When New Yorkers make their way to the pharmacy counter, their selections are heavy on sex and therapy and ambivalent about kids. The top-selling sedative, ranked nineteenth nationally, is one of the top five drugs sold at Duane Reade. Also popular here is Viagra, and a couple of anti-AIDS drugs are in the top twenty. But what New Yorkers really specialize in is birth control: Three contraceptives rank in the top 25 of Duane Reade sellers, while no contraceptive breaks the top 50 nationally. “There is no birth-control pill that’s No. 1 in any market except here,” Cuti explains. “It’s the nature of the city. It’s where the action is.”

Duane Reade also takes advantage of its intimate knowledge of New Yorkers to cram the stores with as much product as possible. Charboneau’s designs typically use four-foot-wide aisles instead of the five-foot highways in the ’burbs. “New York is one of the only places you’ll ever shop where people are tolerant of being bumped from behind,” he says, defying retailing guru Paco Underhill’s fatwa on “butt-brush.” The other thing we don’t seem worried about, according to Charboneau, is cleanliness: “New Yorkers are less sensitive to it.”

The one thing we 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, and between 10 and 30 employees working at one time. (The company offsets its heavy staffing with paltry pay: Duane Reade’s largely foreign-born employees start at minimum wage, and the company fights for every penny.) “When I’m catching somebody out of Penn Station moving 100 miles per hour, they want service and they want it quick,” says Cuti. “It’s, ‘I’m carrying my bag, I’m ten minutes late, the dumb train was late, I got to get the Tylenol and my bottle of water as quickly as I can.’ ”

Neil Stern, a drugstore analyst at retail-consulting firm McMillan Doolittle, describes the Duane Reade model as blunt sales: “It’s how much more can you sell out of the space, not how clean you were or whether all your products were marked.” This attitude helped the stores move $816 per square foot in 2004, according to McMillan Doolittle, compared with the industry average of $575. Still, in 2004, the company’s profit margin hovered around 1 percent, about a third of what national chains take home. “It falls into the ‘only in New York’ category,” says Stern. “You shake your head and marvel, but you don’t exactly rush to copy it.”

When you operate with such a small margin, events that don’t break in your favor can wreak havoc on the bottom line. The 9/11 attacks destroyed Duane Reade’s most profitable store, a local recession compounded its problems, and a battle with its largest union forced it to set aside about $17 million for a possible payout. And while its sales grew from $1.17 billion in 2001 to $1.47 billion in 2003, its profits plummeted 80 percent. So the company has hit the brakes, opening only 17 stores in 2003 and 16 in 2004, down from more than 30 each year in 2001 and 2002.

Besieged by an army of larger and richer suburban rivals—there are now 100 CVS stores in the five boroughs and two Home Depots in Manhattan (not to mention the specter of Wal-Mart’s looking for a way into the New York market)—Cuti decided to take the company private. In July 2004, he coordinated a sale to Oak Hill Capital Partners, an investment firm run by Texas oil billionaire Robert Bass, for $748 million. Though the deal was opposed by some shareholders, Cuti believes it will allow him to concentrate on a long-term reimagining of Duane Reade. Unable to continue his expansion model because of a runaway real-estate market, Cuti plans to search for more sales inside each store. He hopes to transform Duane Reade from a convenience store where New Yorkers pick up essentials to a “full-service” store where New Yorkers shop for everything. And that means making Duane Reade a little more . . . chichi.

The store at 34th Street and Eighth Avenue gives an idea of the Duane Reade of the future. There’s a high-end European SkinFitness Centre staffed by “skin-care advisors” near the front door, and the company’s first Chock full o’ Nuts kiosk is selling ten-ounce coffees for 99 cents in a bid to undercut Starbucks’ $1.49 cups. The chain has also just opened thirty Moviebank machines, ATM-like gadgets that rent DVDs for $2.49 a day (about $2 less than Blockbuster). Next, Cuti is looking into prescription-eyeglass kiosks and teeth-whitening booths.