Walgreens’ Prioritizes Its Digitalization with Investments in Mass Personalization

Walgreens Boots Alliance (WBA) is prioritizing investments in mass personalization and reinventing the pharmacy prescription journey in order to further its digital transformation, to the tune of $500 million of capital expenditures behind digital and development this year.

The drugstore retailer’s mass personalization initiative involves using marketing dollars more effectively to target a better connection with the consumer, while its prescription journey work will connect the consumer much more closely with the prescription. Both multi-year initiatives aim to boost the connectivity to patients and consumers and drive long-term revenue and sustainable growth.

The company is making progress in moving its data resources to a new and more flexible cloud-based infrastructure, said Stefano Pessina, executive vice chairman and CEO, WBA, in the company’s recent earnings call. It has also made progress on “the development of new services to build on these new infrastructure, to announce our customer experiences, make our teams more efficient and effective and open a new opportunities for our businesses,” he said.

“Clearly, this work on the digitalization of our company and thus closely tie in with our work to modernize our retail offering and the shape and structure of our retail footprint. At the same time we are working with partners to redefine the delivery of health care in the community and the important role of pharmacy in the immediate and longer-term future.”

Walgreens’ digital transformation progress is becoming apparent. Its digital sales reached over $3.7 billion in in its first quarter of 2020, up 9% year-over-year. Over the Black Friday weekend, walgreens.com sales were up over 45% versus the prior year. The Walgreens app has been downloaded 60 million times, up 12% since last year. And around 33% of Walgreens retail refill scripts eligible for digital refill were entered via digital channels in the quarter, up almost 18% since last year.

In addition, the company said its strategic partnership with Kroger is progressing well. The initial Kroger Express pilots in Northern Kentucky have been running for over a year and the pilot in Knoxville, TN for five months.

“We've seen very positive results so far, with a strong sales risk,” said Alex Gourlay, Co-COO & president, Walgreens.

Building on the success of these pilots, the company formed a new group purchasing organization (GPO) called Retail Procurement Alliance in December to cut supplier costs across private label sourcing and expand their collaboration.

“We expect this joint venture to deliver cost savings, encourage sourcing innovation, and generate efficiencies across the supply chain,” said Gourlay.

Despite a soft first quarter, sales increased 1.6%, Pessina said the company is maintaining its outlook for the year.

“We are confident our strategic plans are the right ones to drive long-term sustainable growth going forward,” he said in a press release. “In addition, during the quarter we were very satisfied with the progress made in our Transformational Cost Management Program and with the strong cash flow we delivered.”