You are here
You hear it all the time these days: The lines distinguishing retail channels are blurring. The defining factor in any retail business today is not its product mix, but how it solves a convenience problem for customers. How does a store, supermarket, restaurant, home improvement center or chain drug store meet the endless consumer craving for convenience?
The blurring of retail boundaries is why the label "convenience store" on a small shop attempting to sell packaged beverages, snacks, hot coffee, beer and cigarettes could be a misnomer if its location is bad, its hours too limited, its presentation unappealing and its merchandise off-target. It's an inconvenience store.
And this is why sometimes a Home Depot, Whole Foods Market, McDonald's, Rite Aid or Walgreens is a convenience store, particularly given the fact that Walgreens is testing Cafe W, a self-serve beverage concept.
Still, one chain drug executive would not admit big corner drug store locations are often, in effect, convenience stores. The company spokesman said comparing c-stores and drug stores is like comparing apples and oranges.
Steve Loehr, vice president of operations for Kwik Trip Inc., with 370 stores based in LaCrosse, Wis., disagrees. "As for chain drug competition, I think the line is continuing to blur," he said. "More and more drug chains, as well as big box chains like Target, are carrying more and more convenience items. In our area, the fastest growing drug chain is Walgreens. They have a large selection of beverages, sandwiches, candy, milk and bread. They price them very competitively, too. We don't necessarily match their prices, but we do survey them when we do our price checks and always stay very aware of what they are doing."
Loehr said "Another way they compete with us is for real estate. They are very aggressive on paying whatever it takes for the corner they want."
A quick and admittedly unscientific study of a stretch of four-lane road off the Garden State Parkway in New Jersey, about one hour's drive from New York, seemed to confirm Loehr's assessment. On the westbound side of the highway, Convenience Store News found a large, clean Walgreens on a convenient corner with easy access to a large parking lot, and across a side street from a sparkling Quick Chek, a Whitehouse Station, N.J.-based chain with 100-plus locations.
Further along, a CVS stood on a corner, next door to a small independent gas station and across a side street from an Exxon station with a small store advertising "food." Finally, CSNews checked a big, bright Rite Aid, freshly rebranded a few months ago from Eckerd. Rite Aid also occupied an easy-access corner, and across the side street, its neighbor, a Gulf station, advertised a special on Marlboro cigarettes.
The Walgreens, open 7 a.m. to 10 p.m. daily, clearly sought to capture convenience store business from pharmacy customers with its abundant candy, snacks, groceries, six cooler doors and an open dairy case. A gallon of 2 percent milk was labeled $3.99. Quick Chek, with its own Durling Farms brand of dairy products, beat Walgreens the day CSNews visited with $3.19 for a gallon of 2 percent. A gallon of Welsh Farms brand 2 percent was priced at $4.29 at the CVS. The same milk brand, type and size at the Rite Aid cost only $3.49.
At Walgreens, a 12-ounce Red Bull would have set a customer back $2.99; an 18-stick pack of Trident sugar-free Tropical Twist gum was priced at $1.19, but $1.39 at Quick Chek, although the same product was also $1.19 at CVS. Walgreens offered a king-size Hershey bar with almonds for $1.29.
The CVS also made no bones about seeking convenience customers. Clearly visible from the entrance was the cooler section, with bagged ice, two additional freezer doors and 10 cooler doors. The store offered a generous selection of its own Gold Emblem brand of bagged candy for 99 cents each, and a multitude of other candy and snack items that would be at home in any c-store.
Paul Pierce, vice president of marketing at MAPCO Express Inc., with 497 stores based in Brentwood, Tenn., said he does not believe consumers use chain drug stores as a destination stop for c-store items, but that a customer already in a major chain drug store might buy typical convenience items rather than make an extra stop at a c-store.
"The threat is not necessarily with products but with the core essence of our business -- 'convenience,'" he said. "As a result, we must focus on that convenience aspect. We have to deliver the ultimate convenience with speed of service, great customer service and products that can fulfill that convenience need for consumers. We need to continually look for new products that can enhance the value of the consumer's stop in our stores. Consumers will always need to do things quickly. Other trades will continue to compete for our customers. We just have to keep doing it better."
The major drug chains show no signs of letting up on exploiting the core essence.
Meet Me at the Drug Store
In what could be an interesting return to the once-ubiquitous soda fountain at the local drug store, Walgreens is in the early stages of developing Cafe W, self-serve counters that typically offer one or two coffee machines, fountain beverages and ICEEs. Snack displays can include single-serving cookies, crackers, breakfast-type bars, nuts and candy, according to Carol Hively, corporate spokeswoman.
"We are in the very early stages of developing Cafe W, with fewer than 200 of our stores having them," she said. "For competitive reasons, we don't release information on customer response or why we see the value of adding them, except to say that we see a demand for them.
"Since we're still testing them, we have not released the number of Cafe Ws we plan to have, or where they will be," Hively continued. "This is an evolving concept, so Cafe W may not stay the same going forward." She did say early markets included Wichita, Kan., and El Paso, Texas, and the concepts are expanding in Pittsburgh; Orlando, Fla.; Denver and spreading to Colorado Springs, Colo. In Hawaii, Cafe W locations will sell Kona coffee, she said, adding, "Cafe W has been evolving for years, with some versions emphasizing a cooler case of sandwiches. The current version emphasizes beverages."
Walgreens' total store count is 6,179, and all stores offer convenience food such as snacks, candy, packaged beverages and bottled water. "A typical store offers cooler items such as lunchmeat and dairy products, bacon, eggs, juice, milk, cheese, butter, margarine and yogurt," Hively said. "Frozen items include entrees, pizzas, vegetables, ice cream and bagged ice." The list goes on.
Stores do not sell fresh meats or produce, she said, although some Cafe Ws sell apples and bananas.
These items fall under the general merchandise category in Walgreens' world, a category that represents 25 percent of inside sales. Compare that to nonprescription drugs, which represent only 10 percent of inside sales, according to Hively. (Prescription drugs pull in 65 percent of sales.)
C-stores do appear to have an advantage in one aspect -- 24-hour service. Only a small percentage of Walgreens, for example, are open 24 hours (1,614 stores out of the total 6,179). However, the race continues, and the pressure to win the busy, time-starved 21st century customer continues unabated.