Jurgen Schreiber, chief executive officer of ShoppersDeborah Baic/The Globe and Mail
Jurgen Schreiber's vision of the Shoppers Drug Mart of tomorrow is looking more like a Loblaws supermarket.
The chief executive officer of Canada's largest drugstore chain will soon launch financial services at Shoppers, adding to his widening array of offerings ranging from food to beauty products and electronic gadgets before the customer ever reaches the pharmacy counter. As such, Mr. Schreiber is borrowing a page from Loblaw Cos. Ltd., teaming up with a bank as the grocer has done with its President's Choice financial services.
The Shoppers CEO's banking initiative is among his efforts to help offset the financial pain of provincial reforms on drug payments. The changes threaten to slice deeply into pharmacies' profits if they don't move swiftly to ease the pinch.
As a result, Mr. Schreiber is transforming the business: He's slashing costs, scaling back on new store openings, bolstering high-margin private labels, expanding groceries - and now adding financial services to the mix.
"For us, life moved on," he said on Tuesday at a Scotia Capital retail conference.
Mr. Schreiber's outline of his new business model was his most comprehensive review to date of how he expects Shoppers to make gains in a post-drug-reform world. "We do expect an emphasis to be made on the company's ability to grow in a more capital-efficient manner," retail analyst Patricia Baker at Scotia Capital said earlier in the week.
His model for financial services emulates aspects of the one at Loblaw. The grocer uses CIBC for deposits, loans and mortgages, snapping up a fee for its President's Choice banking products and services.
Loblaw president Allan Leighton said the financial services business holds such potential that he plans to put a bigger push on it. He said on Tuesday that one of its benefits is its "gold mine" of data about customers' shopping habits from its credit and debit cards.
As well, Loblaw's financial services attract new Canadians and young people - two important customer segments for retailers. "This is another growth engine," Mr. Leighton said.
Other retailers, including discounter Wal-Mart Canada Corp. and Canadian Tire Corp. Ltd., have gone even further to profit from financial services by getting their own bank licences. But Mr. Schreiber said that rather than go that route, he's partnering with a bank so that Shoppers doesn't have to shoulder any credit risk. "Anything in that space would be a co-branded initiative," senior vice-president John Caplice said in an e-mail.
Mr. Schreiber didn't name the financial institution, although Shoppers already runs a MasterCard credit card with MBNA Canada Bank. It will soon unveil its financial services plans, he said.
Beyond financial services, Mr. Schreiber is taking a stab at other initiatives to draw more customers. It is expanding its photo counter into a consumer electronics hub, which will offer a wider range of products and services, and pumping up its low-cost private labels.
He views its store brands as such a lucrative business that the retailer will soon start exporting its lines, such as Life products and its new Sanis generic drugs, to other retailers around the world. In that way, Mr. Schreiber envisages building global brands.
The company already has signed its first deal to sell its in-house labels internationally, he said. "That's quite a change in our business model."