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DEERFIELD, Ill. -- The Walgreen Co. is changing along with the drug store industry by looking to the past, as well as to the future. Not only has the retailer been in front of the in-store medical clinics trend, but also—harkening back to the days of the soda fountain—it has been ramping up its fountain drink, coffee and snacks offering through Café W, a compact counter version of a convenience store’s beverage and snack area.

“They’re going back to what they used to be,” John Melaniphy Sr., a Chicago-based retail consultant, told The Daily Herald. “People forget Walgreens had fountain drinks and food 40 or 50 years ago.”

Café W is still in the testing phase, with about a half dozen in the Chicago area and more than 100 across the country, Catherine Lindner, divisional vice president of marketing development at Deerfield, Ill.-based Walgreens, recently told the newspaper. “Café W,” she said, “is our way of going back to the future.”

Designs vary from an elaborate collection of grab-and-go foods and beverage products on wood-grain counters (pictured) to a simple, unadorned counter big enough to hold only a couple machines (at a Mount Prospect, Ill., location visited by CSP Daily News). Walgreens spokesperson Michael Polzin told CSP Daily News, “We've been testing and tweaking the design for a few years, so actually there are quite a few different designs out there as the concept has evolved. I'd imagine it will continue to evolve in the future, too. It changes as we learn more and more from additional stores' experiences.”

Click here for an independent blogger’s take on Café W.

http://ryankarpeles.blogspot.com/2007/05/what-can-cafe-w-teach-us-about-finding.html;

“We're currently installing [Café Ws] in locations in the Baltimore, Orlando and El Paso markets. Beyond that, any other rollout is still to be determined,” Polzin added.

As for the clinics, nurse practitioners diagnose, screen, vaccinate and sometimes treat patients. A supervising doctor is on call. Open seven days a week until 8 p.m., the clinics don’t take appointments, just walk-ins. The average visit costs from $59 to $74. The target customer is a mother, 35 years old or older.

“They answer a need not being filled in our society and that is convenience and immediate access,” Dr. Stephen Sproul, who oversees the clinic at a Mount Prospect, Ill., Walgreens store, told the paper.

Walgreens currently has 63 clinics operating in stores across the country and aims to have 400 by next year, the report said. In-store clinics are the latest retail rage, popping up in Wal-Mart, CVS and Target stores. Their ranks are expected to boom to about 6,000 by 2012, according to the report, citing California HealthCare Foundation, a research group.

Melaniphy said retail analysts already have a slang terminology for the clinics: “Docs in boxes.”

Other “convenience” service being offered by Walgreens include printer ink cartridge refills and Internet photo uploads at Walgreens.com. Drive-throughs started appearing at local stores in the early 1990s but now are a staple of most of its 5,807 stores. The additional features at Walgreen’s stores mean some stores need modifications, said the report, and new stores are larger, up from 13,000 square feet to around 14,500 square feet.

Still, as much as Walgreen’s stores have changed, Lindner said continuous research at stores means more changes are in the works. “The Café W you see today won’t be the same Café W in a couple years,” Lindner said. “There are very few times we do something and then just stop.”

Polzin declined to indicate interior changes in the works, but told the Daily Herald that tests are being conducted at select stores around the country. “There’s probably 100 tests going on around the country all the time and most customers won’t ever see them,” he said.

Walgreen Co. is the nation’s largest drugstore chain with fiscal 2007 sales of $53.8 billion. The company operates 6,014 stores in 48 states and Puerto Rico, including 77 Happy Harry’s stores in Delaware and surrounding states.

Meanwhile, like the pharmacies, the clinics may draw customers into the store, where they will possibly make other convenience purchases.

“We’re seeing remarkable gains within the drug store channel, as drug store retailers leverage core strengths in health and beauty to bring consumers into their stores and drive incremental purchases,” Information Resources Inc. (IRI) Chief Marketing Officer Andrew Salzman said in a press statement. “The battle for consumer trips is in full swing as time-constrained shoppers look to accomplish more in less time, and drug stores are clearly stepping up to the challenge.”

A recent IRI study, “Channel Migration 2007: A New Cross-Channel Battleground Emerges,”  found that while consumers have steadily decreased their total number of shopping trips during the past five years—consolidating trips in response to high gas prices and a greater ability to get more of what they need in a single stop—drug stores have managed to increase trips. Further, consumers are not only visiting drug stores more often, they are spending more when they are there. The average drug store basket significantly increased by 6.9% versus last year, which is nearly three times the total industry increase across all CPG outlets.

Healthcare-based trip-building strategies appear to be working, IRI said. Drug stores are implementing programs, such as Medicare Part D educational outreach to seniors and expansion of in-store health clinic availability, that are driving store traffic. These programs offer distinct new growth opportunities for manufacturers of products with disease management benefits, including food and beverages as well as prescription and over-the-counter remedies, through tie-in promotions and cross marketing.

The study shows that drug stores captured a half-point share gain in total CPG spending this past year—a sizable increase considering the fact that drug store total share is only 5.6%. This was the largest increase of any channel, including supercenters.

Other key findings by IRI include:

• The dollar flow from grocery stores to supercenters evident during the past several years has moderated considerably; supercenters only gained 0.2 share points this past year, as grocers lost 0.2 share points.
• While total CPG share shifts were modest compared to historical averages, there were large shifts at the category level, where the new cross-channel battles are played out; major swings in channel share occurred in ready-to-drink tea/coffee, hot cereal, shampoo, hair conditioner and toothpaste, for instance.
• Most major channels, including grocery stores, drug stores and supercenters, earned share increases among their heaviest shoppers that far surpassed their all-household share gains—a testament to efforts, including loyalty marketing and relevant assortment, aimed at protecting and growing share among core consumers.
• Value channels, including supercenters, club stores and dollar stores, lost household penetration as consumers increasingly seek out shopping experiences that meet a range of needs beyond price.
• Small-format, express stores will likely be the “movers and shakers” of the future, filling a market gap that exists today in addressing consumer needs on quick trips for fresh foods and prepared meals.

But according to a recent, separate Forrester Research study, only 3% of people surveyed have used a store-based health clinic; however, 55% said they would definitely use a clinic again. Only 9% who used in-store clinics said they visited them because they were less expensive than other health care options.

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