Where does a Washington consumer shop for a new pair of glasses or a new pair of jeans? For a best-selling book or a loaf of bread? For a couple of two by fours or two scoops of ice-cream?
In a drugstore.
Clothing and lumber, eyeglasses and ice-cream, books and bread are some of the products Washington's three big drugstore chains are counting on to pull up their profits this year.
The name of the game is diversification, and Draft Drug, Drug Fair and Peoples Drug Stores have begun playing with a vengeance. Each is in the midst of diversification drives meant to lessen their dependence on the brutally competitive health and beauty aids business on which they traditionally have made their money.
Dart, continuing to expand its unique drug store-home center combinations, also is preparing to open its fifth Crown Books store-the first in Washington-at 21 st and K Streets NW.
Drug Fair launched Scoops ice cream parlors earlier this year and is now trying Soup'r Scoops fast foot shops, adding Fashion Fair boutiques to its big drug stores and setting up separate Wrangler Wranches in three states.
People has put what it calls "mini-combo" convenience food stores into some of its drug stores and added optical departments to others. With 39 optical departments, it ranks second in the drug field.
The motive is profit. Although earnings are improving at all three chains, after-tax profit margins are still slim-just over one percent al Dart, 1.22 percent at Peoples and 1.23 percent at Drug Fair.
Whether diversification will improve thouse earnings is uncertain. "We really don't know yet," said Robert Haft, who launched Dart's Crown Books subsidiary about a year ago. "On the sales side, the consumer has responded. Whether that can be converted into profits is yet to be decided," added Haft, who figures it will take two years to evaluate Crown's success.
"We're by no means saying books are our salvation," the son of the Dart founder stressed. "We're really a drugstore business with a couple of book stores."
Dart is also a home center chain, the drug industry's innovator in merchandising home improvements. Although it no longer is building separate home centers, it is continuing to open Dart Home/Draft Drug combinations, some of which have optical departments as well.
Dart, Drug Fair and Peoples all are pouring millions of dollars into renovating and remodelling their drugstores. Those expenditures probably exceed their diversification budgets, although none of the companies has reported publicly how much it is spending - or making - on its spinoff businesses.
Drug Fair President Milton Elsberg said his chain is trying to "stay one step ahead of the market as innovators, as creative merchandisers and as members of the health profession. This is being done through diversification."
Drug Fair has been in the general merchandise business for years and for some time has had small selections of clothing in some of its bigger stores. Now those departments - which were 2,000 square feet or less - are being replaced by Fashion Fair boutiques that have up to twice as much floor space and a broader, higher-priced range of goods.
About 100 of the 168 Drug Fair stores have apparel departments. A dozen have become Fashion Fair outlets, and that number will reach 30 by year-end.
Although the emphasis is on discount pricing, clothing "still provides better gross margins than most drug items." a spokesman said. Aggressive pricing is essential "because there has to be a reason for a customer to shop a drug store for fashion merchandise," he added.
But there is no reason why a drug chain has to sell fashion merchandise in drugstores, so Drug Fair also has set up separate Wrangler Wranch stores. Franchised by the makers of Wrangler jeans, the Wranches aim at a 14 to 34-year-old customer who wants casual fashions. There are less than a dozen Wranches so far, but Drug Fair's target is a 40-store chain by Decembber 1981.
Forty stores is also the target for Drug Fair's Scoops fast-food operation, which this year opened its first six Scoops ice cream stores, three of them Soup'r Scoops that have soup, sandwiches and other fast foods. Like Wrangler Wranch, Scoops is a brandname operation, touting Breyers' "100 percent natural" ice cream.
Ranging from 650 to 1,500 square feet, the Scoops shops have been notched into the front corner of Drug Fair stores so they have their own entrance. Theoretically, sales of traditional drugstore line ought not to be hurt by giving up a little floor space to an ice cream parlor or a Fashion Fair boutique, and profitability ought to improve, Drug Fair executives say. Again, it's too early to see hard data.
Making more productive use of floor space and raising sales per square foot are also the goals of Peoples Drug's ventures into convenience foods and eyeglasses.
With separate entrances, people's mini-combo convenience stores don't have to keep the same hours as the adjoining drug stores and can enable shoppers to run in for small purchases without tramping through the whole store or waiting in checkout lines.
Since the first convenience store opened in Alexandria about a year ago, People's has added four more and has three more planned.
Optical departments are in 19 stores in People's Washington region, in 6 of its Ohio stores and 14 in its Southern division. Only Florida's Jack Eckard chair - the acknowledged drugstore industry leader in eyeglasses - has more.
Peoples has put a lens lab into its headquarters here to fill prescriptions from its Washington and Ohio divisions and added another lab in Atlanta to serve its southern stores. Once the lab is in and the operating formula for the store units is fine-tuned, rapid expansion of the optical chain will be both easy and economical, Peoples' executives note.
The economies of scale upon which the whole chain store concept is built are the reason all three drug chains have ambitious expansion plans for their new spinoffs. The first few units can indicate whether a new venture can meet its sales volume target, but it may take a dozen units - or a hundred - to reduce the overhead to the point of solid profitability.
Operationally, most of the new ventures are intergrated into the drug chain's mainstream business. Crown Books is a separate subsidiary of Dart, its president is young Haft, who is vice president for planning and development of the parent company. To run its Wrangler Wranches and Fashion Fairs, Drugs Fair formed a subsidiary called Active Casuals; Drug Fair senior vice president Stuart Elsberg, Milton's son, is president of Active Casuals.
Inevitably as the drug chains diversify into new ventures, they run into new competition. The Drug Fair Wrangler Wranches go head to head with dozens of jean specialty shops, including the Pants Corrals that are one of the diversification efforts of Giant Food.
The Peoples and Dart optical departments also must compete with Giant Opticians and, as the drugstores invade its turf. Giant is responding by putting pharmacies into all its new supermarkets.