Journal of
Corporate
Renewal
March
2017
and lead the transformation of Duane
Reade. He quickly assembled a team of
executives and dove in to understand
the long-ignored needs of its customers
and identify strategic “white space”
for the brand to position itself within.
Baseline research programs—including
online surveys, focus groups, executive
interviews, and informal conversations
with customers and associates
in stores—were used to identify
unmet consumer needs, competitor
gaps, and employee attitudes.
Four important insights emerged
from the research: ( 1) Duane Reade
was synonymous with New York
and the very idea of living there; ( 2)
New York was a powerful brand in its
own right, which could be leveraged
more fully; ( 3) life in New York was
considered hard, and Duane Reade, as
imperfect as it was, was one way for
New Yorkers and visitors to make things
a little easier; and ( 4) the ability of the
business to adapt to the widest range
of real estate configurations—small,
medium, and large spaces, in single-floor and multilevel configurations
of almost every proportion—and its
ability to tailor offerings within each
location to the neighborhood it served
were substantial strategic advantages.
These insights became the basis
for the chain’s transformation.
Underneath it all, New Yorkers still had
a pride of ownership and affinity for
the Duane Reade brand and its New
York heritage because it was associated
with the fabric of daily life in the city.
Indeed, it was a brand most New
Yorkers grew up with and that visitors
from around the world could not find
anywhere outside the five city boroughs.
And while everyone generally hated the
Duane Reade shopping experience, they
still had some deeper connection to and
affinity for the stores. By understanding
this relationship and recognizing
the potential to further build upon
it and differentiate, the executive
team saw an enormous business
opportunity. The team collaboratively
defined the mission simply as,
“Build the best urban drugstore in
America,” and systematically went
about aligning every aspect of the
proposition around a new brand
mantra, “New York living made easy.”
Leveraging the opportunity they
identified required a bold move:
changing the conventional drugstore
game by becoming a “category of one”
and offering products and services
unavailable in other drugstores. The
strategic white space that Duane
Reade could uniquely and credibly
occupy offered many opportunities
for growth: food, beauty, personal
care, and expanded convenience
categories—a “daily living” proposition
uniquely tailored to the market. This
thinking would lead to reimagining
what an urban neighborhood
drugstore could be and paved the
way for Duane Reade to return to
growth and gain strategic advantage.
Bringing Strategy to Life
The executive team decided that
to succeed, Duane Reade had to
cater to the shopping attitudes and
lifestyles of health-, beauty- and style-conscious New Yorkers looking for
ultimate convenience to meet their
needs—to serve as an “urban oasis”
in the hectic daily life of the city.
With a clear strategy in hand, the team
moved quickly, and in the fall of 2008—at
the onset of the Great Recession—began
renovating some of Duane Reade’s most
prominent stores. By early 2010, Oak
Hill, with growing confidence in the
strategy on the basis of initial results,
invested another $125 million to fund
the accelerating transformation and
prevent the company from defaulting
on its debt. The decision may have
seemed nonsensical to outsiders in
view of the company’s past weakening
performance, but it reflected the firm’s
commitment to buying more time
for the strategy to be implemented.
To improve the overall shopping
experience, a key part of the strategy
to deliver “easy” for New Yorkers, the
team widened aisles; improved lighting,
merchandise displays, and fixtures;
installed new signage; and overhauled
the overall “zone and flow” of the stores.
Stores were reorganized into three
sections focused on lifestyle needs
and shopping occasions: how I look
(beauty and personal care), how I feel
(prescriptions, health and wellness),
and what I need now (personal
and household consumables).
A notable addition was a “
grab-and-go” section established at the front
of the stores as a unique food and
beverage proposition for time-pressed
individuals. Sales in renovated Duane
Reade stores, of which there were 30 by
2010, grew to 55 percent of overall sales
versus traditional drugstore/pharmacies
at less than one-third of sales.
To address one of its customers’ oft-cited
pain points—perpetually waiting in line,
while also being unsure of which register
they were in line for or even if they were
in a proper line at all—the redesigned
stores added an efficient single-line
queuing system and more cashiers.
From a merchandising perspective,
the store needed to be much easier
to shop, beyond merely how it was
organized. Management decided
to aggressively curate the offerings,
resulting in a reduction of SKUs in most
categories by 10 or even 15 percent.
The counterintuitive results included
customers crediting Duane Reade
with having more variety2 afterward
and sales increasing by an average of
15 percent in overhauled categories.
The team also launched a store-within-a-store concept, the Look
Boutique, a bright, modern space
featuring up-market beauty brands
and beauty advisors and services,
adding a premium look and feel to
the Duane Reade experience.
The new store experience was also
further localized with additional offerings
to reflect particular neighborhoods.
For example, the Williamsburg
location offered craft beer growlers,
while the updated Wall Street location
offered sushi, smoothies, and
“blow bar” hair styling. Such moves
furthered Duane Reade’s vision to
create a full-service, one-stop shop
catering to the unique needs of its
customers at a much deeper level.
Taking cues from best-in-class retailers
around the world, the organization also
retooled its broad portfolio of private
labels in favor of a smaller portfolio of
true private brands. A flagship brand,
DR Delish, was created to deliver high-quality yet affordable food products
with a New York twist, the kind of
brand-defining exclusive offerings
that could halo the banner brand and
incent customers to consider Duane
Reade as a daily destination. The new
private brands featured local landmarks
and iconic New York imagery to
reinforce the brand’s new “Your City.
Your Drugstore.” advertising campaign.
Sales of private-label products doubled
between 2008 and 2010, 3 and overall
sales in renovated stores increased
by percentages in the high teens.