Those boats were built in Sturgeon Bay, but that was another time. The shipyards experienced a downturn in the 1980s, when defense funds dried up and the Cold War ended. Demand for naval minesweepers--also built in Sturgeon Bay--dropped. Eighteen hundred well-paying shipbuilding jobs have melted down to approximately 700, mainly in service and repair.
Meredith has seen a diaspora of good friends and able craftsmen. One man worked 28 years in the yards before striking out for Elgin, Ill. "The last I heard from him," says Meredith, "he was headed for Louisiana."
The Merchandiser
In 1894, Meredith's grandfather opened the first general store in the northern Wisconsin town of Mellen. Doug started working in the family business at age 10 and has been in merchandising ever since: a half century of putting things on shelves and seeing if anyone will buy them.
He saves every newspaper ad he's run for the past 22 years, complete with notes on the results. You can't trust the memory, he says. Last January, he ran a sale that failed miserably--but he duly noted that on two key days, the temperature didn't top 20 below. Meredith can tell you that if Easter falls in March, even on the 31st, candy sales will be one-third lower than when the holiday falls in April. An advertised sale on vitamins will do best in September and October, when kids are returning to school, but will do even better if it's timed to coincide with the arrival of monthly social-security checks.
Meredith has always believed in giving up some margin to get a payback in customer loyalty. In the spring of 1975, six months after buying the pharmacy, he cut prices. Back in Milwaukee, chain supermarkets already bestrode the retailing jungle. "I knew it would only be a matter of time before the chains came up here."
Meredith figured that if he cut prices at the outset and trimmed his cost structure accordingly, he'd be ready. "We could have made more money in those early years," he says. "But look, at least I'm still here."
High prices were a fact of life in Door County back then, owing to limited competition, the absence of chains, and the seasonal presence of "turkeys"--summer tourists vulnerable to gouging. Meredith recalls a fellow merchant walking into his store one day while he was changing prices. He even remembers the item in question. "A tube of Crest had a suggested retail price of $1.29, but it cost me 65¢. I could charge 79¢ and still make a profit." The man tapped Meredith on the shoulder and asked, "You already raising your prices for the turkeys?" Meredith replied that he was lowering his prices. "He said, 'You're nuts.' He went absolutely berserk. He told me I was undercutting all the other merchants in town. I told him, 'If you keep your prices high, you end up screwing the natives."
'Divine Intervention'
Meredith found a new partner, a Walgreen manager from Milwaukee who was looking to leave the big city behind. But that proved short-lived. The new partner, who had had polio as a child, broke out into a drenching sweat when he worked at the store, even on the coldest winter days. "I couldn't let him unload a truck or do any heavy work," says Meredith. The man was diagnosed with a rare malady: post-polio syndrome. For the second time in two years, Meredith had a dysfunctional partner--and, again, one he couldn't afford to buy out.
But his luck turned. Within six months, he met Bill Divine, a pharmacist in Appleton who had been buying into small pharmacies in rural Wisconsin. The struggling west-side store was filling only 60 prescriptions a day, not enough to turn a profit. Divine came to town and assessed the situation. A man named Greg Rohde ran a small prescription shop in Sturgeon Bay, and, he, too, was struggling at 60 prescriptions a day. "Greg and Doug were butting heads," Divine recalls. He brought the two together and persuaded Rohde to close down his shop. The combination gave the business a merchandiser in Meredith, a pharmacist in Rohde, and a silent partner in Divine, all of whom understood where the pharmacy industry was headed. Volume on the west side leapt to 120 prescriptions a day, well past breakeven. Meredith now recalls: "Greg and I had been fighting tooth and nail. If things hadn't changed for me, I was going to close the west-side shop."
Things changed. He renewed his five-year lease on the store.
Wal-Mart
Seventy percent of Bay Pharmacies' sales comes from filling prescriptions, known in the trade as "scrips." The other 30% of the business involves the "front end": toys, crafts, cosmetics, sundries, and health and beauty aids. Independent pharmacies have historically lived and died on prescription volume, which for many might represent 90% of total sales. Major chains such as Revco and Walgreen take in about 40% of their sales in prescriptions.
In the past, filling prescriptions might have fetched the industrious independent a 30% gross margin, but in the brave new world of managed care, that margin has been cut to 20%--or even less. (Meredith's margin right now is closer to 25% because half his prescriptions are paid for in cash, bypassing the paperwork associated with insurance.)
Everything in today's health-care market favors size and efficiency. Margins are being squeezed because insurers reimburse less for prescriptions, or they channel patients into restricted networks of chain stores that deal in larger volumes and thinner margins. Mail-order pharmacies further crowd out independents, while drug companies offer high-volume HMOs lower prices than they do independent pharmacies for an identical quantity of the same drug.
Meredith estimates that his sole competitor, Wal-Mart, fills 220 prescriptions a day. (His total is higher than that, but he won't disclose it for the record.) However, what constitutes the core business for Bay Pharmacies, its bread and butter, represents maybe 15% of sales for Wal-Mart--little more than one of several ways to lure customers into the store.
