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Walgreens Exec: Operational Excellence Makes 1-Hour Delivery Promise a Reality

Walgreens signage
Photo courtesy Michele, Adobe

Any retailer that’s attempted to provide pickup and delivery services knows how fraught (not to mention expensive) they can be. Yet Walgreens has so much confidence in its ability to quickly pick and deliver orders that it’s now offering 30-minute store pickups and one-hour delivery, the latter with a money-back guarantee.

Lindsay Mikos, Senior Director, Retail Omnichannel at Walgreens, revealed the multiple interlocking elements that have allowed the retailer to complete “35 million pickups and one-hour deliveries from our stores in 2022 alone, with that number continuing to grow in 2023,” during her 2023 Retail Innovation Conference & Expo presentation, Cashing in on Convenience: How Walgreens is Investing in Omnichannel Innovation.

It helps, of course, that Walgreens has an enviable store footprint: more than 8,800 stores nationwide, putting 78% of the U.S. population within five miles of a Walgreens store. But it’s how those stores operate that allows them to effectively serve as fulfillment hubs.

COVID Made Pickup a Priority

“Walgreens didn’t have a pickup program prior to COVID, although we had tested it previously,” said Mikos, who has been with the retailer for 19 years. One reason is that there didn’t seem to be a pressing need for online pre-ordering given the level of convenience its stores already provided: “Our average customer is in and out of the store in eight minutes,” said Mikos.

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The pandemic, of course, changed that equation: “Within a couple of weeks, a team of about 10 of us put 100 items on a micro site, allowing people to shop and access critical items that they could get through the [pharmacy] drive-thru,” said Mikos. “It showed [the company’s executives] that there was a very real need here, and they should pay attention and invest in this.

“You have to continue to test, learn and iterate, so we had to continue to build [the program] and roll it out to scale,” Mikos added. “We pushed ourselves to do 30-minute pickups, and then about four months after instituting them, we took it one step further, with deliveries from stores to a customer’s door within two hours,” said Mikos. She credited solid partnerships with courier services such as DoorDash and Uber in making these goals achievable.

Now 30-minute pickups, including drive-thru and curbside options, are available chainwide, providing customers with access to 27,000 items. “We expanded from 100 to our full assortment,” noted Mikos, who added that now “pickup represents over half of our digital commerce volume, and it’s been showing double-digit growth for four years in a row.”

Fast, efficient store fulfillment also made advances in Walgreens’ delivery services possible. “We found that 80% of these delivery orders were being delivered in one hour; in Chicago, the average was 45 minutes, helped by our [store] density and courier network,” she noted. “Then we just launched, at the beginning of May 2023, our one-hour delivery or it’s free guarantee. This helped customers trust that we will deliver them the items they need quickly and easily.”

In 2022, Walgreens added 24-hour delivery service at several hundred stores, and the retailer has expanded its delivery radius from 15 miles to 20, although Mikos noted that 80% of these orders are being delivered within just five miles from a store. Customers also can schedule deliveries for a specific time, which is particularly helpful with pharmacy items.

The Vital Importance of Listening to Store Teams

Mikos and other Walgreens executives were well aware that store pickup had to operate like clockwork, and it’s used a combination of training and technology to make that happen. “From day one of the program, we knew that if you get to that store and wait for the order at curbside for two minutes, or even one minute, it feels like five,” said Mikos. “You won’t have retention, a high repeat rate or customer lifetime value with those customers” if they have to wait.

“We created a robust training module from day one; we brought in our field teams to help lead their creation,” said Mikos. “We asked, how do [store associates] want to learn? How can we onboard them to this new service to make it successful for our customers and patients?

“The program has been live for a couple of years, and the best ideas come from the store associates,” Mikos added. “They’ll say, ‘This is working, this isn’t, we need this.’ For example, at launch [associates picking an order] had to stop at the store’s POS and scan a QR code, and when you’re doing a significant amount of volume and there are other customers in the line,” the time needed for these tasks adds up quickly. “So we allowed [associates] to check out on a handheld device, and that’s reduced time-to-curb by 30%,” said Mikos.

Another technology that has boosted convenience is a real-time in-store communications solution from Theatro. Each store designates a team lead for pickup, although this associate also will typically have other responsibilities during their shift. “This helps the team lead identify who will take an order and fill it, and get an acknowledgement of that,” said Mikos. “It’s helped us manage through situations where a store manager can take over if needed to deal with peaks and valleys throughout the day. We’ve pushed our operations teams to deliver even faster, and we’ve seen that average pick times have dropped below 15 minutes for 95% of orders.”

Walgreens is continuing to seek ways to tighten operations and enhance the convenience of store pickup. “Stores get an alert from customers when they’re on their way to the store and another when they arrive, and then the store offers them a pickup option in real time,” said Mikos. “Curbside is the most chosen option, but some customers might have a prescription ready so they would want to go through the drive-thru. We want to make it a seamless trip, but there’s a lot more room to enhance that and put less onus on the customer, and we’re testing [solutions] right now in certain markets. We’re also piloting with geofencing technology to provide [store teams] with better visibility into where customers are.”

All these efforts are focused on better alignment between Walgreens’ retail and pharmacy operations. “We have to think through how to stitch together the entire experience,” Mikos explained. “We do a pretty good job focusing on [a customer’s] mood state. For example, if we know you bought ibuprofen, we might ask, ‘Are you feeling better? Here are all the other services we have.’ We have to be careful with regard to HIPAA regulations, [which protect patients’ health information], in bringing together these two customer journeys that have been somewhat siloed for so many years, but it’s important to talk to the customer as one customer. She shops in our stores, she gets prescriptions filled — and where is she at in her journey right now? Say she just got a flu shot; does she also need vitamin supplements?”

The ability to unite both “sides” of Walgreens’ offerings in order to build basket sizes and customer lifetime value is essential: “Delivery isn’t cheap, and you have to make the economics work,” said Mikos.

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