As digital healthcare and consumer preferences shift toward online services, traditional retail pharmacies like CVS, Walgreens, and Rite Aid face increasing pressures to adapt and transform their business models. Embracing digital solutions and exploring new strategies have become essential for these companies to maintain relevance and continue serving consumer needs.
Strategic Shifts Among Leading Pharmacies
CVS has recently appointed David Joyner as CEO, effective October 17, 2024 CVS Health. He brings over 37 years of healthcare and pharmacy benefit management experience to the company. In an effort to stabilize its healthcare services amidst rising medical costs and slowing retail sales. The company is considering a structural review that may result in separating its insurance and retail arms. In addition, CVS plans to reduce costs by $2 billion, partly through cutting 2,900 corporate roles.
Walgreens Boots Alliance is also restructuring, aiming to close approximately 1,200 underperforming stores over the next three years. CEO Tim Wentworth acknowledged the tough retail environment, stating, “The consumer may get stronger, but you wouldn’t count on it right now.” Last fiscal year, Walgreens reported a net loss of $3 billion, influenced by opioid-related liabilities and operational expenses.
Meanwhile, Rite Aid is leveraging data-driven marketing and merchandising as part of its post-bankruptcy strategy, focusing on understanding and responding to consumer behavior. Chief Marketing Officer Jeanniey Walden emphasized that these insights will help refine how the company engages with its customers.
As foot traffic continues to decline, retail pharmacies are pressured by both traditional and new competitors, such as Walmart and Amazon. Walmart’s recent expansion into prescription delivery services highlights the competitive landscape that is prompting traditional pharmacies to reassess their offerings.
In an interview with PYMNTS, George Van Antwerp, managing director at Deloitte Consulting, highlighted the impact of online shopping and telehealth on consumer behavior. “The traditional business model is evolving with a focus on the consumer and closer integration with health plans and payers,” he said. “Pharmacies are seeking to engage consumers digitally, personalizing interactions through data and AI while enhancing their mobile and web presence with new delivery options.”
Navigating Industry Changes
Van Antwerp noted that in response to these shifts, retail pharmacies are enhancing their services through technology, offering 90-day prescriptions and expanding central fill operations to reduce costs. They are also exploring new ways to provide clinical services and secure reimbursement, collaborating more closely with payers and integrating patient data to improve outcomes.
Sudip Mazumder, SVP at Publicis Sapient, explained the impact of reduced foot traffic, noting, “While prescription sales remain robust, lower demand for in-person consultations has impacted front-of-store sales, especially for high-margin merchandise.” He added that consumer preference for convenience has led to declines in over-the-counter (OTC) purchases, requiring pharmacies to quickly adapt to these changing patterns to stay competitive.
Mazumder also pointed out that the affordability of online and mail-order services, coupled with long wait times in stores, is creating customer dissatisfaction and financial strain for retail pharmacies.
Strategic Adaptations to Address Consumer Needs
Mazumder highlighted that pharmacies are expanding service offerings to include health screenings, vaccinations, and chronic disease management, while enhancing in-store experiences through personalized services and digital tools. By partnering with healthcare providers, pharmacies are increasingly integrating care services and adding features like prescription delivery and virtual consultations, aiming to retain customers and strengthen their role within the healthcare ecosystem.
According to Amanda Lai, retail analyst and director at McMillanDoolittle, consumers are increasingly opting for value-focused retailers over traditional pharmacies. She noted that the rise of eCommerce and telehealth is reshaping the pharmacy landscape as customers demand convenient, digital-first solutions for managing their healthcare needs. “The shift to digitalization pressures brick-and-mortar pharmacies to enhance their digital platforms,” Lai explained, warning that those who do not adapt risk losing customers to tech-savvy competitors.
The Path Forward for Retail Pharmacies
To remain relevant in an increasingly digital economy, retail pharmacies must adapt by leveraging technology, improving service offerings, and refining operations. Their ability to evolve in response to consumer needs will determine their ongoing role in the healthcare landscape.
Are you interested in how AI is changing healthcare? Subscribe to our newsletter, “PulsePoint,” for updates, insights, and trends on AI innovations in healthcare.
