Walgreens, with more than 9,000 neighborhood drugstores in the United States, has a business model based on being a convenient place to shop. Now it is taking that model to a new level by offering on-demand deliveries by DoorDash.
This summer, Walgreens rolled out DoorDash delivery service to more than 800 stores in 16 markets across the country.
Customers can get 5,000-plus health, beauty, grocery and other non-prescription items delivered within 30 minutes via the DoorDash app.
The collaboration with the third-party service is part of an ongoing effort at Walgreens to enhance its omnichannel offerings and to provide customers more convenient, accessible and safe shopping and delivery options, Stefanie Kruse, vice president, digital commerce and omnichannel at Walgreens, told CO—.
It comes as the pandemic pushes consumers’ DoorDash-food ordering, Uber-hailing, Nextflix-streaming on-demand purchasing behavior to new heights.
And against the backdrop of COVID-19, the on-demand trend has further fueled business, in particular, at essential retailers including supermarkets and drugstore chains like Walgreens.
“As a pharmacy and healthcare-backed company, we are trying to provide our customers with the safest, most convenient ways to get their solutions,” Kruse said. “Being able to service customers in a way that is on their own terms and very easy and convenient for them is where we have excelled in the past from a brick-and-mortar standpoint, and we are continuing to deliver on that need digitally,” she said.
We also believe that it is highly likely that certain aspects of customer behavior may change permanently.
Stefanie Kruse, vice president, digital commerce and omnichannel, Walgreens
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Leveraging the drive-thru edge
The DoorDash service builds on the innovation-geared investments Walgreens made before and during the pandemic to expand its services both online and in stores.
These include new curbside and drive-thru window pickup options, telehealth offerings, COVID-19 testing and plans to begin adding primary care clinics to stores.
Walgreens, unwittingly, had a distinct advantage over much of its competition when the pandemic forced many retailers to switch to curbside pickup. Over 7,300 of its stores have drive-thru windows, giving it an existing infrastructure for store pickups.
Prior to the pandemic, those drive-thru windows were used for pharmacy orders only and were staffed by pharmacists. In May, Walgreens began letting customers use the drive-thru windows to pick up more than 100 non-pharmacy items that could be ordered online.
Walgreens CEO Stefano Pessina in a July earnings conference call said the company has seen “unprecedented” demand for home delivery and online services, and that expanding those services “is a core strategy for us.”
“We also believe that it is highly likely that certain aspects of customer behavior may change permanently,” she said.
Walgreens.com sales rose 23% during the third quarter of this year, which ended May 31, and traffic on its mobile app soared 200%.
Walgreens’ stores in cities have been hit hardest during the pandemic, as work-from-home policies have kept office employees away from drugstores near their offices. Sales at urban stores were down 18% during the third quarter, but sales at rural stores were up 8%.
DoorDash, meanwhile, has been racing to expand beyond its original business of restaurant deliveries to include grocery chains, drugstores, convenience stores and other retail categories, as it prepares for an expected IPO in November or December.
DoorDash is offering Walgreens customers 20% off their first DoorDash delivery of Walgreens items. Walgreens merchandise also is available on DashPass, the DoorDash subscription service that gives members unlimited free deliveries in exchange for a membership fee.
Unlocking the brand equity of other brands
Via a series of wide-ranging partnerships that now includes DoorDash, Walgreens has been working to expand its shopper reach by unlocking the brand equity of other brands.
The drugstore chain also has a partnership with rival on-demand delivery service Postmates that launched last year in New York City, and expanded nationwide to more than 7,000 stores at the end of March.
And as prescriptions cannot be delivered by DoorDash or Postmates, Walgreens has a partnership with FedEx for next-day home delivery of prescriptions.
Retailers like Walgreens typically partner with multiple delivery services because coverage can vary from region to region or even within a city, said Tom McFadyen, CEO of McFayden Digital, a digital commerce agency that helps retailers create marketplace platforms.
Delivery services like DoorDash, Instacart, Postmates and others are eager to add retail partners because in addition to expanding their potential base of customers willing to pay delivery fees, it gives them more opportunities to sell ads promoting certain products on their apps, or to collect data on customer preferences, which they can sell back to retailers, McFadyen said.
The delivery service, rather than the retailer, gets the customer data when a shopper places a delivery order, but retailers consider the added sales to be a worthwhile tradeoff, McFadyen said.
“We work with about a dozen grocery and related retailers that use these services, and they say they hate the fact that they lose the data, but they love the fact that these other services are bringing additional traffic and new customers,” McFadyen said.
Hot on-demand items: food, over-the-counter medication and holiday fare
The initial customer response to the DoorDash-Walgreens collaboration has been very positive, Kruse said. “We have been really pleasantly surprised by how well the rollout has done, and how broadly it has been adopted thus far,” she said.
Food items have been among the most popular purchases by DoorDash customers, but Walgreens is also seeing strong demand for over-the-counter medicines and other health care products, as well as gifts related to holidays or celebrations such as Mother’s Day and graduations.
Walgreens was working on enhancements to its digital offerings before the pandemic, which helped it respond quickly to new demands during the pandemic, Kruse said.
“We already had a lot of the technology in the works,” she said. “Probably most importantly we had the mindset as well, and the customer and patient-focus and desire to really help people through this. That has really helped us adjust to the changing environment very rapidly,” she said.
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Published September 16, 2020