Consumers Will Not Forget Elephant Pharmacy Experience
By George Anderson
Elephant Pharmacy isn’t your typical drugstore.
The two-store business, which first opened in 2001, offers the same services and many of the same products as other drugstores, but it also markets a wide range of complementary medicines and services, such as in-store acupuncturists, nutritionists and yoga classes. The company’s web site even describes Elephant Pharmacy as “the drug store that prescribes yoga.”
Kathi Lentzsch, chief executive officer of Elephant, told The Wall Street Journal, “People are beginning to question some of the traditional pharmaceuticals, so they are looking for alternative ways to treat themselves. We’re sort of turning the traditional drugstore on its head.”
Among the interesting stories behind the Elephant Pharmacy tale is that CVS is one of the investors in the company and holds a seat on its board of directors.
CVS has the advantage of having Elephant Pharmacy’s experience serve as a learning lab for the large chain.
In a company statement, CVS said, “Elephant’s innovative combination of alternative therapies and conventional pharmacy services is a promising model that appeals to a patient population who are taking an increasingly proactive role in their health and well-being.”
Ms. Lentzsch said Elephant Pharmacy is planning to open three Bay Area stores during 2007 in addition to its current locations in Berkeley and San Rafael. The company hopes to expand to southern California and eventually to areas around the country, such as Cambridge, Mass., that fit its consumer demographic target.
“We are so committed to the niche,” Ms. Lentzsch said. “We have people who count behind us, people who believe in us.”
Moderator’s Comment: Is Elephant Pharmacy the future of drugstores? Will it play in places outside of its Bay area
backyard? – George Anderson – Moderator
The synergy mentioned with customers buying organic and/or otherwise healthy food, and boosting the popularity of Trader Joe’s and Whole Foods, resonates. As their numbers grow, so too will the number of more interesting retailers who are perceived to be supplying what customers actually want.
It seems as if the large drugstore chains are focused primarily on prescriptions, and then secondarily on variety store categories and packaged foods. Health-related services and alternative medicine aren’t their focus right now. When the federal and state governments start to squeeze the prescription margins in the next few years, the chains will have to find a new profit focus. Human services and alternative medicine, if their margins are good, will become very attractive. Right now, it’s easier to make money without being innovative. Otherwise, many chain drug stores would’ve already adopted in-store “doc in a box,” paid nutrition counseling, and paid nurse services already. Health could profitably be 1-stop shopping. There may be more profit in giving space to an in-store paid clinic than extra space for seasonal toys and candies.
I think this concept will have great growth potential outside the Bay area backyard. It appears like their growth plans will start by shadowing the $800k to $1 million per week Whole Foods stores given they are going to the Bay area and Chambridge. Look for them to hit Seattle, Chicago, Santa Fe, Boulder, and the DC metro area as well.
An Elephant Pharmacy is nearing completion around the corner from our offices, and it is probably no coincidence that it is down the street from an almost-completed Whole Foods and a nearby Trader Joe’s. Despite there seeming to be a Walgreens and/or Long’s on every corner around here, I think it will do quite well. Silicon Valley is a hot zone for “experiential marketing.”
I think this might be difficult to work on a large scale, but maybe not. In the modern, scaled up retail era, people haven’t thought of pharmacies/drug stores as a primary point of distribution/receipt of health information and services, other than prescription and over-the-counter medicines and the like.
Drug stores moved into the “variety store” mode decades ago. CVS in the Washington region is more of a neighborhood convenience store with a prescription drug counter.
My sense is that this can work in higher SES areas, just like Stew Leonard’s successfully differentiates its product offering vis-Ã -vis more traditional supermarkets, or a hardware store which through superior merchandising and service is able to co-exist with the big box chains.
The issue is can these kinds of paradigm breaking businesses be scaled up and chained as well?
And is it possible, from a health promotion standpoint, to figure out how to do this in health-underserved communities, making the local pharmacy in low-income neighborhoods a partner in the distribution and availability of health care services?
This sounds like the Trader Joe’s of drug stores… passionate, original, providing a spectrum of alternative health treatments, and probably also driven by a set of values. It sounds as if their CEO is confident, focused and perhaps charismatic.
Certainly if this combination would resonate anywhere, it would be in Marin County and Berkeley! Nevertheless, medicine and health products seem like categories that are ripe for a smaller player to differentiate and succeed nationally. Addressing the desire on the part of consumers to learn about and buy non-traditional products seems like a great place to start.
One of the local weeklies last year ran a (quite unflattering) profile on the pachyderm. The gist of the article was the suggestion that the whole concept was more hype than reality. Having never been to either one, I can’t really comment on that one way or the other, but it seems a bit faddish at this point. But one thing is certain: if “prescribing” yoga catches on, expect to see it at every Walgreen/Wal-Mart/CVS/et al. coast-to-coast.
As all channels continue to evolve, so will the mainstream Drug chains with both organic/homeopathic products as offered by Elephant. Will the large chains move to incorporate Elephant’s perimeter departments like acupuncture? No, but they will need to integrate each category with organic/homeopathic SKU’s which will expand their customer base by bringing in the Natural Health premium price shoppers. I believe the Elephant concept will enhance mainstream Drug chains opportunity to drive OTC sales and margins with the addition of organic/homeopathic products.
It was announced last week that a soon to be vacated Albertsons store in Walnut Creek, CA will soon be occupied in tandem by a Trader Joe’s and an Elephant Pharmacy. The location is in the very very “hip” downtown area.
The concept of holistic medicine is gaining ground with alternative therapies like Ayurveda, Unani and Homeopathy finding acceptance in mainstream Medicine. I believe there are two segments Elephant Pharmacy can capitalize upon-
1) Chronic Ailments- where alternative therapy could be promoted as a supplement to mainstream therapy (Allopathy).
2) Lifestyle Medicine- where alternative therapies (usually of natural origin) have a distinct upper hand over the Allopathic ones.
Elephant Pharmacy seems to be on the right track….