The nation’s two main drugstore chains, CVS Pharmacy and Walgreens, should not immune to the influence of Amazon, which is raring to get a slice of the profitable pharmaceutical pie, and different on-line retailers.
“Drugstores should not internet-resistant retailers, and as such, they should carefully consider their merchandise and repair choices in an effort to remain relevant with their prospects,” says Lanie Beck, director of analysis at Stan Johnson Co., which focuses on internet lease investments. “If they will’t discover a means to attract shoppers into their shops, they threat shedding market share to corporations like Amazon, Walmart and on-line prescription retailers.”
The excellent news is that the pharmacy operators should not sitting again idly. In current months, they’ve made large bulletins relating to modifications that they hope will place them for long-term development.
If the roughly $69 million CVS/Aetna merger is finalized, it could solidify a partnership between a standard retail pharmacy and a healthcare insurance coverage and providers supplier that ought to in the end assist drive visitors to CVS’s shops, Beck says. Primarily, CVS is attempting to place its shops as healthcare facilities as opposed to simply drugstores. That transfer may draw extra prospects to its places.
“If brick-and-mortar drugstores modify their choices to incorporate a healthcare service, for instance, they might see their foot visitors improve, which can result in shoppers doing extra of their personal items buying on the identical retailer,” Beck says. “Comfort remains to be a major influencer of customer habits, and to achieve success, retail drugstores might want to evolve.”
In one other strategic transfer, the Walgreens Boots Alliance obtained the go-ahead from the U.S. Federal Trade Fee final yr to accumulate 1,932 Ceremony Support shops for practically $4.Four billion. Walgreens’ full takeover of rival Ceremony Support was scaled again because of antitrust reasons. Retailer purchases have been to be accomplished in spring. Walgreens introduced, nevertheless, that it’s going to shut 600 shops over the following 18 months. The shops slated for closure consist largely of Ceremony Support places close to present Walgreens shops because the retailer seeks to optimize its footprint.
In the meantime, there may additionally quickly be new opponents coming into the market. Large grocery operator Albertsons Cos. agreed to buy the two,560 Ceremony Support shops disregarded of Walgreens’ acquisition in an effort to drive visitors to its grocery shops and compete extra instantly with on-line retailers like Amazon, Beck says. The deal would increase the Ceremony Support model in Albertsons’ shops throughout the nation.
Whereas the prescription drug business at drugstores has been comparatively steady, the front-of-the-store sales have been lowering. Drugstores have gotten more and more extra convenience-oriented and including combined merchandising to assist enhance these sales.
“The thought is that you just’ve received individuals in for his or her prescriptions or over-the-counter treatment, and in case you supply them one thing else, you may improve the scale of the market basket,” says Dave Brennan, professor emeritus of selling on the College of St. Thomas within the Twin Cities. “Notably, they’ve added food and well being and sweetness aids.”
For instance, CVS launched a brand new retailer design and just lately opened a two-story, flagship retailer in Times Sq. in New York City. The shop, which measures greater than 13,000 sq. ft., offers greater than 3,400 new merchandise in well being, magnificence and wholesome food choices along with a CVS Pharmacy. It’s design to “improve the retail customer expertise,” based on a CVS spokeswoman.
Drugstore chains are additionally taking a look at extra distinctive places than they’ve within the previous. Walgreens, for instance, is opening a retailer on the Mall of America in Bloomington, Minn., to serve mall shoppers and staff, in addition to individuals on the connected workplace constructing and motels.
“Walgreens is an thrilling addition to our eclectic mixture of retail, leisure and providers at Mall of America,” says Carrie Charleston, vp of leasing at Mall of America. “With the ever-changing panorama of retail, comfort and providers proceed to be not solely a need, however an expectation from guests.”
In line with Brennan, the Mall of America’s greater than 100,000 guests a day mean there will likely be lots of potential prospects needing each prescription and over-the-counter meds. The shop may also supply on a regular basis objects within the cosmetics and family classes and supply providers like a photograph lab. “Is that a spot that’s going to drive individuals there? Completely not,” Brennan says. “It’s principally a comfort greater than anything.”
On the identical time, Walgreens has additionally began opening upscale flagship shops in markets together with Chicago and San Francisco that include a café, wine with a digital bartender, juice and sushi bars, in addition to a magnificence division with nail and eyebrow bars. That marks a departure from the corporate’s earlier focus.