Perry Drug's turf is the inner city; 'a real niche opportunity.'

Drug Store News, Dec 11, 1989 by James Frederick

Perry Drug's turf is the inner city

`A real niche opportunity'

DETROIT -- Parts of this city still look about as bad as it gets in urban America: bleak landscapes of post-industrial decay where people wage a daily struggle against crime, poverty, drugs and despair. Even in some inner-city neighborhoods whose once-gracious homes still recall better times, the money and vitality that bled away after the riots here more than 20 years ago have never really returned.

Downtown stands the Renaissance Center, much heralded when it was built as a beacon of urban development that would help lead downtown Detroit out of the economic wilderness. Now the center resembles nothing so much as a fortress, sealed off from its surroundings and contributing little to whatever vitality remains on the downtown waterfront. At night, the nearby streets are all but deserted.

These are the familiar images that cling stubbornly to Detroit. While the metropolitan areas to the north and west have boomed in the past two decades -- beneficiaries of the mass exodus of business and skilled workers from the city -- Detroit itself has never fully recovered from the erosion or the downturn in heavy industry. Population and tax base have eroded, and white flight to the suburbs has shifted the racial balance in the city from 30 percent minority to about 65 percent minority. Average household income has plummeted.

"After the `67 riots, the market changed drastically," said Jack Robinson, chairman and chief executive of Perry Drug Stores, in an interview with Drug Store News.

No place for a drug chain to make money, right? Wrong. Perry is churning big numbers and rapid sales growth in its 12 inner-city stores by catering aggressively to a special market and seizing opportunities other chains have neglected or left behind.

Indeed, Perry has much of inner-city Detroit to itself. Its two hometown rivals, Arbor Drugs and Concord-Wrigley, each operate a handful of drug stores within the city limits, and Revco has two drug stores still open in Detroit. A scattering of independents also remain, most with little or no front end to compete with.

Beyond that, K mart and Farmer Jack, a local food chain purchased last year by A&P, also operate a few pharmacies in their Detroit stores.

Thus, Perry has taken the most aggressive role in meeting the drug store needs of a city with a population that still exceeds 1.2 million, and which still serves as the anchor to a metropolitan area of nearly 5 million.

"We see the inner city as a real niche opportunity," added Gary Allen, senior vp-store operations.

Perry's big push into the city came in April 1985, when it purchased the remnants of the old Apex drug chain. Apex itself was an outgrowth of the old Cunningham chain. "Before the Apex buy, we had just two stores in Detroit," said Robinson.

By moving into the city at a time when others were moving out, Perry has positioned itself for a resurgence that many say is bound to come.

A bright future?

"I think there's a stigma attached to the city that's been unfair," noted Martie Karr, district manager for Perry's 12 inner-city drug stores. "The city is spending money to build itself up again."

Two recent construction projects downtown certainly attest to a resurgence here. One is an elevated train called the People Mover to shuttle downtown workers quickly between offices, restaurant areas and other sites. The other is a spiffy new retail and residential complex on Detroit's Riverfront, called Harbortown.

Perry has a recently remodeled, two-year-old drug store doing big business in the Harbortown shopping center. It also has high-volume units near the bustling Greektown area and in some of the densely populated inner-city neighborhoods that ring downtown.

"We now have a format with which we can effectively compete in a highly urbanized setting," said Robinson.

More than half of Perry's 12 urban Detroit stores have been remodeled or built from the ground up in line with the "store of the `90s" look. They feature high-impact graphics and displays, a heavier emphasis on service cosmetics, pharmacy and home/office supplies, up-to-date colors and signage, and a cleaner, less cluttered look. They also sport heavier concentrations of inventory on the selling floor: about 30 percent more than standard Perry stores.

The chain's 92 remodeled stores are reporting average gains of 7 to 8 percent, but renovated inner-city stores are chalking up gains that are twice that high: 14 to 15 percent, Perry officials report.

Even before the renovations, however, volume was heavy in Perry's urban locations. Both its two highest-volume and highest-profit drug stores are located within the city limits.

One of them anchors an older shopping center in an all-black neighborhood at the intersection of Grand River and Fenkell avenues; the other, Perry's current top producer in both revenues and profitability, is a remodeled 13-year-old store at the intersection of Nine Mile and Greenfield roads near the city limits. That store averages 550 scripts a day, according to store manager Joe Haddad, from a customer base whose racial makeup shifts from 50-50 black-white during the day to almost all black at night, when white workers have gone home to the suburbs.