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[14 comments]

Walgreens Offers Online Ordering and Store Pickup Service

June 29, 2011

When Walgreens announced the deal for Drugstore.com in March, CEO Gregg Wasson said the acquisition would help advance the chain's goal of "becoming the most convenient choice for health and daily living needs whether customers shop online or in our stores."

Now, it appears, the company is looking to become an even more convenient multi-channel shopping options for consumers with the announcement that it will offer online ordering with in-store pickup at 480 locations in the Chicagoland area. This comes on top of a test in the San Jose, CA market where the service is available in 27 stores.

"Our customers value choice, control and convenience and Web Pickup brings all of these together to cater to on-the-go shoppers," said Sona Chawla, president of e-commerce for Walgreens, in a press release. "We've developed many innovative ways to engage our growing numbers of online shoppers and to make Walgreens.com a great shopping experience. By adding the convenience of in-store pickup and soon curbside delivery, we're making shopping easier than ever before."

Shoppers may place online orders at www.walgreens.com/webpickup for most non-prescription items found in Walgreens. Orders can be ready for pickup in as little as an hour's time. Select stores will offer curbside pickup with a $20 minimum purchase.

"To shop online anywhere, any time and be able to pick up in as little as an hour is a great convenience, especially for busy moms, those who might have kids in the car, our mobility challenged customers and many others," said Ms. Chawla. "Traffic to Walgreens.com has grown 50 percent over the last two years, so we know that more and more customers enjoy the convenience and intuitiveness of our website as well as the wide product selection."

FINANCIALS:     [NYSE:WAG]

Discussion Questions:

Discussion Questions: What do you expect from Walgreens' Web Pickup service? Do you see it having any particular advantages/disadvantages compared to competing multi-channel retailers both in and out of the drugstore channel?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is Walgreens to succeed with its Web Pickup service?

Comments:

I don't see a huge difference between this service and Walgreens' longstanding offering of automated phone reorders with drive-through pickup. (It's not a big leap in technology.) The real sign of progress will happen when Walgreens figures out how to solve congestion problems, both at its pick-up window and at the drive-through lanes. At least in my experience, Walgreens continues to struggle with "front of the store" and customer service issues that are holding it back from its "convenience" brand promise.

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Dick Seesel, Principal, Retailing In Focus LLC

Walgreens needs to be a multi-channel force in the marketplace and it's obvious that they are working toward that end. The real issue will be how well they are able to execute the in-store pick up process for their customers.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

The curbside pick-up is a nice convenience feature that I have not seen elsewhere (aside from restaurants). I believe it will gain traction and you will soon see it other places. This is a logical extension of the "click and pick."

Most traditional retailers shudder at this concept because it breaks a basic rule of retailing by taking traffic out of the store. It appears in a multichannel world that "rule" is being rewritten.

Paul R. Schottmiller, Senior Vice President of Strategy, Retail and Consumer Goods, Merkle

It's a nice option and won't necessarily reduce impulse purchases - it just shifts the burden to drive higher baskets to the website.

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Al McClain, CEO, Founder, RetailWire.com

The early online to in-store programs have involved larger retailers and covered such departments as durables (Home Depot, Best Buy, Sears, Walmart) and apparel/accessories (Nordstrom, Macy's). These multi-channel models helped shoppers find what they want in research-intensive and variable-inventory categories like electronics and handbags.

Walgreens suggests a value proposition for convenience as well. Walgreens can grab more of the quick trip business by offering a speedier alternative for shoppers on the way home from work, with physical disabilities, and with children in the car. As Paul notes, special parking spots and curbside pickup create a "drive-thru" experience, which has shown that even shaving 5-10 minutes can have dramatic results.

Strategically, this move also helps Walgreens capture more grocery business and drive more website traffic, two key initiatives.

Forrester estimates half of in-store sales are influenced online. Walgreens shows how new store formats are getting in the game.

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Dan Frechtling, Vice President, Global Product Management, hibu, PLC

Does anyone see a disconnect with the fact that we are fighting a losing battle with obesity in the US, and Walgreens, a company focused on providing products and benefits for our health, is allowing us to now shop without ever having to move our large rear-ends out of the car?

How obese should we get before we change our lifestyle habits?

Joel Warady, Chief Marketing Officer, Enjoy Life Foods

I appreciate all the issues around ensuring proper identity on prescriptions, but I really think that until that can be resolved it is risky for Walgreens to offer in-store pickup for online orders.

Online orders require additional labor costs for assembling the orders. I did not see any mention of a service charge although there is a $20 minimum for curbside delivery (I don't know what this means for drive up customers). Are these costs going to be absorbed by overall margins? When you think about the assortment characteristics of the modern chain pharmacy, they have really become a "convenience stores with deep HBA assortments". My local stores offer everything from prescriptions to frozen dinners, milk and bread. So what are people going to be ordering online? I don't think it is going to be high margin items like blood pressure instruments or water picks. Cold remedies and consumables will likely be a popular item, but many of the consumables may be on a prescription. Store employees have to be prepared for assembling the orders and the rules for substitution may vary by category or customer.

I am a big proponent of in-store pickup, but without prescriptions in the mix I think Walgreens risks needing to raise margins to cover the cost. The loss of impulse purchases and lower net may make the service more costly than expected.

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Bill Bittner, Principal, BWH Consulting

Good first step in the "last mile."

'estorerunner'

In Cleveland we have a famous little drug store called Ohliger Drugs. They have had a drive up window with this service available since the '60s. In addition, they go a step beyond and offer the ultimate in customer service by delivering right to your home. They cater to the elderly who can't get out, the mom who can't leave a sick child home alone, the single person who can't drag themselves out of bed to jump in a cold car and pick up the medicine they need. I have often wondered why other drug stores don't do the same. There is a lot more margin in drugs than pizza. These big chains should call Molly Ohliger or Tommy Ohliger and learn what customer service really is.

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Janet Dorenkott, VP & Co-owner, Relational Solutions, Inc.

The Walgreens team is once again paying close attention to their customers. The Web Pickup service effectively plays into the needs and practices of Walgreens' client base who choose them MOST often for prescription drugs, based on BIGresearch's Simultaneous Media Usage (SIMM) Survey.

Walgreens' customers consistently point out that they are living in an online world. A total of 79.5% of them say that they regularly or occasionally search Medical Information or Services online. 95.7% of them say that they research products online regularly or occasionally before buying them -- that indexes at 111 compared to the General Population.

And, a total of 21.7% of those customers maintain that they have purchased Medicine/Vitamins/Supplements over the last 90 days -- that indexes at 123 vs. the General Population. Finally, the Walgreens customer is likely to positively share their recommendation with friends and family about their experience with an online site. That patron offers Walgreens a Net Promoter Score of +32.6%, a significant lead over the +23.8% cushion that the General Population would offer their online site.

It pays to listen to the customer. Walgreens continuously does it very well.

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Roger Saunders, Managing Director, Prosper Business Development

Just pickup and skipping the line would be great, I think, for regular customers. I hope it goes curbside/in-car pickup as well.

craig keefner, manager, Retail Automation & Thin Clients

In-store pickup and curbside delivery offer great conveniences for consumers. But execution is always the key. These services could be a differentiator for Walgreens.

Odonna Mathews, President, Odonna Mathews Consulting

It would be interesting to see how this service ultimately affects sales and profits--comparing locations with this service and without. And how will this affect impulse buys and loyalty? There is a labor cost associated with filling each order and potentially some IT cost.

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Larry Negrich, Vice President, Marketing, nGage Labs

This is another step in Walgreens' progression to continually grow business through innovation and expansion. They are certainly not afraid to try new things, as demonstrated by the foray into fresh foods.

Walgreens' stated strategy is to be "America's first choice for health and daily living needs," whether it is by bringing fresh foods to the "food deserts," starting in their hometown of Chicago, by expanding online services through the Drugstore.com acquisition or by giving the time challenged a new benefit of store or curbside pickup.

I am curious to know how they will be defining and measuring the success of this program, for it could prove to be more cost than benefit. As outside observers, we'll have to guess at the success by the pace of the roll-out.

Dr. Linda Whitaker, Chief Product Officer, Quantum Retail

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