Raleys to close pharmacies

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Raleys to close pharmacies

Post by ninersdd »

About 27 of 96 pharmacies are expected to close. The files are being transferred to CVS or Walgreens. The Bel Air one closest to me is closing. If I remember correctly, the one in Tahoe closed in 2017.

https://www.bizjournals.com/sacramento/ ... dGKzhvOCJ9
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Re: Raleys to close pharmacies

Post by storewanderer »

Given their new store openings the past couple years had no pharmacy, this makes sense.

Looking at the list of pharmacies they are closing, there are some good performing stores on the list. So I don't think this has anything to do with the stores but is really a decision on the pharmacy departments that are just not profitable.

Curiously up here in Nevada, when they bought Scolaris, all but one of the stores they bought had a pharmacy. And, they bought a pharmacy in one of the stores Scolaris still has open...

Where this gets a little funny is with a lot of Raleys Stores, they are often not in a shopping center with another drug store. Since Raleys was developing "superstores" since the early 80's, they often were the lone large retail anchor in a given shopping center. Many of these closing pharmacies, are in stores that Raleys bought from other operators and the prescriptions are just moving within the same shopping center. Where this move is of concern to me is when Raleys has the lone anchor position in a shopping center and they have sold the files to "outside the shopping center" and into a nearby drugstore in a center where some grocery competitor is operating. I think they just walked more than prescription business from their store in those cases.

I see both pharmacies closing up here in Nevada in the Food Source (a former Raleys) and the Sak N Save (Scolaris discount format they bought). That Sak N Save seemed to have strong pharmacy traffic under Scolaris so I am not sure what happened there.

I am wondering what is going on with Raleys. When they sold the gas stations to Anabi Oil last year they said it would allow for some sort of growth acceleration. Now they are cutting off some pharmacies. I am not sure what the growth acceleration they are talking about is. They have started construction in Truckee... but that is only one store. Raleys runs its stores pretty well and staffs its stores well. They also run much better ads than they used to. I never used to like Raleys much, but the past 4-5 years I've been shopping them more and more and am pretty happy with their operation.

But there seems to be slippage in their stores. Floors are routinely dirty, very dirty, in the stores that still have white or beige tile floors. Self checkout equipment is very unstable. They use plain white no name plastic bags that look like they came from the flea market. They have one store in Reno on Keystone that hasn't been remodeled in 25 years and needs serious attention; the store seems to have traffic so I am not sure what the issue there is, unless the building is too old for them to do their caliber of remodel to it. But at this point new flooring, prep areas for deli/bakery, paint, and fixtures are needed simply from an upkeep perspective.
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Re: Raleys to close pharmacies

Post by Alpha8472 »

Pharmacies are a difficult business to run. If a pharmacy takes low income Medicaid or Medi-Cal, you are going to lose a lot of money. Those are very unprofitable insurance plans. Walgreens and Rite Aid stopped taking the money losing Blue Cross Medi-Cal because the losses were too great. The profit is made by getting more private insurance customers which is more profitable.

Just looking at the numbers it might seem like the pharmacy is barely breaking even or making a low profit, but the pharmacy brings in customers to shop. If the pharmacies close, many customers will go elsewhere to do their shopping and you lose an entire basket of groceries and loyal customers.

Walmart takes these money losing insurance plans, because they know that when people drop off prescriptions the customers will shop in the store and leave with a basket of impulse purchases. The money spent in the rest of the store more than makes up for the seemingly low profit from the pharmacy.

If Target can make a deal with CVS to keep pharmacies in their stores, why can't Raley's. CVS takes the money losing Medicaid plans and seems to do fine in those Target stores. It is all about how the pharmacy is run. Raley's should not give up on pharmacies. It is what brings in customers.

There is a Safeway and a Nob Hill Foods (owned by Raley's) near me. The 2 stores are across from each other. The Safeway has a pharmacy and the Nob Hill Foods does not. The Safeway does much more business even though the Nob Hill Foods has comparable products. Safeway is one stop shopping, while Nob Hill lacks a pharmacy.
Last edited by Alpha8472 on October 31st, 2019, 9:47 pm, edited 1 time in total.
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Re: Raleys to close pharmacies

Post by Bagels »

Alpha8472 wrote: October 26th, 2019, 1:54 pm Pharmacies are a difficult business to run. If a pharmacy takes low income Medicaid or Medi-Cal, you are going to lose a lot of money. Those are very unprofitable insurance plans. Walgreens and Rite Aid stopped taking the money losing Blue Cross Medi-Cal because the losses were toi great. The profit is made by getting more private insurance customers which is more profitable.

Just looking at the numbers it might seem like the pharmacy is barely breaking even or making a low profit, but the pharmacy brings in customers to shop. If the pharmacies close, many customers will go elsewhere to do their shopping and you lose an entire basket of groceries and loyal customers.

Walmart takes these money losing insurance plans, because they know that when people drop off prescriptions the customers will shop in the store and leave with a basket of impulse purchases. The money spent in the rest of the store more than makes up for the seemingly low profit from the pharmacy.

If Target can make a deal with CVS to keep pharmacies in their stores, why can't Raley's. CVS takes the money losing Medicaid plans and seems to do fine in those Target stores. It is all about how the pharmacy is run. Raley's should not give up on pharmacies. It is what brings in customers.

There is a Safeway and a Nob Hill Foods (owned by Raley's) near me. The 2 stores are across from each other. The Safeway has a pharmacy and the Nob Hill Foods does not. The Safeway does much more business even though the Nob Hill Foods has comparable products. Safeway is one stop shopping, while Nob Hill lacks a pharmacy.
Proscription drugs are very profitable. Over the past few decades, hundreds of billions of dollars was spent building what's now the Walgreens and CVS empires (combined, they control nearly half the prescription drug market). Most of their stores were built from the ground up (either by them or the companies they acquired), then sold off to investors and leased back, with escalating rents. Today, a typical Walgreens or CVS generates 60-80% of their revenue from the Pharmacy. So to cover rising costs and satisfy Wall Street, Walgreens and CVS have been the 800 lb. gorillas in raising prescription drug prices.

To combat rising costs, insurance companies have been seeking aggressive discounts; Walgreens and CVS are opposed to these discounts, but chains like Kroger, Walmart and neighboorhood drug stores are very accepting of them, since they don't have the overhead or Wall Street problem, and these contracts generate new business. It isn't Walgreens giving the boot to BCBS -- it's BCBS giving the boot to Walgreens (and it's the Obamacare plans in CA, not Medical, which is pretty lucrative).

A few years ago, I worked for a fairly large company and helped design our health plan, which was self-funded; the first $750 (per covered member, not including co-payments) in prescription drugs was fully paid for by the company, the remainder was covered by our insurance policy. One year, we began charging higher co-pays to use the pharmacies that charged us (via our plan manager-think BCBS) higher prices; this was mostly Walgreens and Rite Aid (CVS/Longs agreed to the discount pricing). Because most of our employees lived in Orange County, where Walgreens and Rite Aid then-enjoyed a combined market share in the 60s, what we spent on prescription drugs dropped well below our expectations, and prevented rate hikes for employees for two years.

As for Raley's.... one has to remember, pharmacies have high labor costs. In Northern California, the average Pharmacist makes $150K, and the average Pharmacist Tech makes $45K. It likely costs in excess of $500K (total comp) just in labor cost to keep a typical, low-volume grocery store pharmacy open. I'd bet that for many store pharmacies, that number's too high a hurdle; grocery store pharmacies have been closing in masses in recent years, and even Albertsons is speculated to close theirs.
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Re: Raleys to close pharmacies

Post by Alpha8472 »

I have friends who work for Walmart in California, and the pharmacists have a pay freeze. Many are quitting due to the low wages. Walmart pays pharmacists and pharmacy technicians much less than other chains and therefore are able to run profitable pharmacies. Perhaps, it is because of the unions that make the supermarket pay more for their pharmacy employees.
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Re: Raleys to close pharmacies

Post by storewanderer »

Well, 4 of the 27 pharmacy closures were in Nevada. I would guess the wages here are lower.

I wonder how much cash this got them, selling off these files.

It is more ironic given Raleys history; they had pharmacies in their stores as a usual feature way before Safeway, Save Mart, etc. did in CA.

I have not seen evidence of Albertsons scaling back its pharmacy operations at all (or Kroger). Kroger seems to run a better pharmacy operation; obviously higher volume with more staffing, many drive throughs even in 20+ year old stores, and longer hours and more efficient than what Safeway runs. Albertsons old pharmacy operation wasn't bad (when it was coupled with Osco/Sav-On) but Safeway lagged way behind on things like longer hours, drive throughs, etc. I don't usually like drive throughs but I think drive through pharmacies are pretty good... great way to keep busy people who don't want to waste their time from having to park and walk through a store, and a great way to keep a few sick people out of grocery stores.
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Re: Raleys to close pharmacies

Post by Alpha8472 »

Kroger, by far seems to have well run pharmacies. They are staffed well, answer their phones very quickly, and deliver great sevice. However, drive thru pharmacies reduce impulse buying. Customers are drawn in to the store to shop by pharmacies. If those people drive thru, they will not buy much of anything. It will reduce sales, and defeat the purpose of having a pharmacy. The reason why Walmart does not like the drive thru is that it kills sales. Often, a customer will use the pharmacy and while waiting for medication, they will fill up an entire shopping cart.

Safeway is not reducing pharmacy hours, but they have fired staff and are running on the bare minimum amount of pharmacy employees. In some cases, the pharmacist is all alone. This leads to long wait times and burned out employees. Longtime employees are quitting. It is a miserable place to work at. Customers are leaving to go elsewhere to get better service.

I suspect Raley's did much the same and lost too many customers. Their business is not as profitable as it once was.
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Re: Raleys to close pharmacies

Post by storewanderer »

Raleys never seemed to do anything to try to draw traffic to its pharmacies. I am not aware of any loyalty program tie in with the pharmacy or anything. I've never seen them give offers on new or transferred prescriptions. Their pharmacies are often closed Sunday which I find very strange given that is a high traffic day for grocery stores (some of their pharmacies are open Sunday).

Smiths pharmacy gives 50 fuel points for any prescription filled. So if I go there and co-pay $3 on a prescription for a few days of simple antibiotics to kill off some bug, I get 50 fuel points (as if I spent $50 on groceries). Safeway I believe used to have some kind of flat incentive but switched to pharmacy just counting as regular spend (so that $3 co-pay would get me 3 fuel points at Safeway, though if you were getting more costly drugs over $50 per bottle then Safeway would be a better deal as far as the fuel points go).

Safeway seems to often have something going to draw traffic to its pharmacies. $25 gift cards with a new or transferred prescription from time to time the past couple of years, right now some $75 gift card offer if you transfer and refill it a few times, etc. I rarely see incentives for "new" prescriptions like this anymore- most chains only currently give an incentive for transfers (used to be common to see incentives for "new or transferred" 15 years ago) but Safeway keeps doing them. It seems costly.

Generally speaking Raleys needs to try harder to get out the message they have high quality fresh products and they will take care of you in their store with well staffed stores and fast service (they do these things well). Their marketing messages look promising and feel fresh but in the end it seems to be the same re-hashed message over and over again that does not focus on the food or the store experience. Raleys seems to want to preach to the customer what they want the customer to believe and it seems often times their message is not sinking in too well to the customers and generally the marketing seems strong but is ineffective. The latest is their shelf tag program highlighting "high sugar" items. Also too many liquor displays in the stores of high dollar liquor that does not sell well (pallets of cheap beer would generate more sales, but that would not be fashionable to the image Raleys thinks it has). Raleys is not Whole Foods or Nugget despite that they may want to be. They are a standard grocery store that does have nice stores and high quality fresh products with good service levels, but, really, perhaps a step above Safeway in the mind of the consumer, at best. And the only reason Raleys even seems as good as it seems is because Safeway and Save Mart have gone so far downhill in their store operations over the years. Put a Raleys up against a well run Kroger operation (Smiths hammers them real well in Nevada in the locations where they compete directly- Raleys had to move the locations that directly compete with Smiths to a lower price scale and those Raleys have noticeably less traffic than the ones in parts of town where Smiths is absent like NW Reno where Safeway and Save Mart are the only competition and Raleys stores perform very well). How many times can they re-badge their "Raleys Dailies" everyday low price program which is the same old program they've had for like a decade with 2.98 gallons of milk and assorted other everyday low prices that end in "8" on a handfull of store brand packaged goods?
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Re: Raleys to close pharmacies

Post by Bagels »

Alpha8472 wrote: November 14th, 2019, 10:46 pm I have friends who work for Walmart in California, and the pharmacists have a pay freeze. Many are quitting due to the low wages. Walmart pays pharmacists and pharmacy technicians much less than other chains and therefore are able to run profitable pharmacies. Perhaps, it is because of the unions that make the supermarket pay more for their pharmacy employees.
It's not just Walmart, it's everybody (pharmacists are generally not union) including Kroger, Walgreens, CVS, etc. But the issue is related to the high costs associated with labor. Walmart just cut a bunch of pharmacists, and is now staffing its pharmacies with lower-cost Pharmacy Technicians, Pharmacist Assistants and Pharmacist interns. They are experimenting with pharmacists working at two to three stores per day, with those stores either staffed by technicians & assistants or utilizing a pick-up locker system (depending on local law, obviously this wouldn't work in some areas including CA).

Employers have leverage -- some sources are predicting that there will be a contraction in total pharmacist jobs this year, and we have 10,000 more graduates entering the workforce than retirements. It's placing downward pressure on wages, but the average salary is still in the mid-$100K in most areas.
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Re: Raleys to close pharmacies

Post by Super S »

There are a lot of other factors involved, but this has similarities to Bi-Mart's situation around the Pacific Northwest, where they have announced pharmacy closures at 19 stores now, which is about 1/4 of the chain.
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