Business model of Walgreens Boots Alliance

Customer Segments

Walgreens Boots serves a large customers base across numerous countries worldwide. These customers can be organised primarily into two core categories:

• Retail Customers, comprising general consumers across multiple demographics, to which the Company sells medicines, and health and beauty products; and
• Wholesale Customers, comprising pharmacies, hospitals, doctors and physicians, medical centres, and other healthcare facilities, to which the Company sells medicines and medical products on a bulk order basis.

According to its website, Walgreens Boots has more than 110,000 wholesale customers around the world.

Walgreens Boots is based in the US, which continues to be its principal market. The Company, however, also has retail operations across a number of international markets in Asia Pacific, the Americas, and Europe, including the UK, Thailand, Norway, the Republic of Ireland, the Netherlands, Mexico, and Chile. The Company also serves various markets, primarily customers in Europe, through its wholesale pharmacy business.

Value Propositions

Walgreens Boots provides value to its customers in the following ways:

• Its brand strength and industry standing, with the Company established as a leading name in the retail pharmacy industry, both under the Walgreens name in the US and the Boots name in the UK, with a reputation for providing high-quality and reliable products and services;
• Its international sales reach, with the Company serving a broad international customer base spanning the Americas, Asia Pacific, and Europe, through its physical retail networks, online sales channels, and wholesale business unit;
• Its extensive distribution infrastructure, with the Company operating a wide-reaching distribution and storage network that allows it to serve its customers and its own stores around the world quickly and efficiently;
• Its intellectual properties, with the Company controlling a number of trademark, patents, and other intellectual properties that are used in its products and sales operations, helping to differentiate the Company from its competitors; and
• Its industry expertise and experience, with the Company employing a number of specialist personnel, including those with pharmaceutical experience, as well as experienced industry executives.

Channels

Walgreens Boots operates a website at www.walgreensbootsalliance.com, through which it provides information on its operations, product lines, and operating locations. The Company operates separate website for its Walgreen and Boots brands, including country-specific websites, through which it provides further information on its products and its retail locations. These websites also double as online sales channels, allowing customers to make purchases, arrange deliveries, and manage account details.

Walgreens Boots makes the bulk of its sales through its physical retail stores. This comprises 8,175 retail outlets across the US and its territories, and a further 4,673 across various jurisdictions outside the US, including a significant presence across the UK and Mexico. The Company operate sits retail stores primarily under the Walgreens and Boots brand names. Walgreens Boots operates a separate wholesale sales organisations, that deals directly with healthcare providers around the world.

Additionally, Walgreens Boots operates its own extensive distribution and storage network, including a number of warehouses and distribution centres across its operating regions.

Customer Relationships

Walgreens Boots offers products to its customers on a self-service basis through its Walgreens and Boots-branded online sales channels. These platforms allow consumers to browse products, make purchases, manage account details, and track orders online without interacting directly with members of the Company’s sales and service personnel.

Walgreens Boots serves its customers on more personalised basis through its retail stores, with its in-store sales personnel able to respond directly to customer enquiries, queries, and complaints, offering solutions tailored to their individual needs. The Company’s wholesale unit also works closely with its individual clients, fulfilling orders on a client-by-client basis.

Walgreens Boots operates a dedicated customer support unit that provides after-sale care to its retail customers, with wholesale clients typically supported by account management teams. Consumers are able to access personalised customer support over the phone and online, and can access a range of online resources, such as FAQs and guides, independently.

Additionally, Walgreens Boots operates social media accounts with Facebook, Pinterest, Twitter, Instagram, and YouTube, through which it is able to interact with customers directly and provide company updates.

Key Activities

Walgreens Boots Alliance is a holding company. Through its subsidiary companies, it operates chains of pharmacy-led health and wellbeing stores around the world.

The Company aligns its operations into three reportable business segments: Retail Pharmacy USA, consisting of the Walgreen Company business, which includes the operation of retail drugstores, care clinics across the US, and also provides specialty pharmacy services; Retail Pharmacy International, consisting primarily of the Alliance Boots pharmacy-led health and beauty stores, optical practices and related contract manufacturing operations; and Pharmaceutical Wholesale, which consists of the Alliance Boots pharmaceutical wholesaling and distribution businesses.

The Company operates retail networks across multiple markets in the Americas, Asia Pacific, and Europe, with the US and the UK its principal markets. Its wholesale operations are targeted primarily in Europe.

Key Partners

Walgreens Boots works closely with a network of partner companies and organisations across its operating segments. These partners can be categorised broadly as follows:

• Supplier and Vendor Partners, principally comprising drug and pharmaceutical wholesalers that supply products and merchandise for resale across the Company’s physical and digital outlets, as well as suppliers of technologies and services that are utilised across the Company more broadly;
• Health System Partners, comprising various health service providers that assist the Company in operating its in-store clinic locations across the US, ensuring that customers receive appropriate care;
• Strategic and Alliance Partners, comprising various market-leading companies across multiple sectors, often in the retail and consumer goods space, with which the Company collaborates on branding, marketing and other joint projects; and
• Community and Social Partners, comprising non-profits and charitable organisations with which the Company collaborates on joint community and social projects in the US and abroad.

Walgreens Boots launches partnerships on a relatively frequent basis. This includes a pharmaceutical partnership with United Health with a view to capturing a greater portion of the prescription drug market, and a tie-up with pharmacy benefit manager Prime Therapeutics.

Key Resources

Walgreens Boots’s key resources are its intellectual properties and proprietary brands, its merchandise and supply chain, its online sales platforms, its IT and communications infrastructure, its physical sales and distribution infrastructure around the world, its partnerships, and its personnel.

Walgreens Boots owns a portfolio of physical properties around the world that are key to its operations. This notably includes its international network of 12,848 retail stores, as well as its 23 retail distribution centres and 29 principal office facilities.

Walgreens also owns a number of brands and trademarks, which help it to provide unique products and services to its customers.

Cost Structure

Walgreens Boots incurs costs in relation to the procurement of products and merchandise, the procurement of professional services, the development of its online sales platforms, the maintenance of its IT and communications infrastructure, the operation of its physical sales and distribution infrastructure, the implementation of marketing and advertising campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 Walgreens Boots’s largest expense was its cost of sales, which amounted to $87.48 billion for the year. The Company additionally recorded annual selling, general, and administrative expenses in the amount of $23.91 billion.

Revenue Streams

Walgreens Boots generates revenue through the sale of pharmaceutical and health products on a retail and wholesale basis, through physical and digital channels. The Company primarily generates revenue in the form of product sales, but also derives a smaller portion of revenue in the form of service fees.

In 2015 Walgreens Boots generated net sales for the year of $117.35 billion, up considerably on the $103.44 billion recorded by the Company in 2014. The majority of the Company’s annual sales were attributed to its Retail Pharmacy USA segment, which alone recorded net sales of $83.80 billion. This was followed by the Pharmaceutical Wholesale segment with sales of $22.57 billion.