Drugstores are working on a new look as the industry faces challenges

A customer browses a shelf at a Walgreens pharmacy in Deerfield. America’s drugstores are testing smaller locations and focusing more on health care to adapt to customers who need them less for convenience.
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As price-conscious shoppers look elsewhere, U.S. drugstores are testing smaller locations and expanded ways to offer personal care products.

Customers will see Walgreens stores that are a quarter the size of a regular location or CVS pharmacies that house entire clinics. If these experiments are successful, the new stores could improve access to healthcare and build a more lasting bond with customers, analysts say.

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

Walgreens CEO Tim Wentworth recently said his company could close a “significant portion” of its low-revenue stores in the next few years. CVS Health is facing a wave of closures. Rite Aid has filed for bankruptcy. Thousands of independent drugstores have closed in the last five years.

The closures can leave gaps: An Associated Press analysis published in June found that black and Latino neighborhoods have fewer pharmacies per capita than white neighborhoods.

While there are still more than 30,000 drugstores across the country, even Walgreens executives admit the market is oversized.

Stores are struggling with increasing competition from Amazon and low-cost retailers like Walmart and Dollar Tree. They are also struggling with theft, rising costs and lower reimbursements for prescription drugs.

Some are responding with a new look. Walgreens is currently testing a branch in Chicago with digital kiosks where customers can place orders. Items ordered at the kiosk or online can be picked up at a separate counter.

Medicines are displayed on the shelves of a Walgreens pharmacy in Deerfield.
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The company has also opened about 100 mini drugstores focused on health and wellness and offering private-label goods. Walgreens began testing these stores in 2019 and plans to open more this year.

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

Saunders points out that these stores are less expensive to operate and allow the company to serve areas where there are not enough staff for a larger store.

At one of those locations in Indianapolis, just four short aisles separate the front door from the pharmacy counter in the back. The shelves are stocked with healthy snacks, vitamins, first aid supplies and the usual mix of antacids and Advil.

However, the store, which is closed on Sundays and is located about a half-mile from an empty Walgreens branch, has no magazines and only a small selection of greeting cards and beauty products.

Customer Leonard King has been here several times. He says his prescriptions are ready on time and the store seems to have adequate supplies.

“As a diabetic, it is sometimes difficult to get medication,” said the 67-year-old Indianapolis resident.

But King also said he misses being able to buy things like toiletries that are available in larger stores.

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

The clinics may have primary care physicians, social workers and people who help with insurance coverage. They specialize in treating patients with Medicare Advantage plans, which are privately run versions of the government insurance program primarily for people age 65 and older.

CVS Health says it will set up the clinics in areas where primary health care is needed, initially targeting major cities such as Chicago, New York and Dallas.

“If we can invest more up front in patients who need it by improving access and improving the quality of care, we can keep patients healthy,” said company CEO Mike Pykosz.

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

Independent drugstores have also been polishing their health care reputations, expanding their vaccination and testing offerings, partly due to increased sales during the COVID-19 pandemic, said Kurt Proctor of the National Community Pharmacists Association.

A patient room is seen at a Walgreens pharmacy in Deerfield.
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Some are also opening medical practices or specializing in diabetes care. 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 the same,” he said.

Getting into healthcare is nothing new for drugstores. They began opening small clinics over 20 years ago. CVS Health has focused on healthcare issues since it stopped selling tobacco in 2014.

A sign hanging at a Walgreens pharmacy in Deerfield describes the store’s new design.
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Up to a quarter of all drugstores, especially in densely populated areas, could ultimately become large health centers, says Jeff Jonas, a portfolio manager at Gabelli Funds who monitors the industry.

However, he pointed out that the idea is still unproven.

Walgreens has closed VillageMD primary care practices just years after it launched plans to open hundreds of them in its stores. Analysts say companies are still learning what makes money and resonates with customers.

One thing they know for sure: Drugstores are no longer “America’s convenient shopping option” as they once were, Saunders said.

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

A customer browses the first aid section of a Walgreens pharmacy in Deerfield.
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A Walgreens pharmacy in Deerfield.
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Informational signs line the aisles at a Walgreens pharmacy in Deerfield. The company has opened about 100 mini-drugstores that focus on health and wellness and offer its own-brand goods.
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