Gresham plans to enter new niche with opening of closeout stores

Drug Store News, Oct 10, 1994 by Mike Troy

GAINESVILLE, Fla. -- Gresham Drugs, already well established in a niche as this city's leading health care provider, is entering another niche, this time as a discount merchandiser.

To stock the new format, expected to open this fall, Gresham Drugs president Steve Gresham wants to buy closeout merchandise from trade show exhibitors and vendors.

Gresham plans to use the store -- to be called Bob's Discount City -- to help sell through slow-moving merchandise from the six Gresham Drug stores in Gainesville. But he expects the main source of products to be leftover products from manufacturers' trade show displays.

One example was the recent Chain Drug Marketing Association (CDMA) show in Orlando, a two-hour drive south of Gainesville. The show proved to be a good source of products for the chain and its upcoming debut of Bob's Discount City.

Holding costs down

"What we want to do with this store is create the impression that you don't know what you are going to find but when you find it, it will be the best price you've ever seen," Gresham told Drug Store News.

That means being able to hold acquisition costs down, something Gresham believes he will be able to achieve by working closely with trade show-site hotels and convention centers in the Orlando area. Trade show exhibitors, many of whom give away their merchandise to show attendees or local charities, now have an additional option with Gresham.

For example, one vendor at the CDMA event offered Gresham a good deal on grills.

"We don't really have room in our stores for grills, and it's not the kind of thing we would carry anyway where there is a Wal-Mart across the street," Gresham said. "But that's the kind of thing I can put in Bob's and offer for a great price."

For those curious about the store's name, Gresham said he chose "Bob" because of its commonality and comfort level with consumers. In addition, he did not want to use the Gresham name and confuse customers or erode the health care image of Gresham Drugs.

The six-store chain was founded in 1953 by Gresham's father, W. Marvin Gresham. Steve Gresham, 40, bought his father's share of the company several years ago and has thrived despite the intensely competitive Florida arena in which he operates. This past year, he said, was the most profitable in the chain's 40-year history.

Gresham Drugs has a strong health care image and derives 65 to 70 percent of its sales from pharmacy.

"We've done some focus groups, and one of the things we learned is that the community here thinks of us as the health care experts. We have this image that when you have a special health care need, you can go to Gresham Drug," the Gainesville native said.

Services such as compounding, inventories of hard-to-find drugs, home infusion therapy, a broad assortment of home health care products and durable medical equipment and frequent in-store health screenings are some of the extras available from Gresham.

No more cigarettes

The chain also opted last year to cement its niche as Gainesville's leading health care provider by getting out of the tobacco business. Gresham said the decision to stop selling cigarettes worked on two levels: it was the right thing to do; and it also made good business sense. Margins on cigarettes, he said, were 8 to 10 percent, and "the shrink more than took up the profit."

What's more, he said, cigarettes were taking prime shelf space near the checkouts, the number of smokers continues to decline, and smokers who came to Gresham Drugs for cigarettes tended to avoid buying other products.

Thus, Gresham announced at a press conference last fall that the chain's New Year's resolution was to give up cigarettes. The decision made great fodder for the local Gainesville television stations, and the story was picked up by all three networks and ran numerous times last fall.

The result: Gresham Drugs got a lot of free air time and invaluable favorable press coverage. Its president also received an award from the local chapter of the American Cancer Society.

Stiff competition

Gresham needs to be a savvy marketer to succeed against fellow Gainesville competitors Wal-Mart, Kmart, Pic 'n Save, Eckerd Drug and Rite Aid, as well as combo operators Publix Supermarkets, Winn Dixie Stores and Kash 'n Karry. Phar-Mor and Kmart recently closed stores in the small city, which is home to the University of Florida.

"I don't really look at Wal-Mart as my competition. I'm competing with Eckerd more than anybody because they have about the same number of stores here," Gresham said. "I want to create a market niche that we can own because there is no point in being like everybody else."

According to Gresham, it is impossible to own the low-price niche. Even a retailer as successful as Wal-Mart, he said, can't lay exclusive claim to the low-price moniker.

"You want to be in the ballpark on price. If Wal-Mart has Oil of Olay for $5 and we have it for $5.25, I don't think that is going to bother anybody. We just can't have it for $7," Gresham said.

Much of the emphasis at Gresham may be on pharmacy, but the front-end hasn't been forgotten. This past year stores took on a new look when shelf heights were lowered a foot and departments were reset.