Profits Drive Change Walgreens Will Change Format At Rxpress Outlets

In the pharmacy business, less is not necessarily more.

That’s a lesson Walgreens learned in Spokane and the other markets where it unveiled its stripped-down RXpress format.

The company recently has embarked on a plan to convert all of its 1,800-square-foot RXpress stores to full-sized company stores, which are about 15,120 square feet.

Walgreens has seven RXpress stores in Spokane, which was a test market for a format designed primarily for drive-through business.

The Chicago-based company also unveiled RXpress stores in Southern California; Wichita, Kan.; and Evansville, Ind.

The RXpresses, which debuted in 1989, were seen as a tool for experimenting with drive-through pharmacy sales and as a way to test smaller markets.

“It was a concept that we tried,” said Patrick Tupa, Walgreens’ real estate director for Washington. “It has good results, but not quite what we expected.”

The smaller stores just weren’t profitable enough, said Dereck Leckow, a stock analyst with Barrington Research.

“They’ve seen they can make a lot more profit with full-sized stores,” Leckow said. “They have to justify the real estate with sales and earnings, and there are more high-margin items they can sell (in the larger stores).”

The full-sized stores, which also will include drive-throughs, allow customers filling prescriptions the opportunity to buy other items, which they couldn’t do when driving through the RXpresses.

Walgreens will attempt to expand its Spokane RXpresses to full-sized stores at their current locations, where possible, Tupa said. In some cases, the stores will be relocated.

In Spokane and elsewhere, Walgreens will have competition for the choice corner locations that it needs for its drive-throughs.

Rite Aid, one of Walgreens’ biggest rivals nationally, also is snapping up corner locations as it moves from strip centers to free-standing stores. Walgreens claims it came up with the idea first, but in Spokane, Rite Aid has the jump and already has begun the transition.

The new stores will help Walgreens better compete with Rite Aid, Tupa said.

“Right now, Rite Aid dominates (Spokane),” Tupa said. `We feel we can make it a little more competitive.”

The conversion from RXpress to full-sized stores came during an aggressive growth period for Walgreens. The company, which has 2,731 stores in 37 states, has plans to more than double its stores in 10 years, with a stated goal of 6,000 by 2010.

But as consumers find a rapidly increasing number of venues to fill prescriptions, from discount chains to supermarkets to mail order to the Internet, some wonder whether the market can handle another 3,000 Walgreens.

It can, said company spokesman Michael Polzin, because of America’s changing demographics.

“Someone in this country turns 50 every 8 seconds, and that’s about the time in life when the use of prescriptions starts to rise pretty dramatically,” he said.

According to Walgreens’ research, someone between ages 45 to 54 has an average of nine prescriptions a year. Between 65 and 74, that number rises to 15.4 prescriptions.

Also fueling demand for prescriptions is the increased spending on research and marketing by pharmaceutical companies, who are rolling out brand-name products like Viagra and Rogaine, said Leckow.

“Drugs are advertised everywhere you look - on buses, magazines, television,” he said.

The Walking Co. will make its Spokane debut at River Park Square.

The Chatsworth, Calif.-based shoe store will occupy 1,475 square feet on the downtown project’s ground floor, said Lynne Bremer, a real estate broker with Terranomics, which is helping to lease the development.

The company, founded in 1991, sells walking shoes and hiking boots. It has about 65 stores nationwide, including three in Seattle.

Inland Empire Distribution Systems has leased 80,000 additional square feet of warehouse space at the Spokane Industrial Park.

Inland Empire provides logistics support, including shipping and warehousing, for a number of companies, including DuPont and Kaiser Aluminum, said Jim Ewer, company executive vice president.

With its new space, Inland Empire has nearly 400,000 square feet at the park under lease or in month-to-month arrangements, making it the park’s largest tenant, said Brent Long, of Crown West Realty, the park’s owner.

The park also leased 6,000 square feet to Cables Inc., an electronics manufacturing company.

JP Realty Inc., the owner of three area malls, has a pair of new tenants.

American Eagle Outfitters, which sells clothes to young people, opened a 4,500-square-foot store in the Spokane Valley Mall last week.

And at the NorthTown Mall, Christopher and Banks, a women’s clothing retailer, opened June 4.