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Boots Pharmacy

The retailer known for bringing cheap chic to the masses has extended its expertise to pharmacy, a move that could serve to up the ante in its competition with not just other discount store formats, but the chain drug industry as well.

In true Target fashion, the retailer has chosen to make pharmacy retailing more fashionable with a new program launched last month. Called Clear Rx, the program features new prescription bottles with flat-front panels and large-print labels. The bottles themselves are a translucent red, and colored ring tops will be offered so family members can keep track easily of which medication is whose. The effort marks the first time a large-scale operator has broken away from the traditional prescription bottles used for years.

"We really think this is a breakthrough," said Gregg Steinhafel, president of Target stores. "It offers a reason for our guests to switch from their local pharmacy or some other competitor to us. It's a competitive advantage."

Target operated more than 1,000 pharmacies in 2004 and will add another 150 this year, Steinhafel said. Target's total store base will reach approximately 1,400 by the end of this year, 90 to 95 of which will be new locations.

Target is working hard to increase the frequency of consumer visits and is using the pharmacy department--together with a renewed emphasis on it's "expect more, pay less" mantra, dollar merchandise offerings and increased grocery items--to achieve this goal.

With fewer supercenters than its direct competitor Wal-Mart, the retailer continues to focus on new ways to differentiate and steal market share from other category specialists. The new pharmacy initiative is yet another shot at getting customers into the store more frequently. On a recent conference call, management stated that it believes the program will add value in an otherwise mundane category, building customer loyalty, increasing store visits and further extending Target's innovative merchandising proposition.

The combination of Target's pharmacy and its health and beauty departments helps make the retailer a formidable competitor against drug chains. The retailer has been expanding its selection of high-end hair care products slowly and consistently and has added more spa products and accessories.

The Sonia Kashuk line of cosmetics is part of Target's stable of strong proprietary labels, consistently garnering high marks and recommendations in women's magazines.

It is expected that Target will expand the reach of its proprietary brands throughout 2005. A recent test with British brand Boots is being discussed publicly by management for the first time, and while the line currently is available in only a handful of locations, management has mentioned the effort consistently in conference calls and highlights the program in the retailer's 2004 Annual Report released last month.

Target

Headquarters: Minneapolis

2004 * sales: $46.839 billion

% change vs. 2003: 11.6%

No. of stores: 1,306

Avg. store size: 126,000 sq. ft ([dagger])

Rx sales: $1.4 billion

% of sales from Rx: 2.9%

Sales per store: $35.9 million

* Fiscal year ended Jan. 31, 2005

([dagger]) Reflects average of discount and supercenter formats

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