Why Walgreens Is Shuttering 1,200 Stores While Pharma Sales Soar To $722 Billion

Walgreens is making a major strategic shift, announcing plans to close 1,200 stores in the next three years. This decision, though staggering in scale, reflects broader challenges within the pharmacy industry despite its significant size, which is projected to generate $722 billion in sales. Walgreens isn’t alone in this struggle; competitors like CVS and Rite Aid are also feeling the heat, indicating a systemic crisis rather than isolated issues. Let’s examine the factors leading to this drastic decision and what it means for the future of pharmacies.

Big Numbers, Bigger Problems

At first glance, the pharmacy sector should be thriving. After all, seven out of ten Americans rely on prescription medications, suggesting a reliable revenue stream. However, the situation for many retailers in this sector is dire. Reports indicate that a quarter of Walgreens stores are operating at a loss. Similarly, CVS has announced the reduction of 3,000 jobs and the closure of hundreds of locations, while Rite Aid continues to grapple with bankruptcy issues, also cutting back on store numbers to maintain viability.

Even those pharmacies that remain open are often facing unappetizing conditions. Many store shelves appear half-empty, with products increasingly locked away, leaving customers frustrated and wasting their time seeking assistance to unlock simple items like deodorant.

What’s Eating Pharmacies Alive?

The issues plaguing pharmacies extend beyond Walgreens and CVS. Even convenience giants like 7-Eleven have started closing down locations. This phenomenon, often dubbed the “retail apocalypse,” was exacerbated by the COVID-19 pandemic but is not solely a result of it. According to health care analyst Elizabeth Anderson, “None of these things is a new factor. But you compound that for years and years and eventually, you get to kind of a breaking point.” It appears that pharmacies have now hit that breaking point.

Amazon And Friends Are Winning

As consumer habits evolve, traditional pharmacies find their footing eroding. Who wants to endure a frustrating trip to a pharmacy when Amazon can deliver over-the-counter medications, snacks, and essentials like toilet paper directly to your doorstep? Additionally, competitors like Walmart and Target are aggressively marketing their pharmacy options. Notably, Walmart introduced same-day pharmacy delivery last year, appealing to the growing demand for convenience. Even budget-friendly chains like Dollar General are stepping into the pharmacy space, capturing price-sensitive customers.

With pharmacies making shopping increasingly inconvenient—think locked shelves and inadequate staffing—it comes as little surprise that consumers are opting for alternatives.

Pandemic Boost? That’s Over

The COVID-19 pandemic initially provided pharmacies with a temporary boost in revenue, driven by the demand for vaccinations and testing kits. However, as the most acute crisis recedes, the fundamental issues that have long plagued the pharmacy business re-emerge. What was once a silver lining has turned into a stark reminder of lasting challenges.

Can Pharmacies Make A Comeback?

Both Walgreens and CVS are attempting to adapt to these relentless market dynamics, but it may be too little, too late. Today’s consumers prioritize convenience and value. With the competitive landscape evolving at a rapid pace, traditional pharmacies must innovate quickly or risk being left behind. If these retailers fail to transform their business models, the current closure trend could signal just the beginning of a larger crisis.

In summary, while the pharmacy industry boasts substantial sales figures, significant operational challenges threaten the livelihoods of many retailers within this sector. Walgreens’ decision to shutter 1,200 stores is a reflection of broader market realities, including shifting consumer preferences and fierce competition. The big question now is whether these companies can adapt effectively to survive in an increasingly digital and convenience-oriented world.