Any retail analyst will tell you that there's much more to a drug store than a pharmacy.
In fact, the most profitable components of drug stores are what they call their "front-end" offerings, which include cosmetics, gift items and photo-processing services. Many supermarkets are increasingly turning to those same types of categories to boost their own bottom lines.
That's why Albertson's has converted most of its supermarkets in two Western markets to combination food-and-drug outlets bearing both the Albertson's banner and that of one of its drug store chains.
The maneuver mirrors what Albertson's Jewel-Osco division has been doing for decades in the Chicago market, and is similar to what other supermarket chains have done to make their stores destinations as both supermarkets and drug stores. Leading pharmacy innovator H-E-B, for example, recently opened a food-and-drug combo outlet in its headquarters market of San Antonio that features a separate entrance and facade for the drug store portion of the supermarket, along with a drive-through pharmacy.
As more and more supermarket chains install pharmacies with the rapid-fire regimen of octogenarians popping their morning prescriptions, it might pay for them to explore the opportunities of becoming destinations as drug stores.
In the Tucson, Ariz., and Reno, Nev., markets, Albertson's refitted the Albertson's-Osco and Albertson's-Sav-on stores with 25% more general merchandise and health and beauty care items than it offered in the original supermarkets. In addition, the chain added beauticians to staff the expanded cosmetics departments and installed one-hour photo labs in the stores. Greeting cards and seasonal merchandise also got up-sized to drug store proportions.
The transformation was facilitated by the fact that Albertson's already had drug stores under the Osco and Sav-on banners in those markets. In fact, the Boise, Idaho-based company said it would only consider converting additional supermarkets in regions where it already had an established presence as a drug store operator.
Still, supermarkets that are adding pharmacies might learn some things from Albertson's.
Perhaps one of the most significant facets of Albertson's strategy is the fact that the company is equipping the stores with separate managers for the drug stores. That should mean that the stores' nonfood sections will get plenty of attention. They'll have the right product mix and will utilize the proper merchandising strategies.
In other words, they won't be an afterthought, which they are in many food stores.
Supermarkets all seem to agree that offering prescription drugs delivers multiple benefits, including increased customer loyalty, incremental sales gains and a professional health care image. But perhaps bigger opportunities exist.
Maybe supermarkets should implement more strategies to take themselves beyond just being food stores that offer prescriptions, and beyond being destinations for whole health solutions. Maybe they should look at the possibilities of becoming drug stores.