He was tying his tie in a Minneapolis hotel room when it happened. The phone rang, and Ryan Hill, a 27-year-old pilot in town for a job interview, answered. His appointment had been canceled. An airplane had just hit the World Trade Center.
Hill had just graduated from the Air Force Academy and had lined up interviews with every major airline. None of them happened. And, as hiring froze, he grew anxious and applied online for a position at Walgreens Co. He accepted the job, but then he changed his mind when ATA Airlines called looking to hire a pilot. The dream of flight was simply too much to walk away from.
Three years later, though, the airline industry was still in a decline, and Hill faced an inevitable furlough as his company headed toward bankruptcy. “It was time for a career change,” he says, “and I knew that it was the right time to make a move.”
With his degree in civil engineering from the Air Force Academy, Hill contacted the Walgreens recruiter he had interviewed with in 2001 and accepted work with the company as a project engineer. Nine years later, after working his way up, Hill has become a divisional vice president of facilities and technical shared services. His role encompasses myriad responsibilities, including development planning, preconstruction activities (such as bidding, contracting, and estimating), construction management (including design-build), architecture, engineering, business development (including vendor relations, training and development, diversity, and union relations), and program management. He’s helping Walgreens—the drugstore with 8,000 locations and $71.6 billion in annual revenues—launch a series of new, high-profile flagship stores that are rejuvenating the company and allowing it to get, as Hill puts it, “more from the core.”
When the recession hit in 2008, Walgreens was growing at a rate of nine percent annually by building 600 new stores per year. New locations, however, typically take three years to turn a profit, and Hill and other Walgreens personnel realized that they would need to adopt a new strategy to reduce the drag on earnings. After careful analysis, they decided to slow growth to two percent, launch only 150 new stores per year, and reroute the remaining funds to existing stores, which were aging and not performing as well. “We wanted to invest in our core to get more sales and profit from each location,” Hill says.
The strategy allowed Walgreens to earmark some of its construction funds for 12 enhanced flagship stores across the country, including in Hawaii and Puerto Rico. “The idea behind our flagship stores is simple,” Hill says. “It gives us a halo effect and provides the ability to showcase and test new concepts, products, services, and solutions.”
Walgreens’s supersized flagship stores (25,000 square feet instead of 14,500) are not typical drugstores. Customers can dine on sushi, sample baked goods, grab a smoothie, pick a bouquet of flowers, browse private-label products, find beer and wine, or indulge at a LOOK Boutique beauty center. Stores in major cities such as New York (on Fifth Avenue) and Los Angeles (on the Walk of Fame) feature high-market products, manicure stations, automated pharmacy kiosks, and beautifully landscaped outdoor spaces. Hill says the fresh and buzzing retail hubs—each a mini living laboratory for the company—offer new marketplace insights that his team will apply to the existing store base.
In addition to improving the company’s core while continuing organic growth, Walgreens’s strategic shift in development has positioned the brand to take full advantage of acquisitions, including the $6.7 billion deal for Alliance Boots, made in the summer of 2012. The company also bought Kerr’s Drugs in 2013 and is now well positioned for international expansion. Through a partnership with AmerisourceBergen, Walgreens has emerged as the world’s largest distributor of pharmaceutical drugs, and its buying power brings leverage in new markets around the globe.
Although Walgreens is shifting to slower, more calculated growth through the flagship model, Hill says the brand experience—built around the phrase “the intersection of happy and healthy”— will remain consistent. By offering a totality of products and services, Walgreens brings value to the customer, and its substantial real estate footprint makes it convenient to find. But, the fact that Walgreens is still growing and adding high-profile stores will change some decisions. “The biggest shift is that we are moving away from a prototype and giving every single new store a unique look and feel,” Hill says. That look is strictly driven by the surrounding market, and even when stores are only separated by a few city blocks, they will still serve different parts of a market. Each location’s architecture, content, layout, and branding are now specific to its city, its block, its corner.
The Hispanic demographic, for example, is one of the fastest-growing consumer segments, so Walgreens has a building design and product assortment more targeted toward Hispanic shoppers in states such as Florida, Texas, Colorado, Arizona, and New Mexico. Meanwhile, urban outlets offer more opportunities for beauty supplies, including the LOOK Boutiques. “We do our research and know who our customers are in each area,” Hill says. “We know what will and won’t sell.”
The tailoring to local flavors is also reflected in each location’s design. Walgreens partnered with FITCH, a global design consultancy, to develop its new architectural guidelines. The firm deconstructed Walgreens’s prototype and outlined basic elements (maintenance, loss prevention, safety, building codes, etc.) that must be kept—everything else can be approached creatively. Outside architects now receive basic templates based on FITCH’s design guidelines. “The process with FITCH let us give architects a list of items they could play with to find innovations in providing a unique solution for a specific store,” Hill says.
Overall, flagship and standard locations should make customers feel like “it’s their Walgreens,” Hill says. Design teams achieve this by positioning buildings properly, manipulating the lighting, and selecting appropriate materials. For instance, because the female demographic drives business, the stores have soft, curved elements in place of rigid, sterile ones. Overall, four objectives guide each design team’s process: be more relevant to customers, lower the total cost of ownership, increase speed to market, and foster an environment of constant learning that promotes the sharing of ideas and the refinement of the architectural process through an evolution to improve overall design.
The risky strategy to slow growth and invest in new markets while revamping existing stores seems to be working. Walgreens is growing its product assortment, its services, and its overall reach, and this is attracting customers in large numbers. The company launched a new loyalty program, Balance Rewards, in 2012 that already has 85 million participants—roughly one quarter of the entire US population. It’s all at least partially thanks to the work of Hill, who, despite giving up an aviation career 10 years ago, looks to be flying high with a company that can’t be stopped.
