Duane Reade finds a cure in private label

In less than two years, Duane Reade’s private-label brands have doubled in sales. Some of the New York City-based drugstore chain’s private brands have emerged as bestsellers. Beyond that, improved private-label sales have brought higher average gross margin rates and raised overall store gross margin.

Duane Reade has achieved these eye-catching results by repositioning and redesigning more than 2,000 private-label SKUs, as well as giving its 250-plus stores a facelift. In the process, the retailer, synonymous to New Yorkers with “pharmacy,” has evolved into a store with a pharmacy, and Duane Reade appears to be re-emerging as a meaningful shopping destination for consumers in New York City and surrounding boroughs.

With its extensive makeover, Duane Reade paints a picture representative of retailers who are getting more adept at leveraging packaging’s power as a brand communicator and sales influencer, especially when it complements other marketing efforts. The company has completed the arduous process of creating new brand experiences, discontinuing products that didn’t meet consumer needs, and upgrading food product quality under its four primary private brands.

The new look emphasizes the tagline “New York Living Made Easy.” Duane Reade’s private brands bear such package images as gritty photography capturing the character of the city and clever UPC code-like depictions of New York landmarks, from the Empire State Building to the Brooklyn Bridge. The strategy behind Duane Reade’s fresh appearance was carried out by a new management team that reports to new owner Walgreen Co.

Inspiration for a new direction

Duane Reade’s rebirth began more than two years ago with both research of the chain’s core consumers and market analysis. Research showed that the stores did a decent job in some categories and a less-than-stellar job in others of meeting New Yorkers’ basic product needs. But as a brand, the stores lacked “New York attitude,” which many local shoppers found perplexing given the chain’s birthplace in Manhattan in 1960. In addition, the retailer was coming under increased competition from other drugstore chains moving into the metro area.

Research also uncovered the need for a more careful approach to product merchandising that accounted for localized shopper preferences. There is no typical Duane Reade shopper, so store offerings would need to be customized to neighborhoods. Besides demographic considerations, merchandise offerings would be dependent on store size; Duane Reade stores range from 15,000 to 20,000 sq ft.

Duane Reade gathered quantitative insights in six or seven consumer segments, and then narrowed the results to five segments where focus would be placed. Duane Reade set out to improve its pharmacy and health-related product offerings, make a stronger play in beauty products, leverage its strengths as a convenience store, and evolve into a store that included a pharmacy, says Todd Maute, CBX managing partner. His company influenced the store redesign and played a major role in package creation.

Adds Paul Tiberio, Duane Reade’s senior vice president of merchandising and marketing, “Both the store design and packaging originate from a clean, sophisticated look with a definite New York feel.”

The store redesign includes new and redesigned department areas and consulting services that give shoppers the experiences they associate with salons and high-end department stores. The company also restyled its logo to cast the Duane Reade brand in a more contemporary light.

Holistic integration

Packaging for Duane Reade’s private-label products supports the overarching brand strategy by integrating with the store layout and collateral materials. The use of color, imagery, and clever wordplay all express Duane Reade’s “New York Living Made Easy” mission. The brand names and package designs reflect the store and the store reflects them, whether it’s Delish All Butter Chocolate Chip Cookies or Apt 5 Goes Green paper products (made from a sugar cane by-product).

“From the outset, our goal was to develop a European-style private-brands program at Duane Reade,” Tiberio explains. “This includes alignment throughout the organization, from the senior ranks down, and a brand management approach to our category strategies.

“For example,” he continues, “we developed two quality tiers within food so that we could deliver what New Yorkers were telling us they wanted. DR Delish was created because we needed a differentiated offer, and then a ‘value’ brand, which we refer to as Cityscape, was added as a complement. These brand designs are purposefully very different, clearly communicating their differentiated versus value positioning to our customers.”

It’s easy to see the differences in those two product-positioning approaches by looking at the packaging. DR Delish is the retailer’s new line of premium foods created in a partnership with Zabars, a bakery well established in New York, to generate good-tasting foods and gain consumer trust. As the products were being created, Duane Reade collaborated with CBX to create distinctive packaging. The design oozes with the character of New York City. Labels on cans of Delish Deluxe nuts, for example, spotlight color photography of the nuts whimsically positioned on bar stools and park benches, and in taxicabs, in scenes shot in black and white.

In contrast, the Cityscape family of products emphasizes UPC code-style illustrations of the Statue of Liberty, Brooklyn Bridge, and other local landmarks on the front-of-pack artwork. These designs appear on some food products, as well as on packages of frequently purchased items like bottled water and bath tissue.

“It’s not about the attributes, but more about clear communication of value,” Maute says.

Repositioning in household

Elsewhere in the store, Duane Reade’s Apt 5 brand has relocated from cosmetics to household products, where it has been repositioned with an apartment-living motif. “We thought it was a perfect match for how many New Yorkers live,” Tiberio says.

Dish soap, toilet bowl cleaner, and other products appear in bright, color packages where photography again takes center stage. Apt 5 toilet paper packages feature an image of an empty roll on a tiled bathroom wall in a typical New York City apartment.

Apt 5 is further segmented with a green product lineup. Eco-friendly cleaning products feature bright-green labels and interior photography of bathrooms, kitchens, and living rooms from New York apartments.

“We repositioned the Apt 5 brand name out of cosmetics and into household, which we thought was a perfect match for how many New Yorkers live,” Tiberio says.

The new look at Duane Reade seems to be working. Not only have private-brand sales improved, but anecdotally New Yorkers are talking more positively about Duane Reade today.

“Bottom line,” Tiberio concludes, “we believe that the very positive reception that consumers have given us at the cash register is a direct result of category and design strategies supporting our ‘New York Living Made Easy’ corporate mission statement.”