No retailer has a crystal ball into where consumer behavior is headed, but Walgreens is hedging by experimenting with a little bit of everything when it comes to fulfillment and delivery.
“You name it, we’re doing it,” Roxanne Flanagan, Walgreens senior vice president and chief supply chain officer, told attendees Tuesday during the National Retail Federation’s Supply Chain 360 conference in Cleveland.
The retailer, part of Walgreens Boots Alliance Inc., counts about 9,000 stores that place it within five miles of 80 percent of U.S. households.
Walgreens has partnerships with third-party delivery apps, such as Postmates, DoorDash and Instacart. It offers curbside pick-up and same-day pick-up in stores, and handles fulfillment in stores and from its four microfulfillment centers. More recently has been trialing drones.
The experimentation keeps the retailer in step with consumers, although Flanagan admits no one truly know where consumer behavior will go in the future.
“When somebody thinks about the consumer, and I think about where the consumer’s going, what I tell my team is that’s the million-dollar question,” she said.
Curbside and same day were of interest pre-Covid for Walgreens, like many other retailers. Coming out of the pandemic, consumers are facing inflation, while retailers are grappling with China’s zero-Covid policy.
“We don’t know what the next shortage is going to be,” Flanagan said. “There’s so many more variables that have happened. The labor force is struggling. Consumers are spending money, but with gas prices where they are, what are they going to stop spending money on? Are you really going to have a milkshake delivered to you or a $15 sandwich? So, I don’t think that any of us know exactly where the consumer is going to end, but it’s more complicated than just coming out of the pandemic. There’s just a tremendous amount of uncertainty and volatility in the world today.”
The digital channel continues to grow for Walgreens’ parent, which reported companywide sales for its fiscal second quarter ended Feb. 28 of $33.8 billion, up 3 percent from the year-ago period. Net earnings totaled $833 million, down from $922 million a year ago.
U.S. digital sales in the quarter rose 38 percent, led by same-day pickup.
As the company looks to remain relevant when it comes to e-commerce, it’s bolstering its fulfillment capabilities.
The stores are able to handle a good chunk of order volume with their inventory. However, Walgreens has always been focused on its healthcare offering and having pharmacists on hand to assist customers. That was particularly true during the height of the pandemic, with Walgreens having administered over 16 million vaccines.
Yet, pharmacists also manage insurance issues and work with doctors on regimens and drug changes, while also working with customers on understanding their medications. To lighten the load, the company is growing increasingly reliant on filling prescriptions off site with microfulfillment centers, of which there are four.
The centers handle about 60 percent of prescriptions off site in highly automated facilities.
“It’s invisible to the consumer, but it frees up the pharmacist and the technicians for other activities and being very patient centric,” Flanagan said.
Walgreens is also testing drone delivery, although the future of the technology for the retailer is still to be determined.
Walgreens first began working with Alphabet subsidiary Wing in October 2019 for drone delivery in Christiansburg, Va., about 10 minutes from Virginia Tech University. The school had been working with Wing on drone delivery testing for the U.S. Department of Transportation’s Integration Pilot Program. The partnership with Walgreens marked Wing’s first U.S. drone delivery test.
The retailer in April expanded the drone delivery pilot to the Dallas-Fort Worth area, tapping a select group of customers to trial the service with more than 100 stock-keeping units available for order. The program is available to about 100,000 consumers.
The idea behind the service is to offer items mostly in the healthcare category that a consumer wouldn’t want to have to drive to the store for because they’re sick or some other similar reason. Flanagan said the tech for rural consumers makes particular sense by broadening their access to inventory that is not as much of a challenge in urban or suburban markets.
“I don’t know what the future is going to hold for Walgreens or for any retailer, as far as drones go,” she said. “I think we’re all kind of experimenting. We want to be innovative and we want to test all the new options out there.”