To stimulate customers' need to purchase amid a challenging
macro-economic scenario, leading drug store retailor
) recently launched a complete customer loyalty program. This new
program, 'Balance Rewards' which claims to be the largest consumer
loyalty program in the U.S., aims to stimulate spending through
points and rewards earned by customers. Officially starting on
September 16, 2012, this program includes over 7,900 Walgreen and
Duane Reade stores in the U.S. and offers multi-channel access to
join the program.
Earlier in August, Walgreen first announced its plan to
introduce the loyalty card program. Accordingly, on September 6,
the company started the enrollment for its Balance Rewards program.
The company encouragingly noted that since then, over one million
customers have already signed up for the program. According to the
company, the three main benefits of this program are - it is easy
to join, and instant points and endless rewards are made
Other players in this battle
We believe that Walgreen's focus on loyalty programs is
necessary as its peers
Rite Aid Corporation
) are also working toward the same goal. CVS Caremark's 'ExtraCare'
loyalty program continues to remain a prime stimulus for over a
decade (since its launch in 2001). This health card program offers
discounts to eligible plan members on certain over-the-counter
health care products sold in CVS pharmacy stores. Currently, with
more than 68 million active cardholders, this program represents
one of the largest and most successful retail loyalty programs in
the U.S., helping CVS Caremark to build a stable customer base.
On the other hand, Rite Aid is doing well with its loyalty card
program 'wellness+' that was launched in fiscal 2010 in four pilot
markets. Based on the accumulated points from front-end and
prescription purchases, this program provides many benefits to its
loyalty cardholders. The company has been quite successful with
this sales initiative so far. Earlier in August, it launched
the new Load2Card feature for wellness+ members. As per the
new plan, beginning September 2, wellness+ card holders have the
privilege of getting their special reward points automatically
loaded to their cards.
Under the present weak macroeconomic environment, unemployment
remains considerably high and food and gas prices are on the rise.
Increasing costs coupled with unemployment have made customers more
value driven. Consequently, spending on discretionary items is
affected. This situation has impacted same store sales growth. The
drug retailers are also facing other headwinds such as pharmacy
reimbursement pressure and front-end margin pressure, which may
hinder gross margin expansion.
Amidst such a turbulent situation, we are encouraged with these
retail stalwarts' efforts to negate the impact of discretionary
spending. These companies are taking all the measures to boost
customers' spending. The lucrative offers with reward points drive
success in this regard.
Walgreen's sales results were disappointing for the month of
August, 2012. However, it remains to be seen whether the company
will benefit from the recent marketing initiatives. We remain
'Neutral' on the company along with CVS Caremark and Rite Aid with
a Zacks # 3 Rank (Hold rating in the short term).
CVS CAREMARK CP (CVS): Free Stock Analysis
RITE AID CORP (RAD): Free Stock Analysis Report
WALGREEN CO (WAG): Free Stock Analysis Report
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