June 28, 2024
Photo by Sachina Hobo on Unsplash
Will Zebra Technologies Help Walgreens Bounce Back?
In a strategic move to enhance operational efficiency and customer experience, Walgreens Boots Alliance has successfully integrated Zebra Technologies’ Workcloud Actionable Intelligence software. This optimization effort has resulted in significant cost savings, helping the company better manage operations and combat retail shrinkage.
The integration of Zebra’s Workcloud suite includes Actionable Intelligence, Task Management, and Demand Intelligence software. These tools are designed to streamline task management, improve inventory accuracy, and reduce total retail loss. By using Zebra’s modular software in conjunction with its hardware solutions, Walgreens has effectively increased operational visibility and compliance.
Suresh Menon, senior vice president and general manager of software solutions at Zebra Technologies, emphasized the company’s commitment to helping retailers like Walgreens modernize their operations. Zebra’s technologies enable increased accountability, visibility, and actionable intelligence, driving better business outcomes and substantial savings.
The financial benefits of implementing Zebra’s Workcloud Actionable Intelligence are substantial. Walgreens has saved millions of dollars over five years, thanks to improved operational compliance and the ability to swiftly identify and address areas of loss. The comprehensive deployment of Zebra’s software and hardware solutions has benefited 20,000 associates across various roles, including asset protection, store operations, pharmacy management, and inventory specialists.
Tim Bailey, senior manager of asset protection solutions at Walgreens Boots Alliance, highlighted the positive impact of these advancements. The deployment of Zebra’s solutions has empowered Walgreens’ workforce, improving associate engagement and elevating the overall customer experience. This technology-driven approach has also enabled Walgreens to address phantom inventory, shelf gaps, fraud detection, and markdown non-compliance, reducing waste by 27%.
However, Walgreens plans to close numerous underperforming stores across the U.S. as part of a multi-year effort to enhance efficiency and financial health. This announcement, which included a reduced profit forecast for 2024, caused a significant drop in shares. Over the past year, Walgreens’ stock has fallen by over 45%. Despite setbacks, CEO Tim Wentworth highlighted strong performance in Walgreens’ international and U.S. healthcare segments. Walgreens now expects adjusted earnings for fiscal 2024 to be between $2.80 and $2.95 per share, down from the previous estimate of $3.20 to $3.35 per share.
Furthermore, Walgreens and other retail pharmacy chains have been grappling with escalating shoplifting incidents since the pandemic, prompting measures such as locking up items and closing high-theft locations. However, Walgreens’ challenges run deeper, involving stiff competition and unsuccessful growth strategies. In fact, Walgreens acknowledged last year that it might have overstated the impact of shoplifting on its business.
A significant factor behind Walgreens’ closures is the declining profitability of the current pharmacy model. Analysts point to falling reimbursement rates for prescription drugs as a major issue. Drug stores rely heavily on prescription sales for the bulk of their revenue, but profits from this segment have dwindled due to lower reimbursement rates and rising fees.
Pharmacy benefit managers (PBMs), who negotiate drug prices and rebates with manufacturers on behalf of insurers, largely determine the prices customers pay and the payments pharmacies receive. In their quest to boost profits, PBMs have been reducing reimbursement rates, putting financial pressure on pharmacies. The pharmacy industry argues that PBMs wield excessive control and can significantly squeeze their margins, whereas PBMs contend that their negotiations help keep drug prices down.
BrainTrust
Brian Delp
CEO, New Sega Home
Pamela Kaplan
Principal, PK Consulting
Gary Sankary
Retail Industry Strategy, Esri
Recent Discussions
Discussion Questions
How can Walgreens and other retail pharmacies balance advanced technology integration with addressing structural issues like declining reimbursement rates and competition in the pharmacy sector?
What additional innovative strategies could Walgreens implement to sustain long-term profitability and counteract challenges in the current pharmacy model?
Given the pressures of rising theft and dynamics with pharmacy benefit managers (PBMs), how can retail pharmacies mitigate these issues while maintaining accessible and affordable healthcare services?
Poll
Loading …
I am sure this technology will be helpful to Walgreens, will help the chain save money, and will reduce issues in the problem area of theft. As for helping Walgreens bounce back, the answer is a firm no because this technology does not solve the core issues that Walgreens faces which are far more existential than just theft. Walgreens has to work through profitability issues on the pharmacy side, streamline its broken healthcare strategy, reinvent a tarnished and increasingly irrelevant retail proposition, and fix poor staff morale. That’s a very long to-do list!
All good points – It sounds to me like.a case of getting back to the retail basics to make the company work again. Not so different from what we are seeing with the old department stores models. It’s a recurring message that many retailers don’t seem to get.
Agreed, a failure to focus on the basics and fundamentals is often at the root of many retail issues.
That was very well said. To expand, technology does not solve the core issues that Walgreens or any other retailer faces.
Yes! Thanks Gene!
Walgreen’s is not alone in citing theft as an issue to its profitability, however I don’t think adding tech in this manner is the real solve. Yes, it may provide more data but I’m not sure that will get to the root of their problem. They fundamentally have issues with merchandising, store upkeep, and shifting customer expectations. They are competing in a new phase of retail, with new entrants such as Amazon. A larger reinvent is needed.
Yes. This. I think it will help them be more productive and offer more data points to look at, but there are deeper issues (that you noted) that also need to be addressed. Until these are looked at, the company will find a comeback an uphill battle.
Agreed, because theft did not case a 90% decline in Walgreens market cap over the past 9 years. $105.6 billion to just under $10 billion. An eyewaterinw decline.
Solving its loss prevention problems through better technology is only a small piece of the Walgreens puzzle. Clearly its longstanding real estate strategy — location saturation to gain market share — has reached a dead end.
Walgreens has never recovered (especially on the pharmacy staffing side) from the strains during and after the peak of Covid. Maybe the store closures can help Walgreens compete without being so overextended.
Well, Walgreens is on a level playing field with everyone else when it comes to shrink, so I’m tossing that one off the list. My best recommendation to Walgreens is to staff up and treat its customers right, and quickly. Technology is an enabler. The magic question is…enabler of what? What’s the strategy in plain English?
Do you mean to say that technology is not the end-all-be-all solution? How dare you? 🙂
Zebra Technologies will benefit Walgreens improve in a weak area of technology, help reduce shrinkage, and marginally improve operations. But this solution is the tiny tip of a monster-size iceberg. In my opinion, Walgreens has a lot of larger problems.
More than anything else that Walgreens wants to be, Walgreens is a pharmacy. Walgreens makes money and profits when customers choose Walgreens to fill prescriptions, and when Walgreens sells front end products to those same customers.
But Walgreens has lagged behind in many aspects of technology, and continues to struggle with in-store labor, including pharmacy personnel. I understand that the new plan is to reduce store-counts by approximately 25%. That is a band aid solution, at best.
This is unofficial, but my own sources believe Walgreens is experiencing more than 40% turnover ratio each month, including pharmacists and technicians.
As someone who works with numerous suppliers, and in brand-development, its my opinion that Walgreens tries to make up too much of its profit needs with charges, fees, allowances, and terms, from its branded suppliers. Again, band aid solutions. – Db
Underperforming stores, escalating theft, and whatever else is affecting Walgreen’s growth won’t be helped by software. Zebra’s technology is good but it’s not a magic bullet.
Technology is important, and companies need to be up to date on the latest, but as you say,” there is no magic bullet.”
The implementation of relevant technology always helps but it is seldom the cure for an entire company’s declining sales and/or profitability. Walgreen’s is making efforts on the technology front. Specific problems I see are the inability to hire and retain store associates and pharmacists (compensation? training? treatment? all of these?). ‘Wholes’ in the shelves point to inventory management challenges. Walgreen’s is very competitive at pricing of its private label products. The same formulation costs significantly less that national branded product. Lack of attention to detail and presentation is a cultural problem, not a technology problem and Walgreen’s suffers from both of these. I have been involved in retail technology for my entire career and I swear by it but, admittedly, technology does not perform miracles, management does.
Just about every retailer worth its salt has made or is making investments in inventory accuracy, decision support and actionable intelligence. This announcement doesn’t set Walgreens apart, but at least they have not ignored these imperatives.
Of the cited benefits to their retail business, I’d say cost savings are good, but less consequential than operational improvements.
But Walgreens is much more than a string of mediocre convenience stores that sell a lot of razor blades, toothpaste and cough medicine – or at least it should be. The healthcare side of the business should be leading the charge, which apparently has not been happening.
Walgreens (and CVS too!) suffers the misfortune of being an overwhelming market leader in the alarmingly dysfunctional prescription drug business. Its people spend more time wrangling claim paperwork than they do dispensing clinical advice. No wonder chain pharmacist and tech positions have become such tough hires.
Better operational tech won’t solve these systemic challenges, even if they help improve penny profits. Alternative revenues from its nascent retail media network may buy a little time, but won’t fix the core business. This is a moment when the entire chain drug business model is in need of an overhaul on three fronts:
- Trim down the convenience grocery, candy and general merchandise business in most stores. Offer less packaged junk food and more healthier options that align with the health status of their pharmacy patients.
- Improve assortments and on-shelf availability of OTC categories, supplements, and personal care products.
- Re-imagine the professional roles of the pharmacists and techs as wellness coaches who step in front of the counter to interact with and advise shoppers.
Interesting choice of words: “convenience store.” Yes, several years ago, we wrote about Walgreens’ convenience store strategy. I don’t remember what the consensus was, but convenience stores are not pharmacies. The operational mindset is very different.
There are no “silver bullets” in business software. Like any struggling business, Walgreen’s issues are far more complicated than just one issue, in this case, theft.
I’m a fan of innovative technology because it can unleash new business models, new ways of working and new revenue streams. However, it can’t fix a myriad of other competitive pressures that Walgreens faces on a daily basis, from merchandising to pharmacy to digital upstarts that are biting at their heels. This is an extremely complex set of issues facing Walgreens that technology alone won’t fix.
Zebra Technologies’ Workcloud Actionable Intelligence software will help Walgreens be more efficient and reduce costs, however, it is not a “silver bullet.” The drug store segment has been under serious challenges of profitability which has been exasporated by increased theft. Addressing the core issues is necessary for a “bounce back.” And a bounce back may be too strong of a description.
I’m sorry. Can we not talk about theft? While it is an issue, it is not just an issue for Walgreens. How about facing the extraordinary problem of employee turnover? The numbers I see—35% to 40% per month—are outrageous. Thirty-five percent or more per year would be a problem, especially in the pharmacy.
The on-again, off-again discussion of splitting off Boots doesn’t help. Neil can tell us how many times in the last years they have bounced back and forth on this issue. I beleive Walgreens’ management doesn’t want to face what must be done to turn it around. Is it too much hard work? Or would they admit they have taken their eyes off the ball for the last several years?
Certainly the $5 billion the company is on the hook for in opioid addiction claims has something to do with this, right? That’s more than a half-million in liabilities per store location, averaged out. Using Neil’s term, the company’s share of responsibility in this scandal is also an existential issue that needs to shake management to its core, rather than taking it out on those stocking shelves.
It’s good to see Walgreens invest in inventory accuracy + intelligence, but this should be the expectation anyhow of retailers at such size.
Introducing such new tech won’t solve their competitive pressures.
They need to really focus on 1) updating their outdated retail strategy; & 2) improving staff morale.
Walgreens is not a technology-driven business. Technology enables their business. Every process or technology used has a cost to use and maintain. The assumption is the math has been done here as there are a lot of indirect costs (e.g. how the data insights from Zebra’s software syncs back and drives actionable change in their core operational systems) that are unknown based on what’s in the article. They have fundamental problems that will require reviewing the business strategy/model first.
More Discussions
Why Did Amazon End Palm Pay?
What’s behind Amazon’s pullback on palm pay?Will Spotify’s New Page Match Feature Impress Bookworms?
Will Spotify’s new Page Match feature drive sales of both audiobooks and physical books?Is it Fair To Describe Walmart as ‘Basically’ a Tech Company?
Is Walmart becoming a tech company?
I am sure this technology will be helpful to Walgreens, will help the chain save money, and will reduce issues in the problem area of theft. As for helping Walgreens bounce back, the answer is a firm no because this technology does not solve the core issues that Walgreens faces which are far more existential than just theft. Walgreens has to work through profitability issues on the pharmacy side, streamline its broken healthcare strategy, reinvent a tarnished and increasingly irrelevant retail proposition, and fix poor staff morale. That’s a very long to-do list!
All good points – It sounds to me like.a case of getting back to the retail basics to make the company work again. Not so different from what we are seeing with the old department stores models. It’s a recurring message that many retailers don’t seem to get.
Agreed, a failure to focus on the basics and fundamentals is often at the root of many retail issues.
That was very well said. To expand, technology does not solve the core issues that Walgreens or any other retailer faces.
Yes! Thanks Gene!
Walgreen’s is not alone in citing theft as an issue to its profitability, however I don’t think adding tech in this manner is the real solve. Yes, it may provide more data but I’m not sure that will get to the root of their problem. They fundamentally have issues with merchandising, store upkeep, and shifting customer expectations. They are competing in a new phase of retail, with new entrants such as Amazon. A larger reinvent is needed.
Yes. This. I think it will help them be more productive and offer more data points to look at, but there are deeper issues (that you noted) that also need to be addressed. Until these are looked at, the company will find a comeback an uphill battle.
Agreed, because theft did not case a 90% decline in Walgreens market cap over the past 9 years. $105.6 billion to just under $10 billion. An eyewaterinw decline.
Solving its loss prevention problems through better technology is only a small piece of the Walgreens puzzle. Clearly its longstanding real estate strategy — location saturation to gain market share — has reached a dead end.
Walgreens has never recovered (especially on the pharmacy staffing side) from the strains during and after the peak of Covid. Maybe the store closures can help Walgreens compete without being so overextended.
Well, Walgreens is on a level playing field with everyone else when it comes to shrink, so I’m tossing that one off the list. My best recommendation to Walgreens is to staff up and treat its customers right, and quickly. Technology is an enabler. The magic question is…enabler of what? What’s the strategy in plain English?
Do you mean to say that technology is not the end-all-be-all solution? How dare you? 🙂
Zebra Technologies will benefit Walgreens improve in a weak area of technology, help reduce shrinkage, and marginally improve operations. But this solution is the tiny tip of a monster-size iceberg. In my opinion, Walgreens has a lot of larger problems.
More than anything else that Walgreens wants to be, Walgreens is a pharmacy. Walgreens makes money and profits when customers choose Walgreens to fill prescriptions, and when Walgreens sells front end products to those same customers.
But Walgreens has lagged behind in many aspects of technology, and continues to struggle with in-store labor, including pharmacy personnel. I understand that the new plan is to reduce store-counts by approximately 25%. That is a band aid solution, at best.
This is unofficial, but my own sources believe Walgreens is experiencing more than 40% turnover ratio each month, including pharmacists and technicians.
As someone who works with numerous suppliers, and in brand-development, its my opinion that Walgreens tries to make up too much of its profit needs with charges, fees, allowances, and terms, from its branded suppliers. Again, band aid solutions. – Db
Underperforming stores, escalating theft, and whatever else is affecting Walgreen’s growth won’t be helped by software. Zebra’s technology is good but it’s not a magic bullet.
Technology is important, and companies need to be up to date on the latest, but as you say,” there is no magic bullet.”
The implementation of relevant technology always helps but it is seldom the cure for an entire company’s declining sales and/or profitability. Walgreen’s is making efforts on the technology front. Specific problems I see are the inability to hire and retain store associates and pharmacists (compensation? training? treatment? all of these?). ‘Wholes’ in the shelves point to inventory management challenges. Walgreen’s is very competitive at pricing of its private label products. The same formulation costs significantly less that national branded product. Lack of attention to detail and presentation is a cultural problem, not a technology problem and Walgreen’s suffers from both of these. I have been involved in retail technology for my entire career and I swear by it but, admittedly, technology does not perform miracles, management does.
Just about every retailer worth its salt has made or is making investments in inventory accuracy, decision support and actionable intelligence. This announcement doesn’t set Walgreens apart, but at least they have not ignored these imperatives.
Of the cited benefits to their retail business, I’d say cost savings are good, but less consequential than operational improvements.
But Walgreens is much more than a string of mediocre convenience stores that sell a lot of razor blades, toothpaste and cough medicine – or at least it should be. The healthcare side of the business should be leading the charge, which apparently has not been happening.
Walgreens (and CVS too!) suffers the misfortune of being an overwhelming market leader in the alarmingly dysfunctional prescription drug business. Its people spend more time wrangling claim paperwork than they do dispensing clinical advice. No wonder chain pharmacist and tech positions have become such tough hires.
Better operational tech won’t solve these systemic challenges, even if they help improve penny profits. Alternative revenues from its nascent retail media network may buy a little time, but won’t fix the core business. This is a moment when the entire chain drug business model is in need of an overhaul on three fronts:
Interesting choice of words: “convenience store.” Yes, several years ago, we wrote about Walgreens’ convenience store strategy. I don’t remember what the consensus was, but convenience stores are not pharmacies. The operational mindset is very different.
There are no “silver bullets” in business software. Like any struggling business, Walgreen’s issues are far more complicated than just one issue, in this case, theft.
I’m a fan of innovative technology because it can unleash new business models, new ways of working and new revenue streams. However, it can’t fix a myriad of other competitive pressures that Walgreens faces on a daily basis, from merchandising to pharmacy to digital upstarts that are biting at their heels. This is an extremely complex set of issues facing Walgreens that technology alone won’t fix.
Zebra Technologies’ Workcloud Actionable Intelligence software will help Walgreens be more efficient and reduce costs, however, it is not a “silver bullet.” The drug store segment has been under serious challenges of profitability which has been exasporated by increased theft. Addressing the core issues is necessary for a “bounce back.” And a bounce back may be too strong of a description.
I’m sorry. Can we not talk about theft? While it is an issue, it is not just an issue for Walgreens. How about facing the extraordinary problem of employee turnover? The numbers I see—35% to 40% per month—are outrageous. Thirty-five percent or more per year would be a problem, especially in the pharmacy.
The on-again, off-again discussion of splitting off Boots doesn’t help. Neil can tell us how many times in the last years they have bounced back and forth on this issue. I beleive Walgreens’ management doesn’t want to face what must be done to turn it around. Is it too much hard work? Or would they admit they have taken their eyes off the ball for the last several years?
Certainly the $5 billion the company is on the hook for in opioid addiction claims has something to do with this, right? That’s more than a half-million in liabilities per store location, averaged out. Using Neil’s term, the company’s share of responsibility in this scandal is also an existential issue that needs to shake management to its core, rather than taking it out on those stocking shelves.
It’s good to see Walgreens invest in inventory accuracy + intelligence, but this should be the expectation anyhow of retailers at such size.
Introducing such new tech won’t solve their competitive pressures.
They need to really focus on 1) updating their outdated retail strategy; & 2) improving staff morale.
Walgreens is not a technology-driven business. Technology enables their business. Every process or technology used has a cost to use and maintain. The assumption is the math has been done here as there are a lot of indirect costs (e.g. how the data insights from Zebra’s software syncs back and drives actionable change in their core operational systems) that are unknown based on what’s in the article. They have fundamental problems that will require reviewing the business strategy/model first.