Working to stay one step ahead

Drug Store News, April 29, 2002 by Michael Johnsen

Staking out a spot among the top regional drug chains, Hi-School Pharmacy reported that its sales growth increased three fold in 2001, jumping from an increase of 4.4 percent in 2000 to 13.8 percent last year. And that was without adding one store.

"It was a good year, but not great," remarked president and chief executive officer Steven Oliva.

The key driver for the chain is its pharmacy--on a store-by-store basis, a few of the pharmacies achieved 20 percent sales gains, which helped Hi-School generate an overall leap of 15 percent in pharmacy sales chainwide.

Sales have gone up in spite of a plethora of competitors recently expanding into the market. When asked about the competition, Oliva rattled off a list that includes Wal-greens and Longs Drug Stores, Wal-Mart and Target, all of whom are expanding in the market, Oliva said. "The pharmacy dollar still is expanding. We have noticed no decrease in the number of prescription customers--they're all increasing," he said.

As for growing its own store base, the chain still is carefully looking to slowly reach into two or three communities through independent acquisition, an opportunity that didn't materialize last year. Hi-School also is considering merging some of its pharmacy operations located in medical buildings into its full-fledged stores--where the pharmacy sales can be complemented by a front-end mix.

Another initiative the chain plans to embark on within the next year is implementing an updated computer system that will enable the chain to refill prescriptions via the Internet. It's a step in the right direction, especially in communities with such a technical job base. Yet, Oliva said he's been told by fellow pharmacy operators that e-fills are not readily used by the consumer. The chain does provide customers the convenience of a round-the-clock automated telephone refill system.

The chain maintains a multipage Web site that's updated frequently with the front-end consumer in mind. The chain posts its weekly circular, and when a specific ad is clicked on, the e-circular opens a new window showcasing that product, making it easier to read. There is even a button within that new window allowing shoppers to e-mail Hi-School deals to family and friends. The e-circular is cross-indexed by product on the left side of the Web page, enabling consumers to quickly identify that week's specials.

Being a health-oriented company, the site also offers quite a bit of health care information, including a question and answer link about anthrax that has been available on the site since late last year when anthrax scares were commonplace. The site includes links to national health care organizations, such as the American Diabetes Association, the Consumer Product Saftey Commision, the American Heart Association, American Academy of Pediatrics and the American Cancer Society.

Creating efficiency through consolidation

The chain did increase its headquarters office space by 10,000 square feet, affording it the opportunity to bring its computer and third party administration arms into the central fold. Hi-School also remodeled two stores. In one case, the chain moved into a 25,000-square-foot box left vacant by a grocery business. "We completely remodeled the building and put in new fixtures," Oliva said. In fact, that particular location maintained 4,000 square feet of a grocery department and includes a sandwich shop that serves hot espressos and subs. "That's something new," the president noted. "It's a growing business [and] it's in an area where there are no major grocery stores right now. We service the needs of that community."

That's not the only location expanding its food selection to serve local needs. "We are continuing to enlarge our grocery presentation in stores where the supermarkets have gone out of business," Oliva stated. "It's tailoring the mix to the community that we're in. If there's no Home Depot [nearby], the hardware set is expanding. If a grocery store goes out of business," then our food selection will grow," he said.

Indeed, the chain is taking a hard look at its front-end mix. Although Hi-School is trending up in pharmacy sales, along with many other drug chains across the industry, front-end sales are a bit more difficult, which also holds true for other drug chains, both large and small. Hi-School's front-end sales rose about 1 percent to 2 percent last year.

In addition, Hi-School has begun experimenting with a lawn and garden offering, making the chain a destination center not only for photo and medications, but also a mecca for new home buyers--the area was named Money magazine's best big city to move to the last time the magazine compiled such a list.

"The largest initiative that we've done this year is we have expanded our garden shops into 3,000-square-foot enclosed areas with separate checkstands in the parking lots of our stores]," Oliva said. "It's been so successful that it's expanded into five stores this year."

Ownership for pharmacists