Customers may soon encounter Walgreens stores that are a quarter of the size of traditional locations, or CVS drugstores that incorporate entire primary care clinics. If these innovative designs prove successful, analysts believe they could enhance access to healthcare and foster stronger customer relationships.
What are the current challenges for drugstores?
Neil Saunders, managing director at GlobalData, remarked, “Everyone looks at health care and says, ‘Oh yeah, it’s a market that’s ripe for disruption.’ But disruption isn’t easy.” Walgreens CEO Tim Wentworth indicated that the company might close a significant number of underperforming stores in the coming years. Meanwhile, CVS Health is also undergoing a series of closures, and Rite Aid has filed for bankruptcy. Over the past five years, thousands of independent drugstores have shut their doors.
Despite having over 30,000 drugstores nationwide, the market is considered overbuilt. Increased competition from Amazon and lower-priced alternatives like Walmart and Dollar Tree, along with issues like theft and rising costs, have made it difficult for these stores to thrive.
What changes are being implemented?
In response, some drugstores are adopting new formats. Walgreens is piloting a store in Chicago featuring digital kiosks for customer orders, alongside a separate desk for pickup. The company has also opened around 100 mini drugstores focused on health and wellness, which include store-brand products. This initiative began in 2019, with plans for further expansion this year.
Walgreens spokesperson Jim Cohn stated that the company aims to meet shifting shopper preferences by serving customers where and how they want to shop. These smaller stores are less expensive to operate and can cater to areas with insufficient population to support larger locations.
What do customers think?
At one mini location in Indianapolis, customers find only four short aisles leading to the pharmacy counter, stocked with healthy snacks, vitamins, first aid supplies, and common medications. However, this store, which is closed on Sundays and located near a vacant Walgreens, lacks magazines and has a limited selection of greeting cards and beauty products.
Customer Leonard King, a diabetic, appreciates the timely availability of his prescriptions but misses the variety of products found in larger stores.
How are clinics being integrated?
Some CVS Health locations are integrating primary care clinics, offering a limited selection of retail items. The company plans to open about 25 of these combined facilities this year and 11 more next year, featuring either full-sized or smaller clinics. These clinics may include primary care doctors, social workers, and assistance with insurance coverage, focusing on patients with Medicare Advantage plans.
CVS Health aims to place these clinics in areas with a high demand for primary care, targeting major cities like Chicago, New York, and Dallas. Executive Mike Pykosz stated, “If we can invest more upfront for the patients who need it, by increasing access and improving quality of care, we can keep patients healthier.” This approach not only facilitates patient care but also strengthens relationships between store staff and customers, potentially leading to repeat business.
What about independent drugstores?
Independent drugstores are also enhancing their healthcare services, expanding immunizations and testing in response to increased demand during the COVID-19 pandemic. Kurt Proctor from the National Community Pharmacists Association noted that these stores are adapting to meet community needs, with no two independent stores being exactly alike.
Drugstores have a long history of incorporating healthcare services, having added small clinics over 20 years ago. CVS Health has been focusing on health initiatives since it stopped selling tobacco in 2014. Analysts predict that up to a quarter of drugstores may eventually feature large health clinics, particularly in densely populated areas, although the concept remains unproven. Walgreens has previously closed VillageMD primary care clinics shortly after launching plans to expand them.
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