren't necessarily going to expect me to have ketchup-flavored chips."

COPYRIGHT 2004 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2004 Gale Group