SPARTAN: CLINICS IN, VIDEO OUT AT PHARM

WENDY TOTH

GRAND RAPIDS, Mich. - Following the successful opening of one in-store clinic in Oregon, Ohio, in June, Spartan Stores is considering expanding the concept, which is part of a strategic repositioning of its The Pharm discount drug stores, said Craig Sturken, president and chief executive officer, Spartan Stores, during the company's first-quarter fiscal 2007 earnings call last month.

"We are really delighted with the results that we've had with the repositioning and with this. We think that this is something we can get out in front of as opposed to, for example, in gasoline, we were behind the eight ball," Sturken said.

The clinic is operated in partnership with Curaquick Clinics, Sioux City, Iowa.

The clinics are going into spaces of 200 to 300 square feet now dedicated to video, he said. "Our Pharm stores are over-displayed and over-dedicated to video. Video is yesterday's concept," he said, citing the growth of iPods and other electronic technologies. Most Pharm stores have video rental departments. "We can reconfigure the store and dedicate that space to something that is more appropriate."

Before deciding to open the clinic, a team from Spartan Stores went to Iowa to observe the clinic program at a Hy-Vee location "that has one of the most mature in-store clinic programs," Sturken said. "They liked what they saw."

Curaquick Clinics partnered with Hy-Vee to begin opening 10 in-store clinics in March.

Regarding the outlook for the clinics, Sturken said, "we know already that a large percentage of the people that use Curaquick Clinics will also use our pharmacy because if there is a prescription provided, that customer will go right to our pharmacy and establish a relationship."

The clinics allow Spartan to take advantage of underutilized space for a minimal amount of capital expenditure, Karen Short, analyst, Friedman Billings Ramsey, New York, told SN. "The payback on that from prescription filling is expected to be pretty quick."

The capital expenditure that goes into each clinic is "like $200,000, almost nothing," Sturken said.

"These clinics are the future in a lot of drug retailers," Short said. "The strategy is not unique but it makes a lot of sense because if you can offer convenience at a low cost, you will probably get customers."

Repositioning the stores is about "resetting the store to have an appropriate offering, a bit more focus on things that the consumer wants today," Sturken said. Overall, the repositioning will include expanded cosmetics and health and beauty aids, and a stronger commitment to health. Repositioning the entire Pharm chain will take more than one year "because it is a process that takes a month to do in a store without disrupting the business for existing customers," he said. There are about 20 The Pharm stores in Michigan and Ohio.

Curaquick Clinics are staffed by nurse practitioners or physician assistants, and signs outside the clinic will list the types of medical care that are offered to treat minor illnesses and ailments.