Texas Drug Warehouse makes deep discounting pay.
"We still thrive with our deep discount format," says Harold Pinker, president of Texas Drug Warehouse (TDW), which maintains 11 outlets in the Dallas area. "We will continue to offer consumers the value of name brand products at deep discounts daily, as well as a variety of merchandise found in the closeout market and brought into the country in our direct import program."
Texas Drug Warehouse was established in 1983, when it became the first and only franchisee of Cleveland's Marc Glassman Inc. (Marc's) with its initial store in Mesquite, Texas.
A second TDW was opened in Arlington, Texas, in 1985, and the successful formula led to more stores in the Dallas area. Five years ago, says Pinker, TDW became independent of Marc's.
"The people at Marc's were invaluable in helping Texas Drug Warehouse develop its business strategies and the closeout portion of our business that makes us such a unique operation," says Pinker.
Unlike most chain drug retailers, pharmacy accounts for only about 10% of sales at TDW.
"We do everything a chain drug store does, but have a unique merchandise mix," says Pinker. "We make opportunistic purchases in the areas of food and general merchandise in the closeout market."
The closeout sections of the stores are areas of destination shopping and represent a significant portion of the company's business. The sections are filled with products obtained from closeout vendors not frequented by traditional retailers. Substantially discounted seasonal merchandise forms the bulk of this area.
Responding to its customers growing interest in physical fitness, TDW has expanded its vitamin and nutritional supplement sections and now carries more than 300 formulations of vitamins, minerals and herbs in all 11 of its stores.
Seeing the proliferation of bookstores nationwide, the chain now offers a wide selection of closeout books.
"They sell very well because we price them very well," says Pinker. "We sell some $10 to $20 computer books for as low as $1. When a consumer sees such a startling value, it gives us price credibility and a reputation for bargains that can't be matched."
Competition in the Dallas area is fierce and includes Wal-Mart Stores Inc., Target Stores, Eckerd Corn., Drug Emporium and Albertson's Inc. Walgreen Co. has also recently expanded into the region.
However, Texas Drug Warehouse is more merchandise-oriented than systems-oriented, says Pinker, and that helps it move more quickly and decisively than most of its competitors.
"We don't have the issue of how an item fits into our planogram or P-O-S system -- we just get it," says Pinker. "Our suppliers also recognize that we can move cases quickly and not add a lot of margin to it. We stack it high and sell it low."
Texas Drug Warehouse prides itself on being attuned to the local community. The chain is a prime supplier of Dallas Cowboys merchandise and other items favored by area consumers.
"We feel we are more sensitive to the needs of customers in the market than other chains because all of our employees live and work here," says Pinker. "We feel good about the loyal consumer base that we have built and are confident that it will continue to grow.
The chain recently relocated and expanded its central warehouse from Dallas to Garland, 10 miles outside of the city. At 50,000 square feet, the facility is almost twice as large as the one it replaced.
"Obviously we feel it will improve our distribution system," says Pinker.
All of the company's stores are within a 50-mile radius of the distribution center. That proximity allows for same-day delivery of any product, and Texas Drug Warehouse will not sacrifice that capacity to enter markets outside of this area, says Pinker, who is currently investigating expansion options.
"We are the local independent, still small enough to regularly visit each store and explain strategy," he notes. "Yet we do enough business to make respectable purchases in the marketplace."
Texas Drug Warehouse locations average 25,000 square feet, which allows the chain to bring large items into the country via its direct import program. One of the more successful products of the spring/summer 1998 season has been a six-piece patio set, including an umbrella, which the chain retails for $79.99.
"The item is comparable to a set sold at Kmart [Corp.] for close to twice the price," says Pinker.
"We are definitely a first stop for people to buy gifts and home decorative items," he says.
The retailer's motto is "Buy it when you see it, because it will be gone next week."