Discount Drug Mart, Inc. History

Company History:

Discount Drug Mart, Inc. operates a chain of discount drug stores located exclusively in Ohio and primarily in the greater Cleveland area. A commitment to provide customers with low prices and one-stop shopping were key elements in the company's growth, which brought revenues to an estimated $260 million by 1994. In fact, Discount Drug Mart was among the largest privately held retailers in the greater Cleveland area, ranking 15th on the Arthur Andersen Greater Cleveland 100 rankings in the late 1980s.

Discount Drug Mart was founded by Parviz Boodjeh, a pharmacist and successful businessman. In the early 1960s Boodjeh and two other partners introduced the Jay Drug chain of stores in the Cleveland area. This successful operation caught the eye of executives at Cook United, another discount retailer based in Cleveland, and was purchased by Cook for an undisclosed sum in the mid-1960s. Boodjeh remained on board with the new corporate parent for a short time but soon grew disenchanted with a management style he deemed impersonal and again struck out on his own.

Specifically, Boodjeh believed that retail centers should provide low prices and a diverse product line that would allow customers to fill most of their shopping needs in one stop. Boodjeh's concept also focused on maintaining the friendly and personal service generally attributed to smaller, hometown drug stores. In 1969, he established the first Discount Drug Mart in Elyria, a western suburb of Cleveland. Discount Drug would soon prove Boodjeh's most successful retail enterprise, garnering a loyal customer following.

At the first Discount Drug store, customers could have prescriptions filled, purchase toiletries, and find grocery and gift items. In fact, the first store even carried durable good items such as lawn mowers and vacuum cleaners. Soon, however, Boodjeh found that customers would return these items when they needed repair, burdening his fledgling store with a service he was not interested in providing. So he opted to add to his store's shelves the hardware and parts needed to fix such items and found that this enhanced his recipe for success. Boodjeh's concept of one-stop shopping was well received, paving the way for three additional stores by 1973.

Discount Drug's wider array of product selection required more space than that of competitors' stores, which averaged from 8,000 to 12,000 square feet. Indeed, Discount Drug required almost twice that amount of space, presenting a particular challenge for Boodjeh as he sought to expand his chain. However, the misfortune of a local supermarket chain in the Cleveland area in the mid-1970s proved a boon to Discount Drug; tough economic times for the A&P supermarket chain left a host of empty stores in Cleveland. In 1975 Boodjeh leased five of these stores, more than doubling the chain of outlets to nine, each averaging around 16,000 square feet. Also during this time, Discount Drug announced its entrance into the Cleveland drug store market.

In the early 1980s, Boodjeh began standardizing the merchandise offerings among his growing chain and commissioned an architect to develop a store design on which all Discount Drug stores would be based. A 22,000 square foot model was produced and adopted, and this design was later modified and enlarged to 24,000 square feet, making room for new product lines and a video rental business.

Also during the 1980s, computer technology helped the chain distinguish itself as an innovator, with such in-store additions as electronic price scanners, which not only facilitated the check out process but also generated reports to management on product sales and reordering needs. Discount Drug also turned to computers to help map out new store displays. Using a planogram (known in the industry as a Pegman), Discount Drug computers showed store managers where and how products should be displayed.

By the late 1980s, Discount Drug was recognized as one of the hardest working chains in the country. In 1989 it ranked 34th in sales according to a Chain Store Guide list of the top 100 drug chains. Moreover, industry figures showed the chain sold more than $300 worth of merchandise per square foot.

However, the early 1990s brought intense competition to the industry. Discount Drug was still smaller than the Ohio drug store chains of Revco and Phar-Mor, and even these chains were being threatened by the superstore concept as championed by Kmart, Wal-Mart, and Target, which were all expanding at a breakneck pace.

In response, Boodjeh eschewed the aggressive marketing strategy of his competition, remaining content with gradual, steady growth averaging three to five new stores per year. Such conservative growth proved a successful strategy. Moreover, instead of looking to grow in areas that already featured competitors' stores, he focused on pinpointing locations that needed a discount drug retailer. Each new Discount Drug site was carefully selected to meet his specific criteria: it had to be close to the street and located near other successful businesses to ensure customer draw. And in order to keep company assets available for further expansion, Boodjeh sought out developers to purchase the land, build the store, and then lease the property to Discount Drug.

Also unlike many other retail chains, Discount Drug kept corporate costs exceptionally low. Located on the industrial southwest side of Medina, Ohio, Discount Drug headquarters were modestly furnished throughout with linoleum floors, metal desks, and a common "bullpen" room that served as office to Boodjeh and other company executives. Without the managerial "ivory tower," Discount Drug fostered a sense of community and cooperation among its executives and work force.

Finally, Boodjeh made sure that Discount Drug management remained in touch with the customer. Having observed that retaining many levels of management tended to distance the decision makers from the community they served, he established a corporate policy requiring all supervisors to spend a minimum of three days a week in each of their respective stores. In fact, Boodjeh himself served as store pharmacist one day a week at one of the chain's outlets.

Such conservative strategies helped Discount Drug fare well despite the increased competition of the 1990s. "We're just a small fish in a big pond," explained Discount Drug vice-president of finance, Tom McConnell, in the Akron Beacon Journal. McConnell added that "to compete against those (bigger) chains, we just have to provide better service and be price competitive, which is tough because we're smaller ... we just have to work harder."

The success of the Discount Drug chain was attributed not only to Boodjeh's vision and his sensitivity to customer needs, but to the people who worked in the stores. The family-type atmosphere Boodjeh nurtured and maintained throughout the company's 25-year history fostered a low rate of employee turnover, and employees were also encouraged to take on more responsibility and move up in the company.

Several members of Boodjeh's family also played active roles in the management of the company in the early 1990s. Three of Boodjeh's sons were store supervisors and members of the management team: Don Boodjeh, vice-president of advertising; David Boodjeh, vice-president of operations; and Douglas Boodjeh, heading up two of the company's newest business ventures, IPS, Inc. and IPS Network, Inc.

IPS (Immediate Pharmaceutical Services) and IPS Network were launched in 1987 to carry the Discount Drug name into the burgeoning health care market. IPS outlets were set up in physicians' offices, enabling patients to fill prescriptions on the spot. Moreover, in 1994 IPS expanded its offerings to include mail order prescription services. This move was prompted by the spiralling cost of health care in America; like its competitors, Discount Drug perceived that customers were demanding a less expensive option to having prescriptions filled at pharmacies. Mail order prescription services were both cost effective and convenient for the customer, who could have a scrip filled at Discount Drug and then mail order the refills. After forming an alliance with other local drug stores, IPS Network successfully contracted with insurance companies and corporations to gain its share of this growing market.

As Discount Drug Mart marked its 25th anniversary, corporate growth strategy remained conservative, including no plans to expand nationwide. While company management was focused on sustaining Discount Drug's legacy of growth and profitability, the corporate vision remained the same as when the first Discount Drug doors opened: serve customers with low prices and friendly service.

Principal Subsidiaries: IPS, Inc.; IPS Network, Inc.

Further Reading:

• Board, Katie, "Small Chains Battle for Retail Drug Slice," The Akron Beacon Journal, July 2, 1990, pp.
• "Discount Drug Mart Thrives on Gradual, Steady Growth," The (Cleveland) Plain Dealer, October 25, 1988, pp.

Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.