The flagship stores "give us a platform for innovation and to showcase the best of our brand," Walgreens chief executive Gregory D. Wasson told investors at a conference earlier this summer.
"The real money is made in the pharmacy, and the health and beauty aids," said Larry Steinberg, who heads the Philadelphia office of Fameco Real Estate. He estimated the year's lease on the 26,000-square-foot space at $900,000, "a good rent, in an unusual setting," with two sets of escalators.
"It's a pretty positive thing for the neighborhood," said Jody Romano, who commutes from Chester County to her office in the old Fidelity building a block away. She's been walking to this Walgreens instead of driving to Rite Aid at home. Center City chain stores used to be crammed places "where you're almost scared to go," she told me. But this "brings a neighborhood feel."
"This is like a Wawa, with drugs," says David Neff, a publicist who lives three blocks away. Two years ago, Neff complained that a Walgreens would "suck the life out" of the corner. But reviewing the cubed mango, quinoa and gouda sandwiches, sushi, Starbucks coffee, yogurt, and other yuppie fare, Neff reversed: "It's healthier than Wawa. Very smart."
Wawa, which has moved back into Center City as the resident population rises, reopened its store at Ninth and Walnut on Thursday. It was jammed with Thomas Jefferson Health workers buying coffee, hoagies, and pretzels. But a casual visitor could walk by its narrow windows and miss the store. A new sign is on order, said Wawa spokeswoman Lori Bruce.
The new Walgreens doesn't have that issue. Pedestrians can stand across Broad and watch third-floor shoppers choose adult diapers through the wide windows.
Walgreens has "flagships" in eight other cities. "I like these. But it's hard to move the needle, with 7,000-plus stores," John Ransom, drug stock analyst at Raymond James & Associates in St. Petersburg, Fla., told me.
"There's a lot of people experimenting," says Robert Ambrosi, owner of ARC Properties of Philadelphia and Clifton, N.J., who has developed 35 Walgreens and 100 rival CVS pharmacies since the 1980s. Wal-Mart has opened a chain of pharmacy-sized stores in Chicago. CVS has added medical offices. Rite Aid, based in Camp Hill, has overhauled stores, tripling its share price.
"Pharmacies are the highest rent-payers on the market," Ambrosi added. "People want convenience. And prescriptions make them a lot of money." The Broad Street Walgreens, near Jefferson and Hahnemann hospitals, is in "a strategic location."
Walgreens can't afford this to be just a billboard, says Alan Levin, Delaware's economic- development director, who sold his drugstore chain, Happy Harry's, to Walgreens in 2006. Earning just three cents, after tax, on every dollar of sales, according to Levin, "they don't have a lot of margin for error here. Frozen food makes sense. Fresh foods, they don't have a long shelf life.
"Will people really plan their dinner here? Maybe, in the city. But don't lose sight of your primary mission. In retail, you always put your toe in. I'm not sure you want to jump."
Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or @PhillyJoeD.