Wednesday, November 29, 2000
The secrets behind the drugstore explosion
LOOKING AHEAD by Wally Dobelis
Monday night I was passing the new Duane Reade super drug store on Third Avenue, corner 14th Street, in the latest NYU dorm building, erected on the site of that old hellhole, the Sahara Hotel. It is four blocks away from another Duane Reade, on 18th Street, in the space formerly occupied by Sloan’s supermarket. Its next door neighbor is a. CVS, on what I think was the former site of the D’Agostino supermarket. The CVS also has a twin, on corner 18th Street and Park Avenue South, in the location of the former Food Emporium supermarket. I guess supermarkets have had it, we also lost a Grand Union to the Cabrini Medical Center. The multi-job New Yorkers have no time to cook, that’s why we have so many restaurants and take -outs.. But why drugstores?
The lights were bright, the "Open" sign was clearly visible, and I decided to check out the ambiance. As I turned from the window, ahead of me a handsome tall man stepped our of the passenger side of a white unmarked van, straightened the jacket of his perfect pinstripe suit and walked into the store, cell phone in hand. After whispering a few words, he put the phone away and turned around, surveying the store with unmistakable pride of possession.
"How do you like this location?" I asked. "It’s great, but why are you asking me?" he wondered. "You look like the landlord." "I’m not the landlord but I am one of the executives."
"Great, there is something I’ve always wanted to ask one of you drugstore leaders. I write a local events column, and I could never figure out why there are so many large chain drugstores opening in the neighborhood, and all over the city."
"Well, a population of 50,000 supports one of our stores. In the suburbs we would be more widely spread." "Yes, but with another on 18th Street..." "It fits, demographically, New York is a vertical city, you know.". "Well, then, what about the CVS, next door, don’t they cut into the same 50,000 customers?"
"Please, you cannot compare them with us. Look at the height of the shelves, the richness of merchandise, the lights, the displays. People like a nice store" (he may even have called it elegant). "Besides, New York does not have convenience stores, no 7/11s, no Wal-Marts. None of those companies want to pay the rents for the large spaces they require. We fill a lot of that vacuum." (The economics seemed doubtful, but eventually I figured it out. Duane Reade, with mostly packaged food, bottled drinks, small clothing stock - stockings and underwear - and such electronics items as shavers, hair dryers and radios - can have a lot more per square foot turnover than the bulk merchandisers.) "But I think there’s enough business for all of us." "What about the Ma and Pa pharmacies?" "Yes, they have a problem."
"Where do you shop?" he now wanted to know. "At Elliott Pharmacy, and your 18th Street Store, and also on corner Broad and Beaver downtown (diplomatically, I skipped the CVS, which has a one-hour photo service)." "Ah, that’s a good store, don’t you think? We had to combine five small premises to make a single big one!" "Yes, it’s the only place on Broad where you can buy a two liter soda for the office at a decent price." "You see..." he looked at me . "But how many such stores can you have?" "Well, about a hundred, in New York and New Jersey, we are a metropolitan merchandiser, we will not go far outside. But it is getting harder.." he paused. After a greeting we parted.
A few steps away, I turned around. "Do you mind if I make an interview out of this chat? May I have your card?" He considered; "After you give me your card." "I’m down to my last, but if you’d like to look at it..." "Hm, Town and Village, what is your circulation?" "All of Stuyvesant Town and Peter Cooper Village, your customers." Another "hm," as he reached into his wallet to hand me a card, apparently his last one too. "Anthony J. Cuti, Chairman and CEO of Duane Reade, I’m much honored," there was not much else that I could say as we exchanged handshakes. It was a pleasant interview, and Mr. Cuti provided some hard-to-come-by insights into the minds of brick-and-mortar merchandising prophets in this rush-to-Internet era. Besides, there’s that neighborhood connection - James Duane, first Mayor of NYC after the British evacuation, once owned what is now Gramercy Park (alas, my histories are silent on the settler who gave his name to Reade Street. Help! Thomas Byrne?).
On the elevator I spoke to a neighbor, mother of two active youngsters: "Have you seen the new Duane Reade store on 14th Street?" "Yes, and I think they are all crazy, where will the business come from?" "I just met the CEO, and he finds that there are enough people in the tall buildings to support them all." "I still think they are all crazy," were her parting words.
Maybe yes and maybe not. The drugstore chains are taking huge risks, doing renovations and paying high rents, more than the supermarkets who could no longer afford the premises. The prices will have to go up, although volume is increasing. As the population is aging, we need more expensive medicines per capita, not just tubes of multi-colored toothpaste. Upstate, the Walgreens, Fays, CVS and Rite Aids are doing healthy volume, despite the drain from the mailing-in to Merck-Medco or other mail-order apothecaries for three months’ supplies of medications at a shot that Supplemental Medicare Benefit providers require. Both major political parties are scheduling some forms of medication benefits under Medicare, which will further increase the volume at the supermarket drugstores. Most of the chains provide, with the medicine, an abbreviated printout from PDR, the mammoth Physicians’ Desk Reference, listing the precautions and side effects , an information service your friendly oldtime neighborhood druggist would casually proffer while dispensing the medication - "No drinkin’ (or aspirin, or Advil).while you’re usin’ this medicine, hear? After you finish this bottle, you can go back to your evil ways. And let me give you a little bottle of laxative, in case the stuff gives you some constipation." Hard to beat that kind of personalized service, in the superstore or mail-order environment
Monday night I was passing the new Duane Reade super drug store on Third Avenue, corner 14th Street, in the latest NYU dorm building, erected on the site of that old hellhole, the Sahara Hotel. It is four blocks away from another Duane Reade, on 18th Street, in the space formerly occupied by Sloan’s supermarket. Its next door neighbor is a. CVS, on what I think was the former site of the D’Agostino supermarket. The CVS also has a twin, on corner 18th Street and Park Avenue South, in the location of the former Food Emporium supermarket. I guess supermarkets have had it, we also lost a Grand Union to the Cabrini Medical Center. The multi-job New Yorkers have no time to cook, that’s why we have so many restaurants and take -outs.. But why drugstores?
The lights were bright, the "Open" sign was clearly visible, and I decided to check out the ambiance. As I turned from the window, ahead of me a handsome tall man stepped our of the passenger side of a white unmarked van, straightened the jacket of his perfect pinstripe suit and walked into the store, cell phone in hand. After whispering a few words, he put the phone away and turned around, surveying the store with unmistakable pride of possession.
"How do you like this location?" I asked. "It’s great, but why are you asking me?" he wondered. "You look like the landlord." "I’m not the landlord but I am one of the executives."
"Great, there is something I’ve always wanted to ask one of you drugstore leaders. I write a local events column, and I could never figure out why there are so many large chain drugstores opening in the neighborhood, and all over the city."
"Well, a population of 50,000 supports one of our stores. In the suburbs we would be more widely spread." "Yes, but with another on 18th Street..." "It fits, demographically, New York is a vertical city, you know.". "Well, then, what about the CVS, next door, don’t they cut into the same 50,000 customers?"
"Please, you cannot compare them with us. Look at the height of the shelves, the richness of merchandise, the lights, the displays. People like a nice store" (he may even have called it elegant). "Besides, New York does not have convenience stores, no 7/11s, no Wal-Marts. None of those companies want to pay the rents for the large spaces they require. We fill a lot of that vacuum." (The economics seemed doubtful, but eventually I figured it out. Duane Reade, with mostly packaged food, bottled drinks, small clothing stock - stockings and underwear - and such electronics items as shavers, hair dryers and radios - can have a lot more per square foot turnover than the bulk merchandisers.) "But I think there’s enough business for all of us." "What about the Ma and Pa pharmacies?" "Yes, they have a problem."
"Where do you shop?" he now wanted to know. "At Elliott Pharmacy, and your 18th Street Store, and also on corner Broad and Beaver downtown (diplomatically, I skipped the CVS, which has a one-hour photo service)." "Ah, that’s a good store, don’t you think? We had to combine five small premises to make a single big one!" "Yes, it’s the only place on Broad where you can buy a two liter soda for the office at a decent price." "You see..." he looked at me . "But how many such stores can you have?" "Well, about a hundred, in New York and New Jersey, we are a metropolitan merchandiser, we will not go far outside. But it is getting harder.." he paused. After a greeting we parted.
A few steps away, I turned around. "Do you mind if I make an interview out of this chat? May I have your card?" He considered; "After you give me your card." "I’m down to my last, but if you’d like to look at it..." "Hm, Town and Village, what is your circulation?" "All of Stuyvesant Town and Peter Cooper Village, your customers." Another "hm," as he reached into his wallet to hand me a card, apparently his last one too. "Anthony J. Cuti, Chairman and CEO of Duane Reade, I’m much honored," there was not much else that I could say as we exchanged handshakes. It was a pleasant interview, and Mr. Cuti provided some hard-to-come-by insights into the minds of brick-and-mortar merchandising prophets in this rush-to-Internet era. Besides, there’s that neighborhood connection - James Duane, first Mayor of NYC after the British evacuation, once owned what is now Gramercy Park (alas, my histories are silent on the settler who gave his name to Reade Street. Help! Thomas Byrne?).
On the elevator I spoke to a neighbor, mother of two active youngsters: "Have you seen the new Duane Reade store on 14th Street?" "Yes, and I think they are all crazy, where will the business come from?" "I just met the CEO, and he finds that there are enough people in the tall buildings to support them all." "I still think they are all crazy," were her parting words.
Maybe yes and maybe not. The drugstore chains are taking huge risks, doing renovations and paying high rents, more than the supermarkets who could no longer afford the premises. The prices will have to go up, although volume is increasing. As the population is aging, we need more expensive medicines per capita, not just tubes of multi-colored toothpaste. Upstate, the Walgreens, Fays, CVS and Rite Aids are doing healthy volume, despite the drain from the mailing-in to Merck-Medco or other mail-order apothecaries for three months’ supplies of medications at a shot that Supplemental Medicare Benefit providers require. Both major political parties are scheduling some forms of medication benefits under Medicare, which will further increase the volume at the supermarket drugstores. Most of the chains provide, with the medicine, an abbreviated printout from PDR, the mammoth Physicians’ Desk Reference, listing the precautions and side effects , an information service your friendly oldtime neighborhood druggist would casually proffer while dispensing the medication - "No drinkin’ (or aspirin, or Advil).while you’re usin’ this medicine, hear? After you finish this bottle, you can go back to your evil ways. And let me give you a little bottle of laxative, in case the stuff gives you some constipation." Hard to beat that kind of personalized service, in the superstore or mail-order environment
# posted by Wally Dobelis @ 5:21 AM 
