CVS, Rite Aid, and Walgreens store signs.
CVS health, Walgreens and Rite aid are preparing to give Covid vaccinations in the coming months, and this effort gives the top three drugstore chains the opportunity to demonstrate the work in progress to rework their business and respond to major changes in consumer behavior.
The three drugstores have long been places where Americans stock up on shampoo, refill prescriptions, and search the hallways for cold or flu medicine. However, many of the driving forces behind drugstore travel dwindled during the pandemic. Further purchases were made online. Fewer people have had to buy over-the-counter cold and flu medications as they wear face masks and social distancing. Some skipped doctor’s appointments, which resulted in fewer new prescriptions to fill out.
Covid vaccines offer companies the opportunity to reach new customers. CVS and Walgreens are Management of admissions in nursing homes and other long-term care facilities and plan to finish the first round by January 25th. All three chains plan to offer the recordings in their storeswhen they are available, which could increase vaccine revenues and encourage pedestrian traffic leading to other purchases. These trips provide an opportunity for companies to prove to buyers that they are still relevant while investors try to gauge their growth potential.
Drug stores fend off challengers who have invaded their turf. Big box stores like that target gained market share during the global health crisis as they offer everything from a single source, from deodorant to pajamas. Amazonstuck in drugstore front-of-store sales, started a pharmacy business in November with a savings program and free two-day shipping for Prime members. And Walmart opens A growing network of health clinics alongside the big storeswho could steal the business of CVS and Walgreens’ medical clinics.
Brian Tanquilut, a health services analyst for Jefferies, said every company must develop strategies to ensure they remain “a viable and important part of the health and retail ecosystem.”
“You as an industry have all been trying to figure out what we need to do to improve our strategy so that we don’t become the next RadioShack?” He said.
The companies also had their share of internal changes. CVS and Walgreens get new CEOs. Rite Aid is in the middle of a turnaround with a new logo and store design.
Every company has turned to a slightly different playbook: CVS wants to be a healthcare destination as it treats chronic conditions and even offers yoga classes in some stores. Walgreens is opening hundreds of primary care clinics and aims to beat retail competitors with faster roadside pick-up service. And Rite Aid has emphasized a more holistic approach to health by adding natural sleep aid products to essential oils and modernizing its businesses.
Here’s a closer look at how companies intend to compete in the coming year:
CVS would like to make its branches more of a healthcare destination. It expands a business concept called HealthHUB, which offers a wider range of medical services.
While customers buy personal care products from their couch, CVS tries to give them one more reason to visit. It wants to be a simple, affordable, and non-intimidating place for healthcare.
It Acquired insurer Aetna two years ago. It has minute clinics for acute conditions like strep throat. And it is transforming more of its 10,000 or so US stores into a HealthHub, a location offering a wider range of medical services. These include tests for sleep apnea, treatment for chronic conditions like diabetes, and a spa room that can offer yoga classes. By the end of this year, 1,500 of these stores are to be built.
With a market cap of $ 98 billion, which is more than double that of Walgreens, it is on stronger footing than its drugstore counterparts.
Jon Roberts, CVS’s chief operating officer, said the company is eliminating some generic merchandise to free up square feet for healthcare. That way, it could stand out from Amazon and other companies who just fill out a prescription.
“When you think about the types of services we can provide, you can’t get them from an online pharmacy only,” he said. “A purely online pharmacy really only delivers prescriptions.”
According to Roberts, CVS also takes into account customers’ digital preferences through virtual visits and its mobile app. Prescription shipments to home customers increased 500% from the first quarter to the second quarter of last year.
“We think people want a choice,” he said. “Some people like to pick up their prescriptions from their drugstore. Some people like to have their prescriptions delivered to their home. We have both.”
Jefferies upgraded CVS ‘stock rating to Buy on Friday and expects the strategy to pay off. CVS is also believed to get a boost as it delivers the Covid vaccine and attracts consumers who may purchase other items or refill a prescription while they are there. It has been estimated that CVS ‘role in the vaccination effort could generate approximately $ 1 billion in additional gross profits over the next 12 months.
The price target for CVS has been raised to $ 90, a gain of around 20% from current levels.
Tanquilut said the company’s HealthHubs could become “the Genius Bar of Healthcare” – much like Apple is known for answering questions and providing strong customer service in its branches.
In the coming year, two new managers will determine the company’s strategy. Karen Lynch, President of Aetna, will take on the role of CEO on February 1, when longtime CEO Larry Merlo retires. Neela Montgomery, who was the former CEO of homeware retailer Crate & Barrel and built its e-commerce operations, became president of CVS Pharmacy in late November. That could bring new ideas and accelerate digital growth.
Walgreens and VillageMD
Walgreens is cutting costs, investing in its app, offering roadside service, and adding hundreds of primary care clinics. Shares are down nearly 20% over the past year. It is looking for a new leader after its CEO Stefano Pessina announced this summer that he will be stepping down.
Sales and foot traffic have declined during the pandemic, particularly at Boots’ more than 2,000 stores across the UK. But its pharmacy and retail sales in the US grew and the result exceeded expectations in the first quarter of the financial year ended on November 30th. Still, like-for-like retail sales grew less than 1%.
The last lock in the UK James Kehoe, Walgreens Chief Financial Officer, warned in a profit announcement Thursday.
Neil Saunders, managing director of GlobalData, said the sales patterns during the pandemic pointed to the bigger issues. Despite selling similar staple foods, the company has missed out on the sales surge and market share gains of its competitors in the grocery store.
He said the company needs to think beyond businesses and acquisitions and become a company that “grows by innovating for the customer.”
Vineet Mehra, its global head of marketing, said at his US drugstores the company aims to be “the fastest in retail.” Almost all items can be picked up at the roadside. Stores can do online purchases in just 30 minutes.
He said the fast turnaround is a competitive advantage over Amazon, which ships purchases, and big box retailers, which can have longer waiting times. And he said it was especially important for the products Walgreens sells, such as pain relievers or personal care products.
“If you think about it, when you run out of toothpaste, you can’t wait a day,” he said. “They want you to get home asap and put it in your pantry so you can brush your teeth. It is the acute convenience needs that are so common in health and wellness that we believe we are really winning with our super-fast pick-up promise. “
Like CVS, Walgreens is adding health services to its nearly 9,000 U.S. Walgreens and Duane Reade businesses. It closed a deal with VillageMD To open clinics in his stores. On a recently accelerated schedule, clinics will add 600 to 700 stores over the next four years.
Walgreens relaunched its mobile app and loyalty program in November. The myWalgreens app offers tailor-made discounts, a pharmacy chat around the clock, vaccination appointments, pick-up at the roadside and home delivery via DoorDash and Postmates.
“It will essentially become the digital gateway to all of Walgreens’ health and wellness services,” said Mehra.
Walgreens’ response to the pandemic has accelerated this development. “In five to ten weeks we have seen five to ten years of digital adoption,” he said.
Rite Aid recently opened its first “Store of the Future” with a more modern design. It has three of the stores and plans to open more.
Rite Aid and Business Wire
When the pandemic broke out, Rite Aid was already redesigning its stores and its e-commerce business. The company’s share price fell so low two years ago that There was a risk of being delisted from the New York Stock Exchange. His struggles resulted in a change in leadership and strategy, including the appointment of Heyward Donigan as CEO in 2019.
The global health crisis has inspired the company to capitalize on consumers’ increased interest in healthy health. in the a new television commercialRite Aid portrays its businesses as the best of both worlds: A place with pharmacists with traditional training, but who can also give advice on alternative and holistic approaches such as sleeping pills.
Jim Peters, chief operating officer of Rite Aid, said the pandemic was “a real test of organizational problems, hectic and heart,” but had sharpened his focus on fulfilling customer needs.
“Gone are the days when retailers forced people into the store as best they could,” he said. “I applaud the reality that we can win by actually giving consumers what they want, when they want it, how they want it.”
In the last few months a new logo and a modernized website have been introduced, home deliveries have been made in cooperation with Instacart and the first “stores of the future” have opened. So far there have been three that have a sleeker design and pharmacists that are stationed outdoors rather than behind and behind a counter. It has exchanged hundreds of products to serve customers who want wellness-centric products like healthy snacks, holistic remedies, and natural skin care products.
Peters said his advantage was “big enough to be a nationally credible player but small enough to turn into a dime”.
Like all drug stores, the company is facing sustained headwinds: people need less cough, cold and flu medication because they mostly stay at home. Peters declined to say how much those sales fell, but said he is trying to offset that with growth in other categories, such as sales of immunity-boosting products like vitamins and essential oils.
The company’s performance during the pandemic has caught the attention of investors. The stock rose 9% after third-quarter earnings beat expectations in mid-December. Their stocks are up around 32% over the past year. This compares to stocks of CVS and Walgreens, which rose about 3% and fell about 17% over the same period.
Still, Rite Aid has to prove itself on Wall Street. Market capitalization is a tiny fraction of the competition at just under $ 924 million. It was sparked by two failed mergers in recent years, one with Walgreens and one with grocery chain Albertsonsand struggled to find a way forward.
Jefferies’ Tanquilut said that Rite Aid is performing better, but that the store’s footprint is smaller and leaning towards lower-income areas. For his strategy to work, the desire for wellness products and willingness to pay must have become mainstream.