We present an edited version of our conversation with Alex Gourlay, Co-COO of Walgreens Boots Alliance, from the Coresight Research & Blue Yonder Open for Business webinar held on May 20, 2020.

Introduction

Deborah Weinswig: Good morning everyone. Thank you so much for joining us today, and welcome to Open for Business. I'm your co-host Deborah Weinswig and I'm honored to be joined by my co-host JoAnn Martin, who is the VP of Retail at Blue Yonder. She has extensive strategic retail experience and a proven track record across apparel, footwear and accessories—including at L brands, DSW and Luxottica. In her role at Blue Yonder, she is the industry thought leader for retail. Her expertise also includes merchandise planning, item planning, assortment planning, allocation and omnichannel inventory enablement. I'll turn the call over to JoAnn for some opening remarks. JoAnn Martin: Thanks Deborah, I'm really excited to be here with you and Alex today. For those of you who don't know who Blue Yonder, as a very quick background, we are an end-to-end supply chain platform company. We are leveraging open APIs [application programming interfaces] to allow our customers to extend our platform and our partners, and we work across manufacturing, retail, CPG and 3PL [third-party logistics] as well. We’ve been really focused on managing supply chain resilience and agility within the supply chain; leveraging the latest in technologies and AI [artificial intelligence] and ML [machine learning]; and helping customers to predict demand and understand how to drive visibility across their supply chain and how to connect it. Deborah Weinswig: Thanks, JoAnn. I'll introduce Alex Gourlay: He is the Co-COO for Walgreens Boots Alliance. He is responsible for the oversight of both Walgreens and the Boots businesses, execution and transformation, as well as overseeing global operations. Previously, he served as president of Walgreens from December 14 to February 20, and prior to this, he served as EVP and President of Customer Experience and Daily Living for Walgreens—so he truly knows all things Walgreens! He is a board member at Rela and World Business Chicago. He is a past chairman of the Board of Directors of the National Association of Chain Drugstores [NACDS], and as a pharmacist himself, he has been very pivotal in driving thought leadership for NACDS. Today, we are going to discuss innovation, community pharmacy and healthcare delivery, customer behavior and what the new normal might look like. Alex, first, thank you so much for joining us. I would like to kick off with a fairly general question: Based on what you have experienced with Walgreens’ global footprint, how important is the acceleration of digitalization and digitization at this point, and how do you think about investing in innovation right now? Alex Gourlay: Thanks, everyone. Thanks very much for the invite, really good to be here. This, I think, is the most obvious question to ask anyone involved with customers right now, because the acceleration has been incredible during this crisis. It doesn't matter what data you look at—whether it be data from a retailer or manufacturer or even from services like healthcare services, for example—the acceleration has been remarkable. What has become really clear has been the sustained movement towards digitalization and apps, and it really comes in two areas:

1. First of all, we're seeing more and more people reaching out to customers. Not just through the television sets or the radio or printing press, but through the digital assets that they have or that they share with partners. We call it mass personalization, but really what it's about is making sure you get your message of care or your message of a new solution to customers much more directly and much more personally.
2. Secondly, of course, people are concerned about coming into the physical world for all the obvious reasons. So, to even get the most essential products like drugs, many people are relying on direct supply chain routes. They want to make sure it's secure, they want to make sure that it arrives in time and they want to be sure it’s the stuff that they ordered. That has been quite a challenge, given the enormous acceleration in the use of digital and e-commerce and omnichannel since the crisis really, the early part of March. So, it's a real acceleration; it’s sustained, and the way I've heard people describe it, inside the company and outside the company, it feels like almost 10 years of acceleration in 10 weeks, which is quite incredible when you think about that.

Responding Quickly to Covid-19

JoAnn Martin: Alex, when you look at the impact that the pandemic has had on how your customers are behaving and how they're shopping, can you give us some insights into shifts in behavior that you've observed through Walgreens? Alex Gourlay: We have seen people automatically pick up services that the Walgreens team has successfully put out at a real pace. For anyone who's listening, I'm really proud of what the Walgreens team has done both physically and digitally, and how they reacted during this pandemic… I'm sure every retailer who's been open, and even those who have had to adapt a model, will say the same thing, but I'm hugely proud of the Walgreens team. What we have done is we have put out additional services, from being able to pick up your prescription and your essential products through the drive-thru, all the way through to offering national home delivery, and of course offering access to healthcare information right through the crisis through both the Walgreens apps and channels—and also something called Find Care, which is a platform we've been developing in Walgreens and also at the group level for last couple of years.  So, we've really had to focus in on how the customer wants to reach us and how we want to reach customers, and putting new products really quickly in the marketplace. And they're not they're not perfect; they're not seamless. The operation in the stores and the supply chain has been challenged, but people have really appreciated that availability, because they can speak to their favorite brand or they can speak to the favorites pharmacy or they can get advice and the product delivered in a different way when they’re genuinely concerned about their health, they’re genuinely concerned about their family's health, and they don't want to be out in the same way they were before.  Those have been the shifts we've seen, and they have been big shifts. In digital language, they have been “10x” shifts in our experience—from quite a low base, but real shifts in customer behavior. Deborah Weinswig: You talked about this idea of, “it's not perfect; it's not seamless,” but do you think that, as we're almost moving to a minimum viable product in the drugstore industry—which I think historically is one to have everything so perfect before they roll something out—it does feel like there's this tremendous very positive shift. Can you elaborate a little bit more? Alex Gourlay: It's been a really exciting period for us, because Walgreens is an innovative company. You only have to think of what they did back with drive-thru pharmacies, when they recreated the drugstore model from the strip mall to drive-thu, which became the benchmark. That’s innovation at the heart of Walgreens, and I would also suggest at the heart of our main competitor, CVS, for sure. We'll see that innovation come through, and the dichotomy for any pharmacy or pharmacist is going to be… when you’re dealing with prescription medication, it has to be right; there is no room for error. So, in the culture, there is this dichotomy of real innovation, but getting it right. So, your question is a great one. When you go to a minimum-value propositions, MVPs, in the omnichannel or digital world, a culture like Walgreens has got to really work that through to make it feel comfortable and to do it. You could argue that it takes moments like these where the ability to get the right information, the right products, in the right way to keep people safe creates that speed, but it's not been without its challenges. And it's not because we're a historical retailer or because we’re an old drugstore; it’s because of the care our people take it to make sure that we get things right for our customers, particularly in the pharmacy area that creates that tension that the team has worked through brilliantly. There’s some stuff out there that isn't perfect, but that works. And, of course, we're starting to develop plans behind this, that will underpin it to make sure that we sustain it: As the customers are sustaining their behavior, we will sustain our behavior as well. JoAnn Martin: When you think about coming into Covid, there were predictors that were along the way that helped you anticipate some of the reactions your customers would have had. So, when you think about your response—which has been very strong—what were those predictors for you, and how many of those do you think will remain and influence your next steps coming out of Covid and how you approach your business? Alex Gourlay: It was a really interesting journey for Walgreens Boots Alliance because obviously we did have a partnership… For example, in China, we have three partnerships, but we have one with a pharmacy chain that’s owned by Sinapharm called Guoda, and it's a big partnership—it's one of the biggest (by volume) pharmacy chains in China. So, we have a team who's active there but also active in supply chain. We have a significant sourcing operation out of Hong Kong… so I think we got a good insight into what happened, both in the drug supply chain and also in the sourcing supply chain.  But we were also on the back foot, because this happened really quickly, and it was really quite hard to predict exactly how the population would react, how the government would react and therefore what we had to do. But what was important to us was our principles. So, we started off with, it's got to be right; it’s got to be safe, and we've got to find a way of getting the medication to people and essential supplies to people as and when they want. And we’ve got to find a way of making our pharmacy safe, because we knew a lot of people want to still come to the pharmacy because they have a relationship with the pharmacist and therefore it had to be safe.   So, we worked on the right things, maybe a couple of weeks earlier than other people did, because we saw this supply chain change of what was selling, what wasn't selling, the big uptick and then the very fast decline, as lockdown went into place in China. We saw that happening, and we did our best to react to it with the principles I described, but it wasn't easy. I don't think anyone can claim that this was comfortable; it was very uncomfortable. Principles were really important. We were underdeveloped in digital; there were others who had invested ahead of us. What drove us at the end of the day was that we had some investment in digital; we had a good connection through a lot of downloaded apps; and we had the corners of America, the previous strategy, which was still very much intact. We had the right assets and the right principles and the right way of reaching customers. We were able to utilize these assets in a different way and make decisions quickly. And again, I want to call out the operational team led by Richard Ashworth, who did a brilliant job through this period and made sure that we used what we had to meet the principles and the desires of customers to have the right drug at the right time, and we did all we could to protect our people. That was for all us the most worrying thing: We were expecting people to go into this unknown area really, and we didn’t always have a conference of government policy change that we needed do that really, really well—but we did all we could, and our team really appreciated it. Within days, we had the right elements in place for team members as well. Physical vs. Digital Experience: Red Nose Day Deborah Weinswig: One of the fun things I always think about from a Walgreens perspective is Red Nose Day, and I’m very lucky in our office, they always hand them out. So, looking forward to that in a different way this year, and can you talk about—I think that's just such a great example, and once again, it's a little bit more fun and light—how that's changed significantly. So number one, can you talk about reimagining Red Nose Day, and number two, maybe just a little bit about how it came together, but how important it is? And everyone should go out on this call and donate to Red Nose Day, because it does make a significant difference! Alex Gourlay: It does. So this is year six of our relationship, and we're very proud of it because we took an idea, I guess, that was a European idea, but the logic behind it at the very start was that we wanted to really release energy into all these in a different way. When you're dealing with serious matters of health and illness, you've also got to look at the other side of life and see that people want to have to have fun, they want to be able to share experiences and the emotional side in the feel-good products and the look-good products, as well as the serious products that make you make you better. I could not believe, in year one how this really lit the whole organization up, from the very start of it. It was the most incredible thing that happened organically in the culture of Walgreens, and people just took it to the communities with such energy—way beyond anything I'd seen before back in Europe—and it was just fantastic to see, and that carried on right through the whole of the next five years. The nose changed; the sponsors stocked more; more people got involved. The whole thing became a recognition of the red nose and comic relief and NBC, of course, our other partners, along with the Mars Group, who were the founding partners, to be honest. They brought the idea to us through the CEO. All of us became really proud of what we created. [caption id="attachment_111084" align="aligncenter" width="700"] Alex Gourlay discusses Red Nose Day in the past and amidst Covid-19.
Source: Coresight Research [/caption]   Last year was a record breaking year. Last year, we raised more money than ever, and we went through the hundred-million-dollar bracket, and two hundred million dollars for the whole event. And all of a sudden, of course, around about early March, it became clear that with social distancing, the last thing you wanted to share with anyone was a physical red nose. It was pretty clear that the whole event was a risk, and of course, the panic, the whole feeling of fear around March meant that we had to completely pivot. We asked ourselves questions like, “Should we do a Red Nose Day this year? Should we just cancel it?” We got together, and we said, no, the whole story of how humor, even in the most difficult situations, can lighten the load was this whole story of Red Nose Day. It was born out of that idea that, in the most desperate situations—famine in Africa during the 80s and 90s, was where the whole idea was born from—people want to be social and want to have fun together. So, “How can we do it differently?” became the next exam question.  Of course, we did it through the digital assets we had, together with all of our partners. We created the first ever truly digital Red Nose Day. The principle we said to people was, you have to act appropriately. People are losing their jobs and people are concerned about their health, so as we go into this big, fun event in our stores, let's make sure that we behave appropriately; we go with the customer and the way they want to go. The team did a magnificent job. We haven't raised quite the same money as we’ve raised in previous years, but we’ve raised lot more money than I ever thought we would raise, and the feeling around our company about being part of this event is stronger than ever. What the opportunity is next year—and everything is crossed that we will have the virus somehow under control by this time next year; if we don't, we don’t, but I hope we do, as a company as a country and as a world—is that we'll be able to mix the physical with the digital. It's been a fantastic relationship, and it's been bigger than ever, from an emotional point of view for the company this year. And more digital, only digital I’ve seen, in fact, in reality—only digital. JoAnn Martin: Dovetailing on that concept of the physical merging with the digital that you were just speaking of, how do you see that impacting the role of the store and the pharmacist within the community? Alex Gourlay: We have been lucky enough to have someone called Vineet Mehra join us, who's our Head of Global Marketing for WBA [Walgreens Boots Alliance]—a great guy who comes with a very fresh perspective. He coined this phase with me in an early conversation—we had a conversation about that very question—“digital magic with human kindness.” I used to use a phrase—and I apologize to any of my colleagues from Amazon who are on the call—I said, you know, a smile on a human being make him into a physical store like a Walgreens. I'd rather have that personally in some moments than having a smile on a box. That's fun—it can sing great songs and adverts—but it’s a smile on a box; it’s not smile on a human being. This idea of turning it into the digital magic being as efficient as we possibly can be as a physical retailer in all different dimensions but still having that human kindness—in our case of the human touch, in many physical retailers cases, I think, is where you start to answer that question—and being really clear how you can differentiate in that world of digital magic and human kindness. And the digital magic continues. It's great to see all the innovation, all the startup companies coming with different ways of giving different experiences to customers, and I think that's fantastic to put the customer at the heart of that experience. But I strongly believe, and I would say this as a pharmacist, that there are moments where people, for reasons beyond pharmacy, want to have a conversation with a human being about a product they want to buy or a new look they want to have, or a new design, or maybe a new illness unfortunately they've contracted—and I think that that's the magic of the interaction between physical and digital and what the omnichannel world is really about.

Personalized Experiences: External and Internal Communication

Deborah Weinswig: Alex, those of us, the analysts, have always felt that there was the back end and the front end, and we analyze it from a top-line perspective, from a margin perspective, but it does seem that during the last 10 or 11 weeks, those relationships have changed, especially as the role of the pharmacist in the community has continued to be elevated. Can you talk a little bit more about what you're seeing and how you think that plays out in the future? Alex Gourlay: I think from a customer point of view, they’re on a shopping mission to get their drugs or buy their makeup or to ask a question about a vitamin—so they are on different missions, and it's up to the customer to decide when and how they want to shop at the pharmacy or the drugstore. What we know to be true is that the absolute convenience and certainty of the drugstore means that people are prepared to the disrupt that mission to talk about other things as long as it is on their terms and as long as there's real value in the conversation and value in the purchase. We've always known that, and that started with the physical drugstore that was built in the corners of America, started by Walgreens and then copied successfully by many others.  I think that's just been translated into a new way of getting that same convenience and the same interruption on their terms—personalized marketing—and going together the experience of physical and digital. So, whether it's having your prescription delivered home with essentials in the box and sent home (because you’re locked at home and you don't want to come out) and you get everything you need from that experience, including your drugs; or whether it’s riding through the drive-thru and doing the same experience this way; or whether it’s still coming in the pharmacy, because you’re able to do it; or whether it's getting the digital communication sent to you as you approach the pharmacy, because I'm telling you what's on deal for you today—I think the concept is still the same. The integration from a customer point of view is stronger and stronger, and it's more efficient than ever before. And I think that's what is really important in the model is it becomes really efficient for the customer. And there's that spark of interaction—the human kindness where they want it—which allows them to check a purchase, or check a new line, or understand what their best solution is, or the condition they have or the gift they want to give to a loved one. It's an incredibly powerful concept, I think, from a customer point of view, but it’s got to be delivered in a really efficient way, and we're not there yet. We're not there at Walgreens, but we’re really committed to that journey. And it's not just the commercial commitment because we know that the reimbursement pressure on pharmacies is unwielding at the moment as the whole market shifted to much more consolidation; it’s a commitment to customers in terms of how want to receive things from a modern-day drugstore.  And I think we’re really committed to that journey, but we have a long way to go, but we're on that journey—and this period of acceleration is a critical period for Walgreens, as it is for many, many retailers are the moment. JoAnn Martin: Just to pivot to your workforce—and you've talked a lot about their response and how agile they've become—how has your communication with your workforce changed during this time? Alex Gourlay: Again, I give a lot of credit to the communication team and to the operations team led by Richard; they have adopted a different methodology. We’re quite lucky, because we were working with Microsoft and we had already got the platform called Teams, which we use now for all of our internal communication and to stores, and stores are able to use elements of Teams as well. And we had something else called Theatral, which is a voice app, which again, we've got rolled out to the majority of our large pharmacies.  So, we'd already adopted quite a lot of digital technology and communication, so we had some platforms out there that allowed us to really think again—a bit like we did with Red Nose Day and other examples I’ve given today—“How do we use these platforms differently, and how do we speed up communication?” That was really important, you know. Say, if you are wearing a mask or not, what does that mean for us? All these are the early conversations, right up to conversations about graduation and, “How do we make sure that we support families and the kids who are going through university to make sure that we make their graduation as meaningful for them as we can?”—using our photographic business, for example. All these were communications internally and externally that we sped up, and it's been really liberating, I think… We haven’t worked it all out yet; we haven't really got comfortable yet, particularly people like me who are from a different generation—I even struggled to do the simplest task sometimes as I communicate in this new way! But it's been liberating for the company and for people, and it's been a fantastic phase, and we've got to keep on going. We’ve got to learn the lessons and move on and not go back, for sure.

Developing the Mass Specialist Platform

Deborah Weinswig: You talk about this idea of learning lessons and moving ahead; it does seem like the industry has really come together from a collaboration perspective. But if we also think about partnerships—Walgreens and really, I think, the hallmark of so much of what you have done is around Kroger and other partnerships—can you look at both collaboration and partnerships and where are we, and where are we going? Alex Gourlay: I think from a strategy point of view, for a period of time—four or five years—this day was coming. We didn’t expect it to happen this way, and it's pretty sad it has happened this way, but this day was coming where all of a sudden, omnichannel is the new model in town. And when we thought about that, we thought it’s been driven by one massively innovative company in America and probably a couple of followers in China—and you and I, Deborah, have spoken about China a lot, because we share the same passion for learning from some of these platform companies in China about how they can really modernize retail—but you have got to give Amazon a lot of credit. They have completely transformed how customers shop, and there's just no getting away from that. And you’ve got to give Walmart a lot of credit because at points in time they realized that they had a problem, and they've been reacting to that problem, I think in a positive way—and Target and many others you can mention. But the way that we view that was that we need scale and we’ve got to be different. So, if you think of a simple logic, there are going to be three platforms—three marketplaces, whichever word you're comfortable with—that are going to be important in the future: One is formed, called Amazon, the online marketplace; one is forming, called Walmart, which is this hugely important big marketplace—35% share, I think, is your average for Walmart in the US, more or less. So, what do the rest of us do if we can't match that scale? And, of course, Amazon is a different model, because they make money, not from selling things, but they make money from cloud or from advertising, etc.—innovative ways that they make money on alternative profit streams. So, how do we grow and how do we become important in this new world that’s forming? We thought of the logic of the mass specialist platform, where we bring pharmacy and healthcare and some things like skin care and cosmetics, which lead into beauty and elements of gifting—and if we join up with others on our platform, can we create the third platform? The mass specialist platform. [caption id="attachment_111085" align="aligncenter" width="700"] Alex Gourlay discusses the development of the mass specialist platform.
Source: Coresight Research [/caption]   The most obvious example of that is test work we're doing with Kroger, where foods and pharmacy are the most frequently used shopping trips. So, if you look across the three platforms I’ve mentioned, the household penetration of these three platforms is more or less the same. Walgreens together with Kroger will be slightly behind Amazon and Walmart, but still a very, very big platform. This number of trips that people make to that platform for food and pharmacy, we thought was the strong logic. Again, getting a big partnership going with with a very successful company like Kroger is not easy, but they are very clear: They want to become the specialist in foods; they want to become a company that services America with food—and their values and principles are very strong there. And we want to be America's most loved and most trusted pharmacy—that’s what Walgreens wants to be. So, we started thinking about that partnership two years ago; we’ve got some tests on the ground. It's been interesting what’s happened through the partnership. I go back to Red Nose Day—it was six years in the making of this day; we're only two years with Kroger, so there’s a long way to go to figure it out. But the reaction of customers to be able to to get their food and their pharmacy from a smaller store in a community setting in the roughly 50 locations where we have it has been very strong, and we're very pleased with what's happened. Then on the other side, the healthcare side, we've always believed that the general practice doctor is the quarterback of any healthcare system. They’re the person the patient trusts; these are trusted relationships over many, many years. And therefore, we decided, rightly or wrongly, that we wanted to create partnerships with doctors, and we went therefore to test with three different approaches: One is through United Healthcare, initially through urgent care, where we learned a ton; then we moved on to primary care within a partnership about a year and a half ago with Humana, which is senior care, and with partners in primary care; and, more recently, we've launched a number of tests with Village MD, which is a standalone platform that looks after commercial Medicaid and Medicare, still leaning towards Medicare. Again, we're working that out through both the physical and the platform to see what we can do there as well. And again, that's work that we're pleased with. Going forward, we think these are critical physical and digital partnerships, which will generate different formats for the corner drugstore in the future. But, partnerships are not straightforward; partnerships take time. What's encouraging is customer behavior is changing as we’ve put these new, more unique offers to doctors, and well treated, well valued healthy, fresh food into drugstores, so we're getting a really good customer reaction. But there’s still a long way to go, to be honest, to pull that strategy off, because it’s very ambitious strategy. You think you can match the big two and become as important as the big two. From where we are, we can’t do by ourselves, but we can do with others who’ve got the same ambition for the customer.

Partnerships through the Last Mile

JoAnn Martin: When you think about that final-mile component—when you start to think about your partnerships and how you drive it home to customers with the online search that's been there—how have you seen that evolve throughout this time frame, and how do you think it will maintain post Covid? Alex Gourlay: One of the more interesting things we've done in the last mile is our partnership with Wings, a drone company. In Virginia, we’ve been working with them for probably about six months, and we’re now delivering your painkillers—we're delivering a catalog; I think it's a few hundred products and some some care packages—by drone to neighborhoods in Virginia, and the average delivery time is less than 10 minutes. So, we've been doing this for six months, so to me that’s the ultimate “always-on” model. I honestly think this will happen in the US. I don't know if it’ll happen in five months or five years or 10 years—I really don't know because it depends on regulation and customer demand, but it’s a very popular service, I can assure you, and very reliable and very safe. The real big relationship is with FedEx, where you can hold at Walgreens products you get from other manufacturers, and that's been going for about two years, and the number of parcels has been on a really big increase all the way through. What's been interesting is that the mix of pickup and drop-off was 50/50, but through the crisis, I think it's moved to 20% pickup and 80% drop-off, because people are shopping a lot more online. Again, people don't always like the product they get, so the number of returns has also been increasing dramatically, as you'd expect. So, the number of drop-offs into Walgreens through this model has been increasing dramatically—another example of the last mile, because it’s not just about pickup. It's also about drop-off, and easy returns, we think, is a big strategy that we are driving hard with FedEx and other partners in the supply chain. Narvarre is another great partner in that supply chain—a small but really nice team that has done a nice piece of work on being in that supply chain.   The last mile was created by the corners of America strategy, the physical locations of forward-distribution hubs in a different era. And we’ve still got these pharmacies—and in fact, we got a few thousand more when we consolidated Rite-Aide to give us over 9,000. And we're building some small pharmacies, maybe European style. We have 40 or 50 of these small pharmacies, which are 250 square feet, but they've all got drive-thrus and pick-up points. So, can we get deeper into communities where we're not yet present in an appropriate way through a lower-cost omnichannel model? That’s going well also. So, you think of the last mile and you think, how do we use these forward-distribution sites to hold the right product, to deliver in a flexible way to customers, not just for ourselves but also for partners? So people like Levi Jeans, for example, their partnership with FedEx and with Navarre and with us is one example. If you want to buy your favorite Levi jeans. I don't think you'll be able to get into any of the Levi shops at the moment, but you can easily pick them up and drop them off at a Walgreens. That happens right now. The last mile, we think, is incredibly important to customers. We think we are advantaged; we haven’t strung together yet all of the data, the technologies, in a way that is seamless and truly efficient, truly AI, truly empowered, in the way that JoAnn described up front. But we're getting there, and we're doing it through partnerships. The Microsoft partnership is incredibly important to us: We’re in their cloud. Microsoft's strategy is to make others stand tall in their sector, and they're working with us to make us stand tall and make our partners stand tall in the last mile.

Live Poll: Supply Chain Resilience and Agility

Deborah Weinswig: I’m going to quickly go through the poll questions. Number one, “In what tech areas is your company investing?” 64% said customer experience, 29% supply chain logistics and just 7% in AR and VR [augmented and virtual reality]. JoAnn, how does that compare to what you would have expected? JoAnn Martin: It's not surprising to me; it’s very consistent with what we're seeing. Customer experiences is at the top of mind, especially as retailers are starting to open, and what that experience for the customers is going to be. I think supply chain and logistics will continue to support that experience for them, but top of mind has been customer experience. Deborah Weinswig: Okay. And the second question, “As a retailer, are you narrowing assortments, and if so by how much?” 43% said minimally and 57% said moderately and nobody said extensively, which is interesting. Alex, we’ve gotten a lot of questions on demand forecasting, assortment optimization—how are you thinking about what's curated in your store right now, and if you want to make sure that you're in stock for the customer when they come in, is there any interest in narrowing the assortment? Alex Gourlay: Well, I think we're taking the lead from the manufacturers. A lot of the manufactuers has to narrow that assortment for at least a period of time to make sure the things that were really key to consumers were available, and they’ve done a nice job there. I think broadly, the big manufacturers have been focusing more and more on their big brands in the last five or 10 years, to much success as well. So I think we’re very much driven by what the customer wants to buy, and we really trust our partners to tell us what that is and to put it on the shelves—and that's no different during this period, partly driven by a lack of supply but also driven a lot by demand, where we're seeing incredible shifts in demand. I’ll just give you some examples which are obvious, but they're worth noting. Vitamin sales are still going extremely strongly, and then you’ve got the other side of it: The cough and cold sector went really strong in early March, but it has tapered off, because at the end of the day, there's not much available yet to help you with the virus. You can protect yourself a lot from getting the virus, but there's not much available to take if you happen to have it apart from lowering your temperature with painkillers. Another example would be hair colorants, where hair colorants have gone really big because people are no longer going to beauty salons and want to look good on on Zoom and on Microsoft Teams and FaceTime and all that stuff, so that’s another catageory that’s exploded. There are many other examples, that all exploded for the same reasons. There has been a lot of shift. And the manufacturers have had to deal with the same things that we've had to deal with, where unfortunately, sometimes it becomes a hotbed or a potential hotbed for an outbreak and therefore they’ve had to close down. So, I think it's been a really disruptive time for supply chains, but I have to say that I've been really impressed by the modern agility of supply chains from manufacturers, and I think they've been very fair in how they've allocated product for those retailers that are open as well. So, we've had no complaints, and we’ve had great collaboration with people to try and make it work to get the product to customers in the best we could. And people, I think, have coped really well, end to end. There’s been some price gouging by certain people and all that stuff, but generally speaking, 99.9% of people in our end-to-end supply chain have done a fantastic job for America in this period of time in my view. In terms of some of the technologies that drive agility and technology, we're moving from lean supply chains to agile supply chains, and people have been investing ahead of that curve, and that's coming through and certainly has been a big help to retail that's been open.

Q&A: Delivery and Fulfillment

Deborah Weinswig: JoAnn, do you want to kick us off on Q&A? JoAnn Martin: Sure. Alex, the first question is, “What are the most critical aspects of customer delivery that all retailers must address?” Alex Gourlay: They’ve got to make the stores safe and clean. There are a range of feelings out there about how dangerous the virus is, but most people think it's extremely dangerous and can be prevented by all the CDC [Centers for Disease Control and Prevention] guidelines. We saw a great piece of work by Kroger called the “blueprint.” Now we had our own internal group thing, but Kroger actually made this blueprint available to all retailers—so I would suggest that if you've not got a blueprint of your own yet about how you keep your store safe, then please use that. I’ll give an example from Red Nose Day. It’s a simple example, but it's a real one. We had a  keypad where customers used to donate for Red Nose Day, and it was quite an easy process and raised quite a lot of money, because if you finish your transaction, “Do you want to give $1, $3, $5, $100 or whatever to Red Nose Day,” people pressed it and off they went. So, we decided not to switch that on because it was encouraging people to use the pin pad too much. We wanted to minimize the use of that pin pad to when it was absolute necessary. So we made deliberate choices to keep our customers safe and our people safe, even though it affected elements of our business model. You have to do that, I think. If you open in a less safe way, then you're not being fair to your colleagues, so get that bit right—and people remember that for a long time. I think if you don't get it right then, then it will be a problem for your brand and your company. Secondly, really listen to your people. We have a survey that we send out every week now, and we simply ask questions like, "Do you have enough PPE? How do you feel about how you're being supported by your company?” We ask three or four questions, and we track them every week. We copied this from Kroger, to be honest; we started it about three or four weeks ago, and it's great because we’re getting real-time information about the morale and how people are feeling about being out there. And it's not great, by the way: Some of the some responses we get are telling us, “You’re not doing all you can to help me or to pay me” or whatever. So, don't expect this to be a rosy picture. It's really a temperature check in real time that gives you a real sense of whether you are doing enough to keep your people safe and your customers safe. And third, your supply chain is everything. If people come into your store and they can’t get from you what they want, they’re doing fewer trips, bigger baskets, so if you're open and you don't have the things that people expect you to have, then you could lose them—not just for your reopening trip, but you could lose them forever if you find it somewhere else. So you have got to really focus on what's important to your customer in that trip, what they expect to get from you, and somehow get it on the shelf or have an alternative. Those would be my three bits of advice. Deborah Weinswig: We are seeing a lot of questions on last-mile supply chain. I'll try and combine a few into one. “Are you fulfilling online from store only from DCs [distribution centers]; how is drive through pickup going; and do you see contactless in-store pickup as important for the future?” Alex Gourlay: Yes, so we're fulfilling mainly from our DC, because again we didn't have a built in network yet to connect the online with the physical. We're in the process of doing that right now, but it wasn't ready. We have started to do about 500 essential lines—coming back to this idea of, “What is that people really come to you for?” We picked our 500 essential lines, and we now pick that from the store. And we can either send it home or do it through the drive-thru window—the drive-thru window has been very popular—and that's our process. We’re increasing the number of essential lines every week. I think we started with 100, and I think we’re now at 500, so we pick from the store now, which we never did before. And we've taken all the essential things, which comes back to that last point in the last question about making sure you have the stuff that people expect to get from you. In terms of the last question, when you read through the population, there are about 10% of people today who are genuinely concerned about the virus and won’t come out. I think there is a pre-vaccine and a post-vaccine phase—that's how we're thinking about it. So, in the pre-vaccine phase, if you listen to the experts… they know it’s going to be a bit of a saw effect [up and down]. There are going to be good times and bad times, hotspots and not hotspots; it’s not going to be a straightforward road until we get a vaccine—and I think all retail is going to be ready for that. So I think this idea of contactless pickup will stay because of that, and will go beyond that as well, because people's attitude towards hygiene and disease will change forever. It’s crazy in Illinois, you know, you walk into every single store and everyone wears a mask. It’s so different way to the way it was before. So I think there's a pre-piece, a post piece and some that will stick forever. We think we’ve got to figure out drive-thru. I call it drive-thru 2.0: Drive-thru 1.0 was pharmacy; drive-thru 2.0 is everything else that essential in people's lives that we can get in our supply chain. So, thank you to Walmart for putting that big idea in people's minds; we intend to ride on the back of it! But we've got to get there first. We’ve got to invest in our omnichannel. We've got a lot of work to do. We're not there yet. We’ve got to make it seamless and a better experience. But we have the better car parks, I think! JoAnn Martin: There was one other question, just a little bit of an extension from what Deborah just asked. Since you have established the final mile and have a perspective and it's running efficiently, “How are you thinking about your micro-fulfillment strategy, or are you, for Walgreens?” Alex Gourlay: We have to; it’s a great question. I think any retailer that's not thinking about that question and how they can either do it themselves or partner with someone will have a problem in the future. Customers are used to getting things on demand, aren’t they? People can now get their drugs and their 200 key lines on demand through a Walgreens drive-thru. It's a bit messy for us—it takes a lot more effort than it should—but we have to do it, and therefore it's micro-fulfillment approaches that are going to be the unlock for us. We’ve got to figure out who's our partner and how we do it and how we get ahead of it—so we invest for maybe the next 10 years, because it will change again. When you’re putting down capital, you’ve got to be sure it will last for a period of time. So, I think it's a critical question, JoAnn, that every single retailer has to have an answer to, I think. Deborah Weinswig: Great. Well, Alex, thank you so much. Your insights were incredibly timely and helpful for all of us. JoAnn, thanks again, and we'll see you soon. Alex Gourlay: Thank you. JoAnn Martin: Thanks, everyone.