Magazine article Drug Topics

ShopKo Putting in Pharmacies through Its New Acquisitions

Magazine article Drug Topics

ShopKo Putting in Pharmacies through Its New Acquisitions

Article excerpt

ShopKo Stores Inc.'s recent purchase of Penn-Daniels Inc.'s 18 Jacks stores and one Lots-A-Deals closeout outlet was a giant step toward its strategic initiative to add 35 stores to its 135-store base by the end of the year 2000. The acquisition also conformed to ShopKo's belief that growth should not occur through building new stores.

"Quite frankly, we believe the United States is over-stored," Dale P. Kramer, chairman, president, and CEO of the mass-merchandiser chain, told Drug Topics. The plan is to grow through acquisition, either of small to midsized chains or of existing "boxes" from retailers who have moved out or from unsuccessful retailers ready to leave.

Equally important to ShopKo's strategy is that Jacks stores are situated in states already covered by the ShopKo distribution network: Illinois, Iowa, and Missouri. (ShopKo runs 130 stores in 16 states, primarily in the Upper Midwest, Western Mountain, and Pacific Northwest regions.) Shopko's average store size is 88,000 sq. ft.; Jacks averages around 82,000. And the Jacks stores are in the same markets as ShopKo's typical stores: midsized-such as county seats-with a trade population of 40,000 to 70,000. Both chains focus on discount family retailing.

One big difference between Jacks and ShopKo is in health care. ShopKo was the first mass retailer to open pharmacies (in 1971) and the first to add optical centers (in 1978), and pharmacy/optical operations have been instrumental in differentiating them from the discount giants; Jacks stores have no pharmacies.

ShopKo will continue to run the stores as Jacks through March; then it will implement their merchandising strategy and begin converting them to ShopKo Stores, with completion expected during July. Right now, ShopKo is assessing each jacks store as to the degree of remodeling needed. Kramer estimated the conversion cost to be $2 million per store. "There may be a case or two where leases prohibit us from opening pharmacies, but our plan is to add pharmacies and optical centers to the majority of the Jacks stores."

ShopKo has always placed the pharmacy in the front of the store-a focus on customer service and sensitivity to the patient's needs, according to Kramer. "In some cases, we've had separate entrances for the ease and convenience of our patients." Along this vein, Kramer expects to investigate the feasibility of adding drive-in windows in some of the Jacks stores.

Kramer emphasized that Shopko has had a strong commitment to patient service and patient consultation. "We're expanding many of the OTC areas, and we've always been a progressive company relative to testing new ideas and new concepts." ShopKo has been doing immunizations, cholesterol screenings, and the like for many years, he said.

ShopKo customers have been very receptive to patient services offered, and Kramer credited that to focus groups. "We went to the customers and asked them what's important. Then we've taken specific steps to address their needs, and we periodically measure that against what the consumer is looking for." According to ShopKo's Gallup Customer Satisfaction Monitors, 85% of the customers surveyed gave ShopKo top ratings in overall satisfaction.

Since entering the prescription business in 1971, ShopKo has had a commitment to offer the customer outstanding value and also to win that customer back with outstanding patient service. It has been an effective strategy, Kramer said. "Our pharmacies fill an average 60% more prescriptions per day than the average drugstore."

In November, ShopKo made news when it ended the sale of tobacco products in all its stores. …

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