June 2, 2005
New Yorkers Will Do Anything to Avoid Crossing the Street
This week's New York magazine examines the curious success of Duane Reade drugstores. Despite the chain's surly staff, alarmingly high prices, and low-rent atmosphere, over 300,000 gullible New Yorkers purchase something at a Duane Reade (most likely birth control) every week.
As it turns out, that low-rent part is the genius of Duane Reade's business strategy. The company focuses solely on foot traffic when considering locations, and not on the physical layout of the space. The model is based on the assumption that New Yorkers, much like ants, will do anything to avoid straying from their pre-set commuting routes. In fact, Duane Reade's research shows that a store can be made or broken simply by locating it on the wrong side of an apartment building.
As someone who has waited in line behind 30 tourists buying Empire State Building-shaped pens at the 34th Street Duane Reade rather than walking a block further for my Sunkist Fruit Gems™, I must sadly admit that this assumption is correct.
By leasing "odd, unlovable, but well-located holes" in high-traffic areas, Duane Reade is able to pay significantly below-market rates for real estate that no one else wants. Since 200 of the stores have leases through 2008, those rates fall even lower below-market every day. And since the company contains costs by paying minimum wage to a largely part-time staff, Duane Reade could sublet their retail spaces and make a killing even if no one ever bought another tampon there again.
As fascinating and devious as this is, I must point out one glaring factual error:
"The one thing [New Yorkers] are sensitive to is long lines, so Duane Reade doesn’t starve its stores of employees. To keep rushed shoppers moving, most stores have six cashiers at the front, compared with three at suburban stores."
Are you kidding me? Six cash registers, maybe - but six cashiers? I challenge any of our readers to tell me when they've seen more than two cashiers actually working at the same Duane Reade store at the same time. Please note, standing around looking sullen while not actually ringing up customers does not count.
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