What's the deal with Walgreens and other pharmacies?
The familiar sight of a Walgreens or CVS on every corner might be changing. Both pharmacy giants have been making headlines with store closures and adjusted hours, leaving many customers wondering what's going on.
Walgreens announced plans to close around 1,200 stores in the U.S. over the next three years. This comes as the company grapples with "low drug reimbursement rates and slower consumer spending," as stated by Walgreens CEO Tim Wentworth. Essentially, the profit margins on prescription drugs are shrinking, and people are buying less overall. This isn't just a Walgreens problem. CVS Health also revealed plans to cut thousands of jobs as part of a cost-saving initiative.
The closure of so many stores is without question "a sign of a company that's in trouble and is trying to course correct," commented Neil Saunders, managing director of GlobalData, on Walgreens' downsizing. This "course correction" involves adapting to a changing retail landscape. Online retailers like Amazon, mail-order pharmacies, and even the expansion of pharmacies within big box stores like Walmart and Target have intensified competition.
Both Walgreens and CVS are dealing with increased operating costs, including rising rents and supply chain issues. Shoplifting and organized retail crime have also become significant concerns, impacting profitability.
While both companies are facing similar challenges, their strategies differ. CVS is focused on expanding its healthcare services, including its HealthHUB concept, which offers a broader range of medical services within their stores. Walgreens, on the other hand, has invested in VillageMD, a primary care provider, aiming to integrate healthcare more directly into its business model.
It remains to be seen how these strategies will play out in the long run. What is clear is that the traditional drugstore model is undergoing a significant transformation. Whether it's store closures, adjusted hours, or a shift towards healthcare services, Walgreens, CVS, and their competitors are all trying to find their new place in a rapidly evolving market.
The Associated Press. "Walgreens to close 1,200 stores as US pharmacies struggle to define a new role." June 27, 2023.CBS News. "Walgreens announces plan to close 1,200 stores over next 3 years." October 17, 2023.CNBC. "Walgreens cuts its full-year outlook as earnings fall short of expectations." July 5, 2023.Fierce Healthcare. "Walgreens' turnaround plan includes hundreds of store closures." June 27, 2023.The Wall Street Journal. "CVS to Cut 5,000 Jobs as It Shifts Focus to Health Care." July 11, 2023. https://www.cbsnews.com/news/walgreens-store-closings/
