The Arbor Company
Gene waited five years until 1968 to open his second store, State Drugs at Maple and Walled Lake. “The difference between myself and other people was, once I opened a store, I wanted to make sure it was a success," Gene said. "I wasn’t interested so much in numbers as in success.”
With the stores concentrated in the Detroit metropolitan area, Gene and his management team were hands-on and onsite regularly. They were able to ensure that operations were consistent, keep tight control on costs and maximize their investment at every store. To aid in this effort, Gene developed corporate support groups in areas like merchandising, cashier training, pharmacy technicians, loss prevention and customer service. Arbor put the focus on the stores, which allowed the stores to focus on the customers.
Gene further commented on the unique relationship between the pharmacist and customer."We are aware of the fact that customers value the knowledge of pharmacists,we know that many of our customers know their Arbor pharmacists by their first names. It is an important relationship."
The Arbor Experience
With Gene’s superb attention to detail, the stores were always clean and well organized. Every detail was considered, including the way the stores were designed. Each store’s layout was almost identical, so that customers could always find what they were looking for, no matter which store they went to. Arlene Reaume, longstanding employee of Arbor Drugs and Arbor Investment Group explained the mission was to showcase the store in the best way, “We took a lot of pride in the presentation of the store, we all worked together; everyone was there for the same purpose, which was to make Arbor Drugs successful.”
Gene always wanted everyone’s opinion on what they could do better, how they could be better. And it wasn’t just management. This was true at the store level as well. “When Gene went into the stores, he would see everyone in the store – stock boys, cashiers – and get their opinions. Everybody’s input was important,” Bolokofsky said.
“Mr. Applebaum never had to sit down and say anything inspirational, he was inspirational just by watching,” Reaume said.
Another unique feature of Arbor Drug stores was the wider center aisle where various seasonal-type items were sold. No other drug stores were selling these types of goods. Arbor was able to get really high-gross margins and turn that inventory quickly. “We didn’t chase fantasies, but at the same time, we tried to innovate,” Bolokofsky said.
Image: Arbor Drugs's famous wide center aisle.
Gene saw that he was making money on the “turns”--not just in the center aisle, but throughout the stores. Arbor Drugs turned its inventory six times a year and Gene became a case study for the University of Michigan.. Gil Gerhard, Arbor Drugs VP of Finance and Administration and CFO described the success at the time,
“We had about the highest sales per square foot metric, which is significant because it signifies how fast you turn your inventory, which of course increases profitability. And, we had the highest sales per store in the chain drug industry as well.”
Arbor’s Recipe for Success
Throughout the growth of Arbor Drugs, Gene kept to four main principles: he was good to his customers, had products in stock, remained disciplined by not diversifying or getting off track and did not get caught up in the press. He focused on slow growth, lean management, one profitable store at a time. "The way to avoid layoffs is not hire in the first place," Gene had said.
In a 1992 interview, he stated:
“Don’t complicate a business that’s simple. Recognize what you are. What works now, worked in 1963: pharmacy, health and beauty aids, cosmetics, promotional sundries, candy, magazines, greeting cards and convenience foods.”
Longtime friend David Hermelin knew from a young age that Gene would be successful at whatever he tried his hand at. “We go back to the sand box," Hermelin once reminisced.
"I knew he’d be a success when we were at Winterhalter School, where he was able to turn one marble into hundreds. He won them in competition. He’s an entrepreneurial genius. Genius means having the ability to make threshold decisions…only a handful of people can make the right threshold decisions. Gene makes the decisions, and he makes them right."
A Pharmacy Powerhouse
With his savvy business acumen, attention to detail and respect for his customers and employee’s needs, Gene grew his business from six stores to 48, and then took Arbor Drugs public in 1986.