New Rite Aid Loyalty Program Boosts Members' Market Baskets 40 Percent

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New Rite Aid Loyalty Program Boosts Members' Market Baskets 40 Percent

09/27/2010
Rite Aid has enrolled 22 million customers in its wellness+ customer reward loyalty program, which launched nationwide only five months ago, and the drugstore retailer expects to have more than 30 million members by the end of its fiscal year in February 2011.

The fast-growing membership is a welcome bit of good news for the 4,700 store retailer, since loyalty program members' market baskets are 40% larger than those of non-members. The size differential increases as customers move up the rungs of the rewards program. At the Plus level, the lowest level, the basket size is 46% larger than non-members'; at Silver, 88% larger; and at the top Gold level, 78% larger. Gold members receive a 20% front-end discount, while Silver members get a 10% discount.

"We believe wellness+ has been so well received because it's different from other retail loyalty programs," said John Standley, president and CEO of Rite Aid . "To attract and retain customers and patients, we offer increasing levels of front-end discounts and health benefits based on the dollar amount of front-end purchases and number of scripts filled."

He added that card usage has been strong: "56% of our front-end sales and 52% of prescription sales came from wellness+ members last week," Standley said during a September 23 call discussing the company's Q2 2011 financial results. Excluding New York and New Jersey, where giving reward points for prescriptions is against the law, the prescription count rises to 58%.

The retailer is also using the program to improve its customer knowledge. "Gaining a better understanding of our shoppers through wellness+ will help us capture some of the significant sales growth opportunities that we identified in our segmentation analysis," said Standley, adding that "we're very pleased with the results of wellness+ so far."

Rite Aid's segmentation includes new merchandising strategies designed to build business in its low-volume stores. The company has 37 value stores offering 9,000 fewer SKUs than its traditional drug stores. "Our goal is to improve the productivity in these stores by combining the new merchandising program with a modified distribution model, and if successful, evaluate whether the model can be expanded to other low-volume stores in the chain," said Standley.

Rite Aid had a difficult quarter. Results for the three-month period that ended August 28, 2010 included a net loss of $197 million, compared to a loss of $116 million for the same period last year. Same-store sales decreased 1.5% during the quarter compared to the same period last year, in part because the retailer is operating 65 fewer stores this quarter than the corresponding period last year.

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