Summit Keynote: Walgreens Seeks Intimacy with Beauty Shoppers, Vendors

Using its new European affiliate as a model, Walgreens wants to “go big” in the beauty category by transferring the customer intimacy it provides through its pharmacies to the front of the store.So says Alex Gourlay, who joined Walgreens as president of customer experience and daily living in October 2013, a little more than a year after Walgreens acquired a 45% stake in U.K.-based pharmacy retailer Alliance Boots (with an option to buy the remaining 55% in 2015). Gourlay had been chief executive of the health and beauty division at Boots.Speaking in March during a Shopper Marketing Summit keynote presentation alongside WSL Strategic Retail CEO Wendy Liebmann, Gourlay detailed how Walgreens can learn from what Boots has accomplished in the beauty and health care categories.“Customer intimacy is really important to both companies,” he said. “Walgreens is the most trusted pharmacy in the U.S.; Boots is the most trusted pharmacy in the U.K. They both have the same background. Their stories are so similar.”But where customer intimacy is concerned, Walgreens doesn’t “get it fully in beauty care or personal care,” he said. While approximately 20% of Walgreens shoppers are very interested in health and beauty, “they’re not interested in buying very much from Walgreens because the experience and the intimacy is not there.”Boots has built that intimacy by offering a variety of unique “own brands” (that are distributed in the U.S. via both Walgreens and Target) and with its Boots Advantage Card loyalty program. Gourlay described the latter as a “treat” program because “customers are able to load their cards with points and buy something special for themselves.”He recounted what typically happens at periodic meetings that local Boots store managers have with groups of shoppers. “We start a conversation with them, and as soon as you get to what they like about Boots, within 30 seconds the room comes alive with people having a conversation about Advantage Card and how to find more points. And they know more about points than the management does. They are so committed to the card.”While Walgreens does have a loyalty program called Balance Rewards, its points are converted into "Redemption Dollars" that can be used on future purchases. With points from their Boots Advantage Card, shoppers buy premium beauty products, Gourlay said.“The opportunity in the U.S. is to make the card really significant and special in the shopper’s life — moving from the rational to the emotional so they almost can’t live without it.”Walgreens is leveraging its U.K. counterpart’s reputation by introducing Boots products within its high-profile cosmetics walls. “As we've started to roll out the Boots brands in markets like Phoenix and New York, we’re not just putting products on shelves,” Gourlay said. “We’re earning the right for a conversation with the customer to make sure that the whole experience is there for them."You don’t build this in six months. This might take us six years. And we’ll need a lot of support from partners to get to that position. You’ve got to be patient, and you’ve got to invest together, and you’ve got to invest in things that matter to shoppers.”Partnering in the ProcessWhile offering advice to Walgreens’ supplier partners, Gourlay emphasized bringing innovation to the table. “There are three ways to win: to be customer intimate, to be innovative, and to be lowest cost,” he said. “Fundamentally, we are a customer-intimate company. We are set up through our pharmacy heritage to be close to and have a great relationship with customers.“We will never be lowest cost because of the structure. And we’re not going to be the most innovative company. The manufacturers have to bring the innovation. So, bring us your innovation in an efficient way.“Walgreens is transforming from being a very insular company," Gourlay continued. "It’s been a period of massive change. We now want to get really close to you. We want to get close to how you think and how you see. Bring us innovation. We’ll bring you customers.”Global Differences Expounding on the presentation’s “global” theme, Gourlay identified what he sees as key differences between the U.K. and U.S. marketplaces:The U.S. market is built more around convenience: 24/7 and one-stop shopping.There is a greater separation between the "haves and the have-nots" in the U.S. In the U.K., he says, it’s a much more social system — prescribed medications are typically free.The U.S. market has an optimistic nature, while European markets are conservative. U.S. markets evolve more randomly and quickly.The store circular is nowhere near as important in the U.K. as it is in the U.S.; instead there’s a much greater focus on in-store marketing.The concept of private label is overplayed in the U.S.On that last point, Gourlay spoke directly to the brand marketers in the Summit audience: “You must be really fed up when you go into many retailers and see your great innovation [i.e., product] there at $5 and see the same packaging on the private labels, on the same shelf, at $3.50.” (Editor's note: This is a strategy Walgreens has consistently employed.)In the U.K., he said, retailers “innovate properly and give reasons the [that] brand they own has real value to the customer — sometimes lower price but often better marketing or better innovation. That has to be the moral for the future.”

P2PI MEMBERS

JOIN P2PI

You May Also Like

The Future of Ad Targeting – Why Retail Media is the Solution, Not the Problem

AD Retail Media’s Transition In-House