Walgreens Transforms with 'Mass Localizations'

Chicago — As Joe Magnacca took over as president, daily living products and solutions, at Walgreens in 2011, the company had embarked on a transformation. The Deerfield, Ill.-based chain set out to become a health and daily living destination, rather than simply a drugstore chain.It wasn't abandoning its roots as a pharmacy first and foremost – 65% of its sales are pharmacy-based – but it wanted to become what Magnacca calls a "pure retailer," and become more global in the process."One of the first things we did was become much less U.S.-centric in our thinking," Magnacca said in October during his keynote presentation at the Shopper Marketing Expo. "It was clear there was a lot of advancement outside the U.S." So, Walgreens' management team took a trip to Europe and Asia to learn what was happening in areas such as store formats, format development, customer experiences and store model evolutions.Then, Walgreens began to apply those learnings. "From a front-end perspective, there was a lot of opportunity," he said. "We may be better than the other guy on a given day in a given store, but we're certainly not the leader we thought we were."Key to the transformation, according to Magnacca, is innovating through store formats and products, differentiating through mass localizations, and reaching its shoppers with loyalty and new branding across all channels.To help Walgreens get there, Magnacca pulled from his experiences at Loblaw, Shoppers Drug Mart and Duane Reade, the latter of which Walgreens acquired in 2010.As chief merchandising officer and then president of New York-based Duane Reade before moving into his current role, Magnacca had to oversee the transformation of a small chain consisting of many stores that offered a poor shopping experience – an "environment that could ruin your day," according to Wendy Liebmann, chief executive officer at WSL Strategic Retail and a co-presenter at the Expo."Traditionally those stores were over-merchandised, over-SKU'd," Magnacca said. "Aisles were narrow and merchandise was piled extremely high. That did not create an environment that was shoppable. People tended to use Duane Reade as a place to go to get exactly what they wanted and then get out as quickly as they could. Our objective was to create a much more significant shopping experience … where people wanted to go to Duane Reade."In addition to addressing store design and rebranding, Magnacca realized that trying to squeeze 18,000-20,000 SKUs in a small store was not the right approach. "It made a lot of sense to start to understand what the consumer wanted in each of those locations," he said. As a result, they began adjusting Duane Reade's merchandising mix by store to meet the needs of its customers, whether local residents, workers or tourists. Among the areas of differentiation were fresh food and beauty products.As part of the transformation, Duane Reade opened a flagship store in the Wall Street financial district that demonstrated an "exaggeration of our strategy" with such features as an "Up Market" food department that includes fresh sushi and a "Look Boutique" beauty department that features manicure stations.Many of Magnacca's strategies with Duane Reade have now been implemented at the parent chain, including similar flagship Walgreens locations in Chicago, New York, Las Vegas and San Juan, Puerto Rico.Additionally, Walgreens has committed to "mass localizations" with its stores. Magnacca claims that the retailer has approximately 160 different planograms to be implemented by category and location."Our organization is now set up to deliver on [mass localizations]," he said. "We were always interested and wanting to deliver on it, but the reality was we weren't physically set up to do it. We reorganized our merchandising and marketing groups. … It's not about trying to find the most efficient way to get something done, it's about doing it the right way in each market and each store."In September, Walgreens launched its "Balance Rewards" loyalty program, which forced the retailer to update its POS systems. Magnacca says the program, which had enrolled 12 million members 12 days into its existence, will deliver valuable insights to further Walgreens' efforts in becoming a health and daily living destination.At the Expo, Magnacca called on manufacturers to help the retailer in its transformation by presenting and committing to five-year plans. "The way to engage our business is not to have a short-term view of the category or the customer," he said. "If you are not engaging at a strategic level with our organization, you should be."Magnacca says Walgreens is a willing collaborator. "We're big believers that we should spend time at your corporate office, have access to your marketers and your teams." He singled out Walgreens' current relationship with Hershey Co. as the ideal. "The more we can engage at a top-to-top level, the more we think we will win."

Walgreens Transforms with 'Mass Localizations'

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