Rite Aid's Internet Innovation Strategies Ahead of Its $17.2 Billion Acquisition by Walgreens Boots Alliance
Rite Aid is the second-largest chain pharmacy operator in the United States, with its corporate headquarters located in Camp Hill, Pennsylvania, and a workforce of nearly 90,000 employees. In 2015, the company ranked 447th on the Fortune Global 500 list. In recent years, Rite Aid’s profit margin has steadily increased year by year, reaching a return on assets (ROA) of 23.8% in 2015.
However, in 2008, its market capitalization once fell to $500 million. Yet, after timely adjustments to its marketing strategy, the company’s market cap reached $7.15 billion by 2015. Today, Rite Aid operates 3,600 chain pharmacies across more than 30 U.S. states, serving millions of customers in 3,800 communities every day. Recently, Walgreens Boots Alliance (WBA) announced that it would acquire Rite Aid for $17.2 billion. On the day of the announcement, Rite Aid’s stock price surged 42.72%, while WBA’s stock price rose 6.35%.
As a chain pharmacy operator closely integrated with the internet, Rite Aid’s rapid growth is inextricably linked to its innovative online marketing strategies. The following section provides a detailed analysis of Rite Aid’s internet marketing strategies.
Rite Aid and SkySurfer Systems
Rite Aid opened its first pharmacy in Pennsylvania, USA, in 1962. In January 1998, Rite Aid focused on its internet operational strategy by installing and deploying the SkySurfer system across the company. The SkySurfer system, based on a personal computer (PC) user platform, replaced the original inefficient Integrated Receiver Decoder (IRD) network services. This system not only provided high-quality pharmaceutical promotional videos but also offered a wide range of value-added services within an IP environment.
This system fully met Rite Aid’s early strategic marketing objectives: it protected existing investments while establishing a new marketing platform to prepare for future marketing needs. Thus, through the SkySurfer system’s flexible and adaptable network coverage, Rite Aid retained the advantages of its private data network while leveraging the benefits of emerging internet technologies. This marked Rite Aid’s initial foray into internet-based marketing.
Rite AidProviding Professional Online Pharmacist Consultation Services
In the U.S. pharmaceutical consumer market, a pattern has taken hold: “serious conditions are treated in hospitals, while minor ailments are managed at pharmacies.” This broader environment has made professional consulting services within pharmacies increasingly important. In particular, large chain pharmacies require each store to staff a supervising pharmacist and assistant pharmacists. Their service philosophy is: “Fewer prescriptions, more information and consultation!”
In the United States, pharmacists, like physicians, are subject to a rigorous licensure system, which ensures high standards of service quality. Moreover, the reputation of each pharmacy hinges on the professional competence of its staff. Against this industry backdrop, Rite Aid pioneered the Wellness+ customer loyalty program in 2010.
Rite Aid has closely integrated health concepts with its loyalty card program and continuously expanded its service offerings. For instance, Rite Aid customers can access pharmacist consultation services 24/7 via an 800-number hotline or the company’s website. This web-based service system maximizes customer satisfaction by meeting their needs to the greatest extent possible.
In addition, Rite Aid is committed to providing customers with advanced pharmaceutical services. Customers can submit their personal health information via the Internet or at Rite Aid pharmacies, and this personalized information will be stored in the Rite Aid Customer Health Network system. Based on relevant customer data in its database, this network system automatically alerts pharmacists to potential adverse drug interactions between medications purchased by customers and other drugs they may be taking. By leveraging this network system, Rite Aid delivers more patient-centered pharmaceutical care. Meanwhile, customers regularly receive promotional emails and discount offers for medications through the Internet. It is precisely through this Wellness+ online marketing service that Rite Aid has further earned customer trust and consistent acclaim.
Rite AidEstablishing a Take Care Health Center Within a Pharmacy
In 2005, Rite Aid Corporation signed a partnership agreement with Take Care Health Systems, becoming another chain pharmacy in the United States to operate in-store clinics.
Rite Aid has launched Take Care Health Clinics within its pharmacies, staffed by registered nurses who diagnose and treat common illnesses, administer vaccinations, and perform diagnostic tests and physical examinations. The health clinics are open seven days a week at times convenient for customers, and patients can access services without an appointment. Mary Sammons, President and Chief Executive Officer of Rite Aid, stated, “Through this partnership, we can combine high-quality, affordable care with the medication counseling services already provided by Rite Aid pharmacists.”
David Nash, Chair of the Department of Health Policy at Jefferson Medical College and Chairman of the Take Care National Medical Advisory Board, commented that the Take Care model heralds the rise of a more efficient healthcare system capable of delivering reasonable, high-quality, and convenient services to consumers. It is evident that the Take Care Clinic services operated by Rite Aid within its pharmacies are complementary to its Wellness+ program, as both initiatives aim to leverage internet resources to expand their service offerings.
Rite AidSupplier Chains in the Internet-Based Model
As is well known, Rite Aid suppliers must undergo a special review process to achieve compliance. The conventional approach requires suppliers to submit relevant written documentation to Rite Aid product managers, including details on company size, location, core business scope, retail product information, indemnification, and insurance sales guarantees. Suppliers then follow up with Rite Aid product managers via phone within two weeks to negotiate next steps. This workflow is highly inefficient, resulting in a lose-lose situation for both Rite Aid and its suppliers.
To this end, Rite Aid provides manufacturers with a streamlined pathway to become suppliers through its online vetting platform. To qualify as a Rite Aid supplier, entities need only maintain a U.S.-compliant Electronic Data Interchange (EDI) system and demonstrate adequate advance supply capacity and inventory levels.
In addition, if a vendor has already become an authorized supplier of Rite Aid but lacks valid EDI network capabilities, Rite Aid will make every effort to assist the vendor in obtaining EDI connectivity.
Rite AidLeverage the Internet to Facilitate Supply-Demand Interaction with Customers
Rite Aid’s products are carefully selected and designed to meet customer needs, ranging from personal health items and household goods to premium cosmetics and fragrances. Many Rite Aid stores also offer a variety of frozen foods and dairy products. In short, this comprehensive product assortment not only attracts new customers but also provides enhanced service quality for loyal patrons.
It is evident that Rite Aid continuously evaluates and adjusts its product portfolio based on customer feedback, adhering to the overarching principle of “We supply what customers need!” However, the collection and incorporation of such feedback rely entirely on internet-based information integration and analysis.
Based on the above five-point analysis, it is evident that Rite Aid’s internet marketing strategy has been successful. To achieve success online, you need to employ these internet marketing strategies to drive traffic to your brand website, establish brand credibility, and ultimately convert this traffic into sales and revenue. Companies must ensure that every dollar spent yields tangible results. An increasing share of budgets is being allocated to digital marketing because it is measurable and has proven to enhance return on investment (ROI). This concept is gaining recognition among a growing number of entrepreneurs.
An analysis of Rite Aid’s success story reveals that internet marketing strategies can deliver the following benefits to business operations:
First, internet marketing enhances corporate competitiveness. For instance, companies can leverage online platforms to develop new customer segments, effectively stimulate customer demand, engage directly with their target audience, provide the latest services, and improve time-based competitiveness.
Secondly, internet marketing helps reduce communication costs with customers. For example, it effectively saves on expenses such as customer service costs, postage, direct mail (DM) printing costs, telephone and fax charges, and advertising fees.
Furthermore, internet marketing helps enhance corporate productivity. For instance, customers can place orders and make payments directly online, streamlining and accelerating the purchasing process; meanwhile, online product promotions can reduce the promotional lead time traditionally required for new product launches.
Finally, internet marketing helps reduce product-related costs, such as lowering direct customer service costs, reducing procurement costs through group buying, decreasing inventory costs, and cutting personnel expenses.
A Review of Rite Aid’s Development History:
In 1962, Rite Aid was founded in Pennsylvania, United States;
In 1968, the company was officially named Rite Aid and listed on the U.S. stock market;
In 1970, Rite Aid was listed on the New York Stock Exchange;
In 1981, Rite Aid became the third-largest pharmacy chain in the United States;
In 1983, Rite Aid’s sales surpassed $1 billion;
In 1987, Rite Aid acquired Gray Drug, a company that operated 420 pharmacies along the U.S. East Coast, expanding Rite Aid’s footprint to over 2,000 locations; in 1989, Rite Aid acquired the 114-store chain of People’s Pharmacy in Ohio.
In 1990, Rite Aid officially partnered with Carl Paladino’s Ellicott Development Company, expanding Rite Aid’s marketing footprint into Upstate New York;
In 1996, Rite Aid also acquired the 1,000-store Thrifty PayLess chain on the U.S. West Coast;
In 1997, Rite Aid acquired a PBM company (Pharmacy Benefit Manager, a third-party representative for prescription drug payments, aiming to reduce treatment costs while ensuring therapeutic efficacy);
In 1998, Rite Aid installed and put into operation the brand-new SkySurfer system;
In 1999, Rite Aid entered into a partnership agreement with GNC to introduce GNC’s small-store operating model. In June of the same year, Drugstore.com was launched; this online pharmacy affiliated with Rite Aid allowed customers to reserve prescription medications online and pick them up at nearby brick-and-mortar pharmacies. Also in 1999, Rite Aid’s then-CEO Martin Grass resigned due to accounting irregularities, triggering a series of lawsuits and investigations. In December of that year, the Rite Aid board of directors appointed Robert Miller as President and Chief Executive Officer of Rite Aid (Miller had previously served as Vice Chairman and Chief Operating Officer of Kroger, and later as Chief Executive Officer of Fred Meyer).
In February 2000, Rite Aid's total debt had reached as high as $6.6 billion;
In August 2007, Rite Aid acquired approximately 1,850 Brooks/Eckerd stores across the United States—previously operated by the Quebec-based Jean Coutu Group—to expand its consumer base; that same year, Rite Aid became the dominant drugstore retailer in the U.S.
On December 21, 2007, Rite Aid commenced its integration process; in the same year, Rite Aid’s stock price fell by more than 75%;
In 2008, Rite Aid’s stock price fell to $0.20, reaching a historic low, with its market capitalization shrinking to just $500 million;
In August 2009, the company’s founder, Alex Grass, passed away from cancer;
In June 2010, Rite Aid appointed John Standley as its Chief Operating Officer and Chief Executive Officer, and launched the Wellness+ customer loyalty program within the company that same year;
In 2011, Rite Aid ranked 385th on the Fortune 500 list;
In 2013, the Wellness+ customer loyalty program was extended to U.S. citizens aged 65 and older;
In fiscal year 2014, Rite Aid’s revenue amounted to $25.5 billion;
In 2015, Rite Aid’s market capitalization was $7.15 billion.
Compiled by Chen Kun
Editor: Yan Bu