Should Amazon or rivals be more wary if it opens brick and mortar pharmacies?
Will Amazon.com 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.
- CVS, Walgreens shares fall on report that Amazon may open brick-and-mortar pharmacies – CNBC
- Amazon is weighing a push into physical pharmacies to grab a bigger slice of the $370 billion prescription market – Business Insider
- Will Amazon’s new online pharmacy disrupt the U.S. drugstore business? – RetailWire
- Will CVS build on its COVID-19 test momentum? – RetailWire
- Number of physical retail stores owned by Amazon from December 2018 and July 2020 – Statista
- Whole Foods gets a lot right and wrong – RetailWire
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?