Aggressive Expansion for Walgreens

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Aggressive Expansion for Walgreens

TUCSON, Ariz. -- If convenience store retailers in Arizona aren't competing with a Walgreens drug store they will be soon. With 44 area locations in Tucson, Walgreens' corner drugstores already outnumber McDonald's by seven to one. And that's just the beginning. The Deerfield, Ill.-based company has seven more stores scheduled to open later this year. It plans to open new stores in each of the next several years, growing toward a goal of 64 by 2010.

"We see a lot of opportunity left in the market," Walgreens spokesman Michael Polzin told the Arizona Daily Star

Blanketing a city is a strategy the company uses nationwide. Its goal is to have a Walgreens within 15 minutes of every American living in a city or town. Some areas exceed that: One downtown Chicago neighborhood has 14 Walgreens stores in a one-mile radius. From a business perspective, the approach makes sense, observers say. It creates a powerful convenience factor that breeds customer loyalty. It creates buying power that lands the company better deals from suppliers. And it serves as a form of advertising, keeping the stores at the top of consumers' minds, the report said.

This aggressiveness is aimed at a lucrative and growing market - baby boomers reaching their 50s, with all the health problems and prescription drugs that brings.

Pima County's 50-and-older population is expected to grow by more than 30 percent by 2010, to about 353,000 from roughly 270,000 last year, according to the city of Tucson's Planning Department. "You've got to take a look at the demographics. We have a lot of senior citizens living in Tucson, a lot visit here in the winter time," said Walgreens district manager Mort Grayam. "Those are the people who are going to be multi-users of prescriptions."

The strategy seems to be working well for Walgreens. The company has a solid track record in the industry. Of the more than 3,000 locations it opened nationwide over the last decade, only two have closed because of poor sales. The stores each average $7.1 million in annual sales, and last year they collectively filled 361 million prescriptions, the report said.

A key to its success is convenience, and other drug store chains are targeting that segment. While Walgreens is Tucson's market leader, capturing more than 60 percent of the local drugstore business, Osco, took 11 percent of the market. Another chain, Clearwater, Fla.-based Eckerd Corp., plans to open its first Tucson store later this year. The 14,000-square-foot store will feature a drive-through window.

Yet another chain, Woonsocket, R.I.-based CVS Corp., recently opened 11 stores in Phoenix. CVS spokesman Mike DeAngelis said the company continues to expand, but doesn't have specific announcements about Tucson.