A prescription for success - omni-channel transformation at Walgreens Boots Alliance

Stuart Lauchlan Profile picture for user slauchlan April 4, 2022 Audio mode
Summary:
Walgreens in the US and Boots in the UK have enjoyed varying degrees of omni-channel success.

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The goal is to support the patient journey across the entire care continuum through omni-channel solution. 

That’s the mission statement articulated by Rosalind Brewer, CEO of Walgreens Boots Alliance. In reality, the company is an example of mixed fortunes either side of the Atlantic even as the sales of Boots in the UK becomes an agenda item.

Let’s start with the US. To any non-US customer, a visit to a US drug store is not like a visit to a pharmacists in, for example, the UK. Shelves stacked high with all forms of products, from medication to makeover, from health goods to family packs of junk food snacks. That’s always been the case, although the vision for Walgreens has evolved. Brewer says:

We're moving quickly to execute our vision of consumer-centric, technology-enabled health care solutions, which extend well beyond the pharmacy walls. As we begin to offer a care delivery experience that improves health outcomes and lowers cost for patients, providers and payers, we are well positioned to drive accelerated sustainable value creation.

Digital transformation is playing its part here, she argues:

We are transforming and aligning the core business and building a pharmacy of the future that will enable and support our health care strategy. We saw continued momentum online in the second quarter with digital sales up 38% in the US. or 116% on a 2-year stack basis. Same-day pickup orders accelerated sequentially to 3.9 million orders…We have 3 automated micro fulfillment centers open and are on pace to have 22 by the end of fiscal '24, driving significant efficiencies and cost savings over time. We expect these centers to ultimately cover 40% to 50% of prescriptions for pharmacy served, removing routine tasks and excess inventory from the local sites.

There’s also a lot of focus on digital marketing, she adds:

We have also enrolled over 96 million myWalgreens members, up nearly 11 million since the fourth quarter. We are now focused on activating members through personalized omni-channel messaging and offers. Additionally, our alternative profit streams are performing well, including our media advertising business, which launched a year ago and is running ahead of expectations. We continue to see digital media as a significant opportunity for us.

Personalization is essential, states President John Standley:

I think we've done a great job here. We have a lot of upside with our program here and kind of where we're going between that program and the Walgreens advertising group and the different things that we're working on there. So I think just from an omni-channel experience, some of the capabilities we've built and where we can go here over the next couple of years, I think a lot of potential and exciting upside for us.

Over the pond

Meanwhile in the UK, there’s been an uptick in the fortunes of Boots. Founded 1849 by John Boot in Nottingham, the brand has 2, 263 stores in the UK. There have been a number of outlet closures in recent years to balance out that real estate as more attention has been placed on creating that elusive omni-channel retail balance. 

In fact Boots has made some promising advances here, according to the Alliance’s CFO James Kehoe. Sales via boots.com are up 60% compared to pre-COVID levels with more than 15% of total UK retail sales coming from digital channels, up from around 9% pre-COVID. That digital expansion is crucial as Kehoe notes:

Foot traffic hasn’t fully recovered in the UK I think it’s like in 15% below where it was 2 years ago, just in terms of foot traffic….Look at the quarter they just have, and foot traffic was actually up 52%, but it still remains about 15% below where it was 2 years ago, right? So it hasn’t fully returned

Boots.com deserves more credit than it’s given, he adds:

That’s 60% growth on a 2-year stack basis. I don’t think there’s many retailers in the UK. that have a boots.com business that represents 15% of sales. So this is a business that used COVID as a time to really invent itself and exit much, much more strongly than it went into COVID. So this is a business with massive momentum and small position for the future, has a large and fast-growing dot-com business.

My take

That growing digital base will be a useful asset if the sale of Boots goes ahead as seems inevitable. With growing competition from online pharmacies as well as the likes of Amazon, having those online capabilities will be essential for future growth. That said, I personally feel you can’t recreate the experience online of wandering the aisles of a US drug store.

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