Walgreens 2005 Annual Report Download - page 17

Chicago customers Eddie Sanchez and Haydes
Gonzalez have shopped at Walgreens since their
son was tiny. But now Nathaniel is 8 years old and
his computer savvy is helping them enter the world
of online shopping.
That’s why they were excited to discover our
new online digital photo service, featuring expanded
network capacity. This allows Walgreens.com customers
to upload photos from their home computer for
pickup at nearly any Walgreens in one hour by
themselves or by someone else, like Nathaniel’s
grandparents in Puerto Rico.
Demand for digital photo products is growing
significantly. In 2004, 37 percent of camera owners
ordered digital prints at retail, up from 14 percent
the previous year, according toWorld Media Digest.
Walgreens digital sales as a percent of all photo-
finishing are increasing every month.
Nearly one-third of all non-prescription products sold in
U.S. drugstores are rung up at Walgreens cash registers
In 2005, Walgreens gained market share in 54 of our
top 60 core categories versus our drugstore, grocery
and mass merchant competitors compared to a
year ago. Areas of high focus for 2006 are beauty,
skin care, private label, consumables, seasonal
merchandise and new items like retail gift cards.
To attract new customers in 2005, we introduced
IsaDora, a Walgreen-exclusive European cosmetics line.
As of August, IsaDora is significantly exceeding sales
projections. New for 2006 is our private label
“Women of Color” skin care system for women with
medium and dark skin tones.
Consumable items are driving up customer
count as we add new items and promote basics such
as milk, eggs and bread. This department continues
to improve in product quality and profitability as we
find new ways to source merchandise.
We are also establishing new vendor
relationships, including those with
minority and women-owned businesses.
A large part of convenience
is stocking what customers want
in a fast-to-navigate store. When
it comes to store size, Walgreens
is the high-end “condo” version
of the sprawling “mansion”
operated by large discounters.
Every square inch of shelf space
counts, and determining which
items to eliminate is as important
as which to add.
Targeting merchandise mix
to small, distinct trade areas has
long been a priority for Walgreens.
It is increasingly important as we
expand in major metropolitan
neighborhoods on both coasts, where land is scarce
and expensive, as well as in rural America, where
needs are so diverse. As George Riedl, senior vice
president of Marketing, says, “One size definitely
does not fit all.”
Nathaniel and Eddie Sanchez use our new online photo
service to order prints without leaving home.
With our new digital online
photo service, Walgreens.com
customers can upload photos
from their home computer
and pick up their prints
at nearly any Walgreens
nationwide in one hour. The
service is also available to
HP’s Snapfish customers.
Product* Sales
Zocor 4.6
Zoloft 3.1
Pravachol 2.0
Ambien 1.9
Zofran 1.1
Source: IMS Health and Merrill Lynch
* Brands expected to face generic competition in
calendar year 2006, barring unforeseen delays.
Going Generic in 2006
2004 sales in billions of dollars
2005 Annual Report 15
Prescription Growth by Channel 1998–2004
In percent