COMPETITORS FACE OFF IN CLOSE PROXIMITY IN SANTA MONICA

Santa Monicans could be the most heavily medicated people in Southern California or unwitting pawns in the latest retail wars. Perhaps it's a combination of the two.

With six drugstores vying for customers within two miles of each other along a well-traveled commercial corridor in Santa Monica and two more opening nearby by the beginning of next year, the beachside community might appear to be saturated.

Don't bet on it.

In a counter-intuitive twist to the generally accepted rule that the first big boy into the market precludes further direct competition, it's not unusual in many parts of Los Angeles to see a Rite Aid directly across the street from a Sav-on or other competitor.

Drugstores are one of the fastest growing areas in the retail sector. As the baby boom population ages and drugs play an increasingly integral part of Americans' daily existence, national chains are scurrying to capitalize on a growing market.

"There's a race among the drugstore operations to get their stores open ahead of the demographic wave of retiring baby boomers," said Derek W. Leckow, a Barrington Research analyst. "The average person over 50 is on a couple of prescription medications any time during the year."

Because real estate requirements for the chains are virtually identical large corner sites with parking lots that will accommodate drive-through windows rivals often set up shop only blocks away.

Add a nearby hospital to the mix and chains see gold.

Santa Monica has becomes a prime spot because there are two hospitals in the small seaside city as well as an affluent population more likely to have health insurance covering prescription drug costs.

Walgreen Co., which ventured into the Southern California market only a few years ago, plans to have 200 stores in the area by 2004. It is preparing to begin construction on its first local drugstore in Santa Monica, at the corner of Wilshire Boulevard and 20th Street, not far from the existing six drugstores already competing for customers.

Blocks away, Longs Drug Stores is preparing to open an enormous 28,000-square-foot outlet on Wilshire that will be one of the largest in the company's Southern California lineup. It will be twice the size of the nearby Walgreen's.

It's a rush spurred by the drug industry's phenomenal growth.

In recent years, prescription drug orders have grown 10 percent annually, while the supply of pharmacists has increased at an annual rate of 1 percent, according to John Ransom, an analyst with Raymond James & Associates.

Prescription orders are projected to grow even more as drug companies aim ad campaigns at consumers rather than physicians.

The National Association of Chain Drug Stores expects the number of prescriptions issued will increase to 4 billion in 2005, from 2.84 billion last year, a 40 percent increase.

Given those numbers, Walgreen plans to nearly double the number of stores it operates in the U.S. in the next decade. One is in Santa Monica, where Walgreen's is building a 14,000-square-foot retail outlet on the former site of a Great Western Bank.

With all these large drugstore chains arriving in town, independent drugstores have even a tougher time staying in business.

But Paul Leoni, owner of Patton's Pharmacy on Montana Avenue in Santa Monica isn't worried. He relies on good old-fashioned customer service to keep his clients walking through the door.

Besides, he said, "The big stores are not my main problem, it's the insurance companies."

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