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Jean Coutu Pharmacy owner Aaron Lloyd inside his renovated drugstore (Nauman Farooqi)
Jean Coutu Pharmacy owner Aaron Lloyd inside his renovated drugstore (Nauman Farooqi)

CASE STUDY

Nearly tripling space helps drugstore thwart new competition Add to ...

THE CHALLENGE

For seven years, Aaron Lloyd had found success running Jean Coutu Pharmacy, one of three pharmacies in Sackville, N.B., and the only franchised outlet of the Longueuil, Que.-based Jean Coutu Group Inc. drugstore chain in the small town.

By 2008, however, he realized that cramped quarters prevented him from offering the full slate of services to keep customers coming, and opened the door to potential new competition.

More Related to this Story

The typical Jean Coutu store takes up 8,000 square feet to 9,000 square feet of space; his store was confined to 3,700 sq. ft. that housed both the retail and pharmacy operations.

The lack of space meant he could not offer value-added pharmacy services, such as private consultation and counselling rooms and inoculation clinics.

It also prevented him from offering the entire range of products that he could carry and display on the retail side, limiting sales.

Mr. Lloyd saw that customer demand for professional pharmacy services and specialty items was on the rise. He felt that the size and demands of the market might entice another franchise player to Sackville, creating a more competitive environment for his business.

Expansion plans, however, were limited by a dearth of sufficient space in the financially lucrative downtown core. Mr. Lloyd had to figure out a creative way to expand his store while staying downtown, as well as minimize the financial risk of investing a significant amount of money in such growth.

He knew he had to make a decision before another franchised, full-service pharmacy could open up and chip away at his market share.

THE BACKGROUND

Mr. Lloyd was born and raised in Miramichi, N.B., where his father was involved in the grocery business. He graduated from Mount Allison University with a bachelor’s degree in biology in 1990. After an unsuccessful attempt to get into medical school, he decided to pursue his second choice and enrolled in the pharmacy program at Dalhousie University in Halifax.

After graduation in 1995, he returned to Miramichi and worked at a Jean Coutu pharmacy for two years, followed by another two years at another Jean Coutu pharmacy in Riverview, N.B.

From the time he decided to pursue a pharmacy degree, he also decided he wanted to own his own business. He jumped at an opportunity that came up n 2001 to buy the Sackville franchise.

THE SOLUTION

To deal with the space crunch, Mr. Lloyd saw opportunity right next door, and suggested to Jean Coutu management that the company buy up all of the retail space of a strip mall adjacent to his store. Jean Coutu went for the plan, and after a year and a half of negotiations, bought the space in March, 2010.

Renovations began immediately and the new store was completed and opened to the public in October. Mr. Lloyd rents the space from Jean Coutu and took out a $1.5-million loan to finance the setup of the new store, which included furniture, fixtures and the like.

THE RESULT

With a new space of 9,700 square feet, Jean Coutu Pharmacy nearly tripled in size and is is now the largest drugstore in Sackville. Mr. Lloyd  was able to expand the store’s retail offerings, as well as add a dedicated cosmetics section, offering high-end products and staffed with a cosmetologist.

On the pharmacy side, he added consultation and counselling rooms, private booths and space for conducting blood pressure, flu and immunization clinics. The store also added five employees, bringing the total number of staff to 32.

With the expansion and addition of specialized product offerings, retail sales saw a double-digit increase in the first year and, on the pharmacy side, Mr. Lloyd was able to keep business steady and customers from looking elsewhere for value-added services. The renovated store has also drawn new traffic from adjoining small towns.

Just as important, by making a timely expansion, , Mr. Lloyd was able to consolidate his market position and thwart any potential new competition from another franchised operation coming to town.

Special to The Globe and Mail

Nauman Farooqi is a professor and head of the department of commerce in the Ron Joyce Centre for Business Studies of Mount Allison University .

This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.

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