Drug Stores Rx For Profits: Offer More Than Prescriptions

Earnings are skyrocketing at drug stores — Walgreens alone saw its earnings grow nearly 70 percent in the last quarter. Drug stores no longer handle just prescriptions and selected sundries. Big chains now compete with grocery stores and sandwich shops. Consumers are also shopping there for holiday gifts.

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Many of you are waking up this morning probably thinking finally I don't have to think of that holiday shopping list or figure out what store to go to today. Turns out many shoppers this year chose places like Walgreens and CVS. Earnings are skyrocketing at drugstores. Walgreens alone saw its earnings grow nearly 70 percent in the last quarter. This is as mid-level department stores such are Sears and JCPenney are faltering. Here's NPR's Sonari Glinton.

SONARI GLINTON, BYLINE: So I'm standing in the aisle of the local drug store near NPR West. In this aisle there are toys on one side, a heated scarf and what looks like a lava lamp, and on the other side is, of course, a Whitman sampler. You can find a little bit of everything here. Before I came to the store I talked to Chris Christopher. He's a retail economist. He says this is a new trend throughout retail.

CHRIS CHRISTOPHER: Thirty or forty years ago at gas stations all you got was gasoline. Now you can get everything from you know laundry detergent to bleach to a nice sandwich or a Slurpee.

GLINTON: So if you're a local chain drug store, you're also competing with grocery stores and sandwich shops.

CHRISTOPHER: It's a little harder to define what many retailers do, since a lot of them do a little bit of everything now.

GLINTON: At the same time, the local dollar stores are nipping at the heels of drug stores for the low cost items. That's while big box stores like Wal-Mart and Costco have pharmacies.

CHRISTOPHER: It's a little difficult, you know, to just be a drugstore. So you have to sort of compete with certain chain stores that are very large, have a lot of pricing power. In addition, they can do a lot of things at a very low cost.

GLINTON: Consumers are expecting a little bit of everything from all their retailers. Rob Price is head of marketing at CVS. He says increasingly the holidays are important for drugstores because the consumers demand it.

ROB PRICE: Customers are looking for giftables, beauty items, fragrance - but they're also looking for surprising items like personalized photo items and assortments of toys and decor.

GLINTON: If the local chain stores can't compete on prices when they're trying to give you a little bit of everything, one of the ways they can compete is by being everywhere.

RACHEL BISHOP: Between 2000 and 2010, our real focus was store growth in order to put together the network stores that we have today.

GLINTON: Rachel Bishop is with the Walgreen company. With over 8,000 stores and nearly 75 percent of the country covered, she says they have to find a different way to grow.

BISHOP: And now what we're looking at is how we get more out of each one of those stores. And we certainly continue to grow and to add stores, but we do have fewer sites that are available to us.

GLINTON: Bishop is in charge of merchandising for Walgreens. She says there's an increasing importance for non-drug store sales. Five years ago, the company branched out into beer and wine and it's beefing up its grocery offering. She says it's not just about the gifts.

BISHOP: And they're looking for yoga accessories. They're looking for vitamins. They might be looking for home health care and additional items that they need to take care of themselves, specifically for that, you know, boomer customer, for those that have more complicated health needs.

GLINTON: So here's a potent formula for the new success of the local chains. Ten thousand people a day are turning 65 and there are an increasing number of chronic illnesses. Rob Price with CVS says part of why stores like his have to get the holiday season right is because of all the new people who are going to be coming in because of the Affordable Care Act.

PRICE: We see exceptionally exciting growth of all these newly insured customers who aren't only going to be looking for prescription services, but they're going to be looking for preventative care services like flu shots and vaccinations.

GLINTON: And maybe after those new people come in, they'll pick up a toy or a greeting card on the way out the door. At least that's what the local drugstores are banking on. Sonari Glinton, NPR News, Culver City.

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