Kerr reformats stores to maintain an edge

Chain Drug Review, April 23, 1990

Kerr reformats stores to maintain an edge

RALEIGH, N.C.--Facing the onslaught of competitors, Kerr Drug Stores has undergone a number of changes in the past year to maintain a competitive edge in its home state of North Carolina. Over the past 12 months, reports president John Kerr, Wal-Mart Stores Inc. alone has opened 40 stores in the state. These have impacted Kerr in 12 of its 20 markets in North Carolina. In addition, such deep discounters as Drug Emporium Inc. and Phar-Mor Inc. are moving into the area. "The area is very much overstored at this time," says Kerr. "Thank God, there are only four corners at each intersection."

In response to these retailers' encroachment, Kerr began to reformat its stores on January 1. With specialized computer software and a new planogram director, the chain has embarked on a program to rearrange its product location and emphasis. The new format should be completed in all Kerr stores before June.

Keep strong image

At the center of this is the pharmacy department. Though Kerr will not relocate its pharmacies, it will increase its advertising and marketing support for them. To maintain the department's strong presence, the chain will also boost customer service and offer a low-price program.

"We've been getting strong increases in the pharmacy area, and so we want to keep a strong image there," explains Kerr.

Categories that have traditionally been strong at Kerr, such as school supplies and home health care, are being moved to more-prominent areas; in some cases, they are receiving expanded shelf space. Categories that have not performed as well, such as giftware and soft drinks, are being reduced and moved to less trafficked areas. In addition, the chain is revamping its photofinishing program.

"It's been a year of redefining who we are in the marketplace and who we want to be," says Kerr. "Of necessity, as a conventional drug chain, we must focus on our core business."

The chain has made a host of other changes as well.

Kerr has reduced prices in many stores. It has changed its circulars from the standard linear presentation to a high-quality format complete with photographs. It has hired a training director to head up an employee training program that focuses on customer service. And it has taken a look at its overall product mix, emphasizing such things as school supplies and stationery.

Kerr has also spent a lot of money to upgrade its distribution center, which is located in Raleigh. It has installed a new conveyer/picking system, as well as a new distribution system. Presently, the operation is being expanded by 50,000 square feet, a process that is expected to be completed by June.

The drug chain also opened eight stores and remodeled six in 1989. Its plans call for another three new units in 1990 and six to eight remodels.

Regarding the market, Kerr reports that, despite pressure from outside competition, the chain's position has been steady. The operation is still No. 1 in such established markets as Raleigh. It also continues to do well in places where it is still fairly new; this would include such markets as Charlotte, where Kerr has only 10 stores, versus Eckerd Drug's 40.

"We're looking at a substantial increase in profits," says Kerr. "And 40 of our 94 stores are less than three years old. As these stores mature and come into their own, I look for our bottom-line performance to improve even more."