honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Sunday, January 14, 2007

Drugstore war: Walgreens vs. Longs

StoryChat: Comment on this story

By Andrew Gomes
Advertiser Staff Writer

Walgreens will open its first Hawai'i drugstores this year, providing direct competition for longtime local retailer Longs Drugs. Walgreens has been around since 1901 on the Mainland, although Longs' stores are generally larger and have a loyal following on the Isles.

AP LIBRARY PHOTO | Sept. 25, 2006

spacer spacer

Illustrations by NORMAN SHAPIRO | The Honolulu Advertiser

spacer spacer
spacer spacer

Over the past two decades, retail titans at the top of their industries Wal-Mart, Home Depot, Best Buy, Costco and Macy's opened their first stores in Hawai'i and drastically changed what long had been a more provincial shopping landscape in the Islands.

The Mainland retailers brought new choices for consumers and competition for smaller rivals.

Now the nation's biggest drugstore chain, Walgreens, has laid the foundation for the first of potentially many stores statewide, with initial deals to lease the former Tower Records store on Ke'eaumoku Street and the Star Market in Kane'ohe.

The Illinois-based chain with nearly 6,000 stores on the Mainland has declined to say exactly when its first two O'ahu stores could open and what consumers can expect.

But Walgreens with enormous pricing power and drive-through service windows is sure to shake up another segment of Hawai'i retailing for consumers, as well as for competitors that include supermarkets, convenience stores, big-box outlets and its most direct rival, Longs Drugs Stores.

Retail industry expert George Whalin, president of California-based Retail Management Consultants, said Walgreens stands out among drugstore chains. "They're very good at what they do," he said. "I think they're the best in their business quite frankly."

The typical Walgreens is fairly similar to Longs in that it carries a variety of general merchandise and derives half or more of its revenue from prescription sales.

Both chains evolved from small neighborhood drugstores into large chains selling food, cosmetics, gifts, school supplies, photo processing and other general merchandise, from auto accessories to gardening materials.

One significant difference is that the average Walgreens store is roughly 35 percent smaller than the average Longs.

Longs, a California-based chain with one-tenth the number of stores of Walgreens, also has something of a home field advantage because it has done business in Hawai'i for 53 years and built a loyal following of generations of kama'aina, many of whom regard Longs as a local institution.

SHOPPERS WEIGH IN

Natasha Petersen, a 20-year-old Honolulu resident born and raised on O'ahu, is a loyal Longs shopper and said the stores have the feel of a mom-and-pop operation.

"It was made here, yeah?" Petersen said of Longs, adding that she isn't enthusiastic about Walgreens entering the market.

But Kindra Milligan, who moved to 'Aiea four months ago from Oklahoma, said she can't wait for Walgreens to open. "I love Walgreens," she said.

Milligan, 25, said that in her opinion, Walgreens stores offer better customer service and are cleaner compared with Longs.

Many local residents, however, said their loyalty will lie with whichever drugstore is more conveniently located.

Frederick Johnson, a 47-year-old Mo'ili'ili resident, said Walgreens and Longs are both good stores, but he'll shop at whichever is closer to home.

"I live about a block away from Longs, so you know I won't be going to Walgreens," he said.

Joann Jones, a writer who moved to Hawai'i four years ago from California, figures it will be hard for Walgreens to find enough prime real estate to make the chain more convenient than Longs, which has more than 30 stores statewide.

"There's a Longs everywhere you look," she said.

Jones, 58, also expects Longs may have a better variety of merchandise if Walgreens opens stores close to its average size (14,500 square feet) compared with the Longs average (23,000 square feet).

Bill Fuson, a retired Continental Airlines flight attendant who lives in the Ala Moana area, said Longs is convenient for him in part because he's familiar with the merchandise layout.

"I know the stores," he said. "I don't have to look around. I don't go to a place because of price, I go there for convenience."

Still, for many residents challenged by Hawai'i's high cost of living, price is paramount.

"I don't find Longs that cheap," said Debra Williams, a trainer at 24 Hour Fitness who lives near Punahou School and finds herself shopping less at Longs since a Wal-Mart opened on Ke'eaumoku Street three years ago. "If Walgreens was cheaper, I'd probably go there."

Some consumers wondered whether Walgreens might pressure Longs to reduce some prices to better compete. Still, it remains to be seen how prices at Hawai'i Walgreens stores will compare with its Mainland stores given higher shipping, real estate and other costs associated with doing business here.

Whalin, the retail industry consultant, said the size of Walgreens allows the chain to be a leader in low prices. "They just have leverage with suppliers that a smaller company won't have," he said.

Whalin also said Walgreens is generally a better-run retail operation with better stocked and maintained stores more focused on convenience compared with competitors. "They've been at this a long time," he said. "They're good."

Walgreens was founded in 1901 by Charles R. Walgreen Sr., who bought a pharmacy he was working inside a Chicago hotel.

As the company grew, it developed a history of innovation, change and aggressive growth that helped it climb to the top of the drugstore business.

A LONG HISTORY

Some historical highlights for Walgreens include having once served home-cooked meals to complement its soda fountain business, and continuing to make food service an important part of operations through the 1980s.

In the early 1990s, Walgreens introduced drive-thru pharmacies. And in 2002, the entire chain was printing prescription label instructions in 14 languages.

More recently, Walgreens has been opening healthcare clinics in its stores with partners employing nurses to treat common ailments including the flu and minor infections.

Most Walgreens stores are less than a decade old, as the chain expanded from 1,000 stores in 1984 to 5,584 at the end of last year. The company expects to open 425 new stores a year to give it 7,000 by 2010.

Mostly, Walgreens has expanded by building new, freestanding stores with drive-thru pharmacies as opposed to acquiring smaller chains with existing stores. About one-third of Walgreens stores are open 24 hours.

Walgreens spokeswoman Tiffany Bruce said the company isn't ready to disclose estimated opening dates, broader expansion goals or other details of its plan for Hawai'i. But she said merchandise in the Hawai'i stores will be tailored to local demand.

"The managers have a lot of discretion as to the products that will appeal most to their customers," she said.

Longs spokeswoman Farra Levin declined to comment about whether Longs customers in Hawai'i can expect any changes in light of Walgreens entering the market.

But over the past decade, Longs has opened and upgraded stores as Walgreens and other competitors made inroads to Longs strongholds in California and in other Western states.

In the past couple of years, Longs also has begun adding drive-thru pharmacies and launched a chain-wide store remodeling program. Some Longs stores are also open 24 hours.

Last month, Longs bought and expanded Gulick Pharmacy, a small neighborhood pharmacy in Kalihi that became the first new Longs to open in Hawai'i since 1999. The new store, measuring 1,500 square feet, is part of a new strategy for Longs operating small pharmacy stores.

However competition shapes up between the two drugstore chains in Hawai'i, observers say they expect Walgreens to meld into the marketplace just as have Wal-Mart, Home Depot and other national chains.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.