Drugstores change their look as their usual way of doing business faces challenges

U.S. drugstores are testing smaller locations and more ways to offer service as price-sensitive shoppers look elsewhere.

Customers can see Walgreens stores that are a quarter the size of a regular location or CVS drugstores with entire primary clinics packed to capacity. If these experiments are successful, the new stores could improve access to healthcare and create a longer-lasting connection with customers, analysts say.

“Everyone looks at healthcare and says, ‘Oh yeah, it’s a market that’s ripe for disruption,’” said Neil Saunders, managing director at data analytics and consulting firm GlobalData. “But it’s not easy to stop.”

Walgreens CEO Tim Wentworth recently said his company could close a “significant portion” of underperforming stores in the coming years. CVS Health is going through a round of closures. Rite Aid has filed for bankruptcy. Thousands of independent drugstores closed in the last five years.

Closings Could Leave Gaps: An Associated Press Analysis published in June found that majority black and Latino urban neighborhoods have fewer pharmacies per capita than majority white neighborhoods.

There are still more than 30,000 drugstores across the country, but even Walgreens executives admit the market is overbuilt.

Stores have faced increased competition from Amazon and lower-priced options like Walmart or Dollar Tree. They are also dealing with theft, rising costs and thinner prescription reimbursement.

Some are responding with new looks. Walgreens is testing a store in Chicago that has digital kiosks where customers place orders. A separate counter offers pickup of items ordered at kiosks or online.

The company also opened around 100 mini-drugstores focusing on health and well-being and offering private-label merchandise. Walgreens began testing these stores in 2019 and plans to add more this year.

Walgreens spokesman Jim Cohn said consumer preferences are changing and the company aims to “meet them where, when and how they want to shop.”

Saunders notes that these stores are cheaper and allow the company to serve areas without enough staff to support a larger store.

At one such location in Indianapolis, just four short hallways separate the front door and the pharmacy counter in the back. Healthy snacks, vitamins, first aid supplies and the usual mix of antacids and Advil fill its shelves.

But there are no magazines and only small selections of greeting cards and beauty products at the store, which is closed on Sundays and is about a half-mile from an empty Walgreens.

Customer Leonard King visited several times. He says his recipes are ready on time and the store appears to have decent supplies.

“Being diabetic, sometimes it’s hard to get medicine,” said the 67-year-old Indianapolis resident.

But King also said she misses being able to buy things like toiletries that can be found in larger stores.

The selection of retail items is also smaller at some CVS Health stores that include Oak Street Health primary care clinics. The company plans to open about 25 of these combinations this year and 11 more next year, with full-sized or smaller in-store clinics.

Clinics may have primary care doctors, social workers, and people to help with insurance coverage. They specialize in treating patients with Medicare Advantage plans, which are private versions of the government coverage program, primarily for people ages 65 and older.

CVS Health says it is placing the clinics in areas that need primary care. It targets major cities like Chicago, New York and Dallas in its initial launch.

“If we can invest more upfront in patients who need it, increasing access and improving the quality of care, we can keep patients healthier,” said company executive Mike Pykosz.

Making things easier for patients helps build relationships between store employees and customers and can lead to repeat business, noted Arielle Trzcinski, a principal analyst at Forrester who covers healthcare.

Independent drugstores have also been enhancing their reputation in the healthcare industry. They are expanding immunizations and testing, spurred in part by the increase in business they have seen during the COVID-19 pandemic, said Kurt Proctor of the National Community Pharmacists Association.

Some are also opening medical practices or specializing in diabetes treatment. Proctor said they are doing what they have always done: adapting to the needs of the community.

“There are 19,000 (independent) stores across the country and no two are exactly alike,” he said.

Diving into healthcare is nothing new for drugstores. They started adding small clinics more than 20 years ago. CVS Health has been on a roll since it stopped selling tobacco in 2014.

Up to a quarter of drugstores could eventually end up as large health clinics, especially those located in densely populated areas, said Jeff Jonas, a portfolio manager at Gabelli Funds who follows the sector.

But he warned that the idea has not yet been proven.

Walgreens closed VillageMD primary care clinics just a few years after launching plans to add hundreds of clinics to its stores. Analysts say companies are still learning what makes money and what attracts customers.

One thing they know for sure: Drugstores are no longer “America’s convenience destination” like they used to be, Saunders said.

“That has really, in the last 10 to 15 years, fallen apart,” he said.

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. AP is solely responsible for all content.