Hi-School blends formats, products, sites in innovative combinations

Drug Store News, April 26, 1999 by Allene Symons

Hi-School Pharmacy's primary market, across the Columbia River from Portland, Ore., in the fastest-growing part of the Greater Portland area, is getting over-stored, in the opinion of Hi-School Pharmacy's owner, Steven Oliva. That just means Oliva will keep on doing what he does best.

Oliva is a maestro of variations in pharmacy formats and locations, although he wouldn't say so. Consider one of the newest variations--relocated pharmacies in former savings and loan locations and in bank buildings. Oliva's eye is keen for real estate opportunities and he can act more swiftly than most of his competitors.

"We're locally owned and our company's in good enough shape to be able to afford to continue to expand," said Oliva. "We're involved in the ownership of 90 percent of the locations that we're in, either as owning our own real estate or owning a portion of the overall shopping center, so our occupancy costs are less than the major drug chains."

In 1998 the chain opened one 18,000-square-foot store, in addition to several relocations and remodels. Two new stores are under construction and slated to open next month, both with drive-through pharmacies. In addition, Hi-School purchased one small store in a small town up the Columbia River Gorge in Stevenson, Wash., which operates under the name Wind River Pharmacy.

Depending on how you tally the locations--or look at the business overall--Hi-School operates 26 large stores and two small pharmacies. Also, chief operating officer Byron Henry and several other pharmacy partners are involved in individual stores with varied pharmacy names, or as Oliva explained: "In some cases we have partnerships with pharmacies in smaller communities." One, for example, is in the northern California town of Crescent City; the rest are in Washington and Oregon. [In the April 27, 1998, issue, some of these businesses were counted as part of Hi-School Pharmacy; therefore, the size of the chain ranges between 28 and 35, depending on how the businesses are counted.]

Hi-School Pharmacy's related businesses range from a managed care pharmacy--a closed pharmacy for assisted living and nursing homes--and two pharmacies in grocery stores, to a separate wholesale business called Price Mart and 26 full-size drug stores, many with full hardware assortments under the franchised names Ace, Coast to Coast or TrueValue. Some stores even have large fabric and craft departments. This kind of site flexibility means Hi-School doesn't have a standard prototype, although most of its full-sized stores are about 18,000 square feet. "We're not trying to hit one demographic," said Oliva. "It's a mix of high and low."

Taking a look just at the core business: In 1998, Hi-School Pharmacy opened one new store but after completing several remodels and relocations, the chain ended the year with a total of eight drive-through pharmacies.

Relocations and remodels are two ways Hi-School Pharmacy optimizes its business. In January, for example, Oliva combined two stores (one existing store, one acquired) in a former bank building. Judging by the initial prescription volume, Oliva expects to bank on this move. This year Oliva plans to remodel two or three of its pharmacies and either make the pharmacies larger, or install Baker cells or other high productivity technology.

Competition in Clark County has triggered some change for Hi-School in the last year or two. A new Costco and a new Wal-Mart (not the first) are opening this year, as is a new Fred Meyer (not the first, either). Another Safeway combo is coming, too. Albertson's is another food/drug competitor in this market. Walgreens is opening a couple of stores in the market, as is Rite Aid--all with drive-through pharmacies. Longs probably isn't far behind.

Despite the influx of competitors, "We have a selection of merchandise that--although we cannot match the mass merchants-we can surely compete effectively against the Walgreens and the Rite Aids. When the mass merchants come in, we do lose some of our front-end business, but we've really been able to build on our pharmacy business and related products," Oliva said.

The arrival of mass merchants and especially large home improvement centers has meant a reduction in size for Hi-School's larger store prototype, down from 22,000 square feet a couple of years ago to 18,000 to 20,000 square feet today. The word prototype doesn't exactly appeal to Hi-School Pharmacy, however.

"Each market is a little different," said Oliva. "You expand the categories if you do not have a big box in that particular location- whatever that big box is. So we are back with fabric departments in quite a few stores where there is no longer a fabric store. We are continuing in the hardware business, but we have reduced the size of our departments except in small towns where we are the local hardware store."

The POS system helps prune slower-moving products. By the end of the year, Hi-School had POS scanning for approximately 70 percent of its SKUs, up from 50 percent the year before. Since its merchandise varies from store to store, some stores are scanning 100 percent and some are scanning in the 50 percent range, such as stores with fabric and hardware.