Should Amazon or rivals be more wary if it opens brick and mortar pharmacies?

Source: Amazon Pharmacy promotional video
May 28, 2021

Will take its pharmacy business from a purely online operation into physical store locations? It is, at the very least, mulling the possibility of this next step, according to reports.

The retail and technology juggernaut is considering adding pharmacies to Whole Foods locations or launching standalone locations, according to three anonymous sources who spoke to Insider. Just the prospect of Amazon’s entry into the physical pharmacy business was enough to rattle investors. Shares of CVS fell three percent on Wednesday, Walgreens was down nearly four percent and Rite Aid dropped more than four percent, according to CNBC.

Amazon has put the retail pharmacy world on the defensive even before its 2018 acquisition of PillPack. It more recently launched Amazon Pharmacy, an online prescription drug service tied to Prime membership. Big brick-and-mortar pharmacy players have been trying to stay ahead of Amazon with improved loyalty programs and omnichannel approaches that offer speedier delivery and pickup of prescription and non-prescription goods. 

CVS and Walgreens have focused more on in-store health-related services, where Amazon doesn’t presently compete. CVS recently announced the expansion of a pilot of in-store mental health services, with plans to offer licensed therapist visits at 34 stores by July of this year. Last summer, Walgreens announced plans to put primary care doctors’ offices in 500 to 700 locations, building off the success of a five-store pilot.

The novel coronavirus pandemic also provided U.S. brick-and-mortar retail pharmacies with a distinct advantage, positioning them as a destination for the vaccine rollout.

Were Amazon to add pharmacies to its Whole Foods stores or its budding Amazon Fresh chain, it would follow the food/drug combo strategy that has been popular in clubs, mass merchandisers and supermarkets for decades. Amazon might be competing in markets where Albertsons, Costco, CVS, Kroger, CVS, Kroger, Rite Aid, Walgreens, Walmart, Rite Aid, Kroger and other national chains operate thousands of stores that contain pharmacies. Add to that regional and local chains and independent operators and Amazon’s task becomes more formidable.

Amazon’s move would have some precedent in the space, given the success CVS has seen with its in-store Target pharmacies. CVS acquired all of Target’s in-store pharmacies and clinics in 2015.

As Amazon builds more of a physical presence, it’s important to remember that not all of its efforts have been hugely successful. Whole Foods, particularly when it comes to digital sales, has benefitted from its ownership by Amazon, but in many other respects has failed to live up to the promise of Amazon’s ownership and guidance. 

Another example, Amazon’s physical bookstore concept, Amazon Books, was dismissed by The New Yorker in late 2017 as not being built for people who read.

As of July 2020, Amazon Books has only 23 locations according to Statista, up only five locations since 2018.

DISCUSSION QUESTIONS: Do you think Amazon can effectively run brick-and-mortar pharmacies and compete in the markets where it opens them? What challenges would it face, and do you see standalone locations or those operating inside of Whole Foods or Amazon Fresh stores as being more likely to succeed?

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24 Comments on "Should Amazon or rivals be more wary if it opens brick and mortar pharmacies?"

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Shep Hyken

Amazon is moving more and more into brick-and-mortar. This is a good extension for them. Plus, they can add the pharmacies to their grocery stores. This can also help with distribution. Every retailer must ask themselves, “What’s next for Amazon?”

David Naumann

It is hard to question Amazon’s ability to enter any retail market, as they are a powerful operations, supply chain and marketing force. From a physical location perspective, with its Whole Foods and Amazon Fresh stores, Amazon doesn’t have the penetration of Walmart and other leading grocery and drug stores. It wouldn’t surprise me if Amazon acquires a drug store chain to expand its physical presence.

Neil Saunders

If Amazon wants to get serious about pharmacy then it needs physical locations. Adding them to Whole Foods is possible, and sounds sensible, but not all locations are large enough to incorporate a full pharmacy operation – not without sacrificing other categories. However as it builds out new Fresh stores, Amazon can easily incorporate a pharmacy operation. Personally, I would like to see Amazon open up dedicated drugstores with a range of convenience products, perhaps with Just Walk Out technology. They could also be used as hubs for collections and returns of online orders.

Dr. Stephen Needel

While I agree that you never want to doubt Amazon’s resolve and deep pockets, this would be another big trend to buck – trying to beat CVS and Walgreens at their own game. The relative scarcity of Whole Foods stores doesn’t bode well – convenience is key in the pharmacy game, followed by price. A bigger question might be, “where are they going to get the pharmacists?” Most pharmacists are already employed.

Dick Seesel

That was my take too. Walgreens has a “location saturation” strategy that is a key competitive advantage, even with the general migration to e-commerce. Sometimes you need that prescription filled immediately, or need to see somebody in a walk-in clinic at once. And sometimes you need the benefit of a neighborhood “convenience store,” which is the other side of Walgreens’ business. Adding pharmacies to Whole Foods would be a convenience to its loyal customers, but would not be the answer to long-term success.

Jeff Sward

Pharmacies as part of a grocery store make enormous sense as part of a one-stop shopping model. But it can get complicated. My insurance company made me switch from my in-grocery pharmacy to a free-standing CVS. Both pharmacies are terrific, but I now have an added stop. It’s a very solvable problem so yeah, I expect Amazon to plant both feet firmly in the pharmacy business, hopefully in-store.

Gary Sankary

This will be interesting to watch. In my experience building technology to support retail operations, dispensing drugs is hands down the most complicated capability to support. Managing insurance plans, managing prices in an environment where every customer seems to have a different price with different reimbursements for product and, on top of all this, recruiting and retaining highly skilled and very expensive team members aka pharmacists, to manage operations at every store. Exactly the reason so many retailers outsource their pharmacies to national brands with experience in this space.
But Amazon is Amazon and they’ve been successful in most ventures. Long term I think this is a good choice for them, I wonder about their ability to successfully manage this when they’re still working out the details of their other physical location strategies.

Gene Detroyer

I cannot think of a more difficult brick-and-mortar business to enter than pharmacies. It is an entirely different structure than usual businesses. You need pharmacists, you need structure to handle drugs, you need compliance and record keeping beyond comprehension. You must be ready for unannounced inspections. Your liability insurance better be big and up-to-date.

Jeff, when it comes to drugs — stay online. You do it well and the future is likely good. In the meantime, buy a movie studio, your ROI will be much better and the upside is much greater.

Ricardo Belmar

It’s safe to say that every incursion into brick-and-mortar by Amazon has been an extended experiment. Apart from the Whole Foods acquisition, none of the physical store plays Amazon has made have to-date resulted in many stores. That doesn’t mean the experiment is over. Adding pharmacies to the mix would offer Amazon a tremendous learning opportunity and help their healthcare market penetration. I believe the best play for them is to open Amazon Go convenience stores with pharmacies rather than standalone or combined with grocery formats. Why? Amazon likes to disrupt a market, so what would be more disruptive than challenging both c-store formats AND drugstores at the same time?

Brandon Rael

Amazon has proven to be adept and successful with opening physical locations. Aside from the Whole Foods acquisition, many of the rumored Amazon brick-and-mortar acquisitions did not come to fruition. Amazon will have to open physical retail pharmacies in a very congested and competitive landscape to win consumers’ hearts and minds out of necessity.

While digital is an outstanding entry point into the market, the competitive landscape is flooded with Walgreens, CVS, and Rite Aid stores, along with Target, Walmart, and other retail giants’ presence in the retail pharmacy space. Amazon could absolutely capitalize on the opportunity to extend into the physical pharmacy space by positioning the brand as a one-stop shop for all health, medical, and wellness needs.

This segment may not be as meaningful as we would expect for Amazon without an aggressive brick-and-mortar strategy or a major retail pharmacy acquisition.

Suresh Chaganti

Walgreens and CVS are way ahead of the curve here. Opening pharmacies in Whole Foods makes sense, but it is an incremental play to move pharmacy subscribers.

An acquisition of one of the pharmacy companies will propel Amazon’s healthcare ambitions. Maybe they will do this after gaining some experience in operating physical pharmacies.

Lisa Goller

Yes, Amazon would make a formidable competitor if it were to add physical pharmacies. Amazon desires high-margin sectors where its efficiency and customer-centricity can win market share and loyalty.

The abundance of rivals shows that Amazon is banking on consumers switching for lower prices, a diverse assortment and superior service. Plus fast, free delivery.

The convenience of grocery and pharmacy under one roof would give Whole Foods and Amazon Fresh an edge over standalone stores.

Steve Montgomery

It is hard to bet against Amazon’s success in anything it attempts but as it has learned with the Whole Foods acquisition, brick-and-mortar retail brings its own sort of complexities. If it elects to move forward I agree with David that its best move would be to buy an existing chain.

Jennifer Bartashus

Amazon is clearly interested in the healthcare space but, like in grocery, is finding it will likely need some sort of physical locations. Whole Foods may not be the answer, given that there could be a disconnect for its brand mission of a natural/healthy foods focus and the dispensation of prescription medicines. If Amazon truly wants to get into pharmacies, an acquisition or stake in an existing operator may be one path. Building a new brick-and-mortar enterprise from scratch is not Amazon’s strength. Just look at Amazon Go – originally projected to open 2000-3000 stores and there is still only a handful. Amazon Fresh grocery stores are still nascent. It takes significant time and expertise to build successful brick-and-mortar concepts, especially in as heavily regulated an industry as pharmacy.


Everyone should be wary of Amazon even if their initial entry in a market seems awkward. Bezos has stated to competitors “your margin is my opportunity.” Even if they fail, they disrupt. Healthcare even at just the pharmacy level is complicated, availability of pharmacists is low, and regulations make barrier to entry high. Nevertheless, I would not bet against this move. I would think they would leverage the Whole Foods real estate and customer flow to learn the nuances of the business before investing in standalone locations.

Joan Treistman
Clearly Amazon can set out to do whatever it wants to do and take its time to figure out how to do it right. During the pandemic I relied on a local (location, location, location) CVS for certain meds that could not be sent through the mail or delivered. I’m a caregiver for a family member and there are many of us who have to strategize trips to the pharmacy to align with available moments for getting things done outside of the home. Right now, the standalone and in-retail pharmacies offer the benefit people like me are looking for. They’re close by and it’s easy to get in and out. I don’t see how Amazon can compete with that in the near future. They can build up a brick-and-mortar omnipresence, however the brand equity will be fragmented between the names associated with the locations where the Amazon pharmacies reside, e.g., Whole Foods, Amazon Fresh. If prescriptions are seen as a commodity product the brand equity of the retailers may not matter. People may think a… Read more »
Venky Ramesh

“Your margin is my opportunity”- that is the weapon of mass destruction that Amazon has used to disrupt several industries that had an inherently complex supply chain requiring sharing profits with non-value-adding players. The pharmacy industry is definitely one such industry that Amazon has been eyeing since 1999 when Bezos bought a 40 percent stake in Amazon can definitely leverage its scale and supply chain capabilities to drive disruption in the industry whether they choose to have a physical storefront or a hybrid model.

Dave Wendland

To be successful in the pharmacy space, brick-and-mortar definitely makes sense. The challenge is successfully integrating more than commoditized dispensing into the operation. Amazon could definitely combine all of its resources (online data knowledge bases, e-commerce reach, virtual personal assistants and telehealth, and their extensive supply chain and 80 million Amazon Prime members) into a juggernaut. As a traditional retail pharmacy (e.g., Walgreens, CVS, Rite Aid), there is plenty of reason to be wary.

The challenges of labor, low margins, and navigating PBMs are real — but not insurmountable. And ensuring the right mix of non-prescription products and diagnostics to complement the Rx side of the equation is critical — unlike the virtual space, getting it right on-shelf is essential.

David Mascitto

Whatever moves they make, be it in grocery or pharmacy, they need to be differentiated from what already exists in the market, otherwise why bother being a “me too” pharmacy? The way to differentiate is to expand upon their existing model. Make life easier for existing customers: place your prescription order online or though Alexa. Pick up your packages at the same time as your pills. Bring your returns to the pharmacy when you pick up your pills. It needs to be an extension of

Trevor Sumner

While the move into pharmacy would make a lot of sense for Amazon, which has ambitions throughout the health ecosystem. The challenge for them is that pharmacy and health require much less on logistics and margin optimization and more on high-touch service and quality. Will they be able to make the switch? The shrinking revenue at Whole Foods at the best time in history for the grocery industry makes me question their ability to succeed.

Doug Garnett

Amazon should be worried a bit. While their brick and mortar has been good for them, the stores are simply stores. Whole Foods has gone downhill a bit. The bookstores are … stores with also a bunch of Amazon tech …

Always firm in my recommendation that Amazon build brick and mortar, I also caution them: Building a store makes them look entirely human and earthbound. It had to happen at some point since their brand is primarily a fantasy. They need to be careful with a move like this.

James Tenser

It’s not the stores. It’s the people. Amazon can easily test a variety of physical pharmacy concepts and advanced systems with its capital resources. Finding a sufficient number of qualified pharmacists and techs is another matter.
Should it succeed at staffing the stores, it will also need to establish a human-centered service culture able to counsel patients and wrestle with insurers on their behalf. The vaunted Amazon digital advantage may not be much of an edge there.

The elephant in the room, of course, is data privacy. What guardrails will Amazon create around marketing products to consumers based on their health conditions? I imagine that even pricing a prescription on their web store once could trigger an endless stream of “people like you also bought” marketing.

Mel Kleiman

As I read this, one of my favorite quotes came to mind. Steve Jobs said, “don’t let good ideas get in the way of great ideas.” To me, this sounds like a possibly good idea, not a great idea.

Karen Wong

Amazon is very good at moving into categories where experience isn’t a driving factor at the time of purchase. Branding and perception of quality aside, convenience and price are very important to consumers when they buy pharmaceuticals. And these are Amazon’s key USPs.

"Clearly Amazon can set out to do whatever it wants to do and take its time to figure out how to do it right."

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