The Shift in Retail Pharmacy

Oct 23

The commercial real estate landscape is evolving rapidly, and among the most notable shifts is the transformation within the retail pharmacy space.

Closures Sweep the Nation: Over the years, major drugstore chains like CVS, Walgreens, and Rite Aid have stretched from bustling cities to serene small towns. Yet, recent trends paint a different picture. Thousands of their stores are closing their doors, leaving communities without immediate access to essential medicines. The very infrastructure that ensured easy availability of pharmaceutical needs is undergoing significant change.

The Root Causes: Multiple factors are influencing this wave of closures:

Declining Profits: A significant chunk of a drugstore's revenue comes from filling prescriptions. However, recent years have witnessed a decline in profits from this segment, primarily due to reduced reimbursement rates for prescription drugs.
Competition from Giants: Traditional drugstores now compete with behemoths like Amazon, big-box retailers such as Walmart that have integrated pharmacies, and even Dollar General in more rural settings. The convenience of online shopping and diversified inventory of these giants has put immense pressure on traditional drugstores.
Pandemic's Double-Edged Sword: Though the Covid-19 pandemic brought customers to drugstores for vaccinations, it also reduced footfalls for shopping and led to a decline in prescription volumes as elective procedures reduced.
Theft and Security Concerns: Instances of theft have become prevalent at some drugstore locations, leading to security measures that sometimes hamper the customer experience.

A Glimpse into the Future: It's not all gloomy for the drugstore chains. In response to the changing landscape, they are innovating and looking for new avenues. For instance, CVS acquired health insurer Aetna, while Walgreens took a majority stake in the primary care network VillageMD. These strategic moves indicate a potential pivot from traditional retail to more integrated healthcare services, which may require fewer brick-and-mortar stores.

However, as commercial real estate professionals, it's essential to be attuned to the implications of these shifts. While these major chains retract, it opens the door for other businesses to fill the void. This could lead to diversification in commercial spaces, offering opportunities for various other businesses to flourish.