Shoppers Drug Mart focuses on bolstering No. 1 market position

Drug Store News, April 26, 1999 by Tina Kyriakos

With Shoppers Drug Mart's distribution centers now operating at top efficiency, and the former Big V Pharmacies now flying under its red and white corporate colors, Canada's largest franchise drug store group is in the throes of carving out a new retail positioning aimed at bolstering its No. 1 position in its markets.

While still in its early stages, the Star Trek project-with roots tracing to 1997 when a special team armed with resources ranging from focus groups and quantitative research to comment cards and telephone polls of customers was formed to identify more clearly Shoppers' place in consumers' minds-has already begun to re-shape day-today business practices in the company's network of 824 locations stretching across the country.

"The whole idea behind the new initiatives was to enhance the shopping experience for the consumer," said David Bloom, Shoppers' chief executive officer. In its initial phases, the Star Trek project is playing out at store level primarily in areas such as customer service and store image, but plans call for changes that will re-engineer some key departments, such as cosmetics, and re-think flyer promotion of high-volume merchandise.

To this end, Shoppers has moved quickly in some areas, notably improving throughput at its check-outs so no more than three customers are waiting in line at one time and removing bins and displays in store aisles. The changes, said Bloom, are already yielding results. "Along with ensuring our customers get in and out of our stores more quickly, the elimination of impediments in the aisles has not only given stores a clean, crisp image, but has improved traffic flow dramatically," explained Bloom.

Wide consumer acceptance of house brands, identified by Star Trek's research, has steered Shoppers to a "compare-and-save" merchandising strategy that has seen the 1,200 SKUs in its award-winning Life brand battling it out for attention on the shelves with national brands. With the chain's high representation in several categories-especially OTCs, where it has extensive line-ups- the new philosophy to point out savings for consumers at shelf level is expected to help boost sales of its corporate offerings.

The company is also reviewing its cosmetics presentations with four new prototypes now being tested. The company is considering a move away from the large, square showcases, or bull-pens, which have long served as focal points for these departments. The search for a new strategy reflects Shoppers' attempts to have its 2,500 cosmeticians take a more active role in selling products. "The idea is to make them more accessible to the consumer, which is difficult when the cosmetician is standing behind these counters," explained Bloom.

As part of a five-year plan now under way to re-fit stores, Shoppers is gradually introducing its new Pharmacy 2000 layouts. Along with making it easier to shop its stores, the initiative to unclutter aisles by removing displays, as well as another that calls for lower fixture heights, is in keeping with the company's mandate to make the pharmacy visible to customers as soon as they enter the store. Removing all aisle displays throughout the store marks a decidedly different strategy for the chain, which has been known for them.

With its larger dispensary areas, lower service counters and three separate counseling areas, the concept reflects the growing importance of pharmacy at Shoppers, which puts prescription sales alone at 38 percent of total business. To eliminate the need for two redesigns, the new layout is being rolled out in stores as they come up for a general retrofit.

Outgrowth of Vision '97

For Bloom and his executive team, the focus on retail positioning is a logical outcome of Vision '97-a plan that effectively re-engineered the company's operations by centralizing distribution, purchasing and accounting. "With Vision '97, the focus was on improving one aspect of our business, and now it's time to turn attention to the stores and their customers," said Bloom.

Indeed, Vision '97-which was phased in over three years and did not become fully operational until 18 months ago with the opening of the last of three warehouses servicing its key regions-is already being credited with contributing to strong increases over the past two years that culminated in a 27 percent jump in the company's operating earnings, totaling $ 182 million at fiscal year-end in December 1998. Sales reached $4.2 billion, up 4.5 percent (excluding tobacco).

"After three years, we can match the efficiency of any distribution network in the country,'' said Bloom pointing as well to the lowering of upcharges every year as the productivity enhancements of the plan have come on stream.

Shopper's fill rate or service levels from the distribution center, operated by Matrix Logistics Inc., has reached 97 percent, which translates to few out of stocks and excellent turnaround time-framed in a two-hour window-for delivering from its DCs to the stores.

Information yields success