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Major pharmacy chains closing thousands of stores

The Walgreens store at State and Randolph streets in Chicago. (Nancy Stone/Chicago Tribune/TNS
July 01, 2024

Major American pharmacy chains have closed numerous locations across the country over the past several years as online pharmacies challenge traditional brick-and-mortar business models.

Last week, Walgreens announced that a “significant” number of its stores in the United States would be closing due to decreasing profitability at approximately 25% of its locations.

“Seventy-five percent of our stores drive 100% of our profitability today,” Walgreens CEO Tim Wentworth told CNBC. “What that means is the others we take a hard look at, we are going to finalize a number that we will close.”

According to Fox Business, Rite Aid announced in June that the company had added 27 locations across Ohio and Michigan to its list of stores slated for closure as the company attempts to restructure under Chapter 11 bankruptcy. Additionally, in 2021, CVS announced plans to close 900 locations as part of a three-year plan.

Jonathan Palmer, a senior health care analyst with Bloomberg Intelligence, told Fox Business that he believes traditional brick-and-mortar pharmacies will continue to close as online pharmaceutical services continue to increase. While Palmer acknowledged that recent store closures by major U.S. companies could be linked to different issues, he emphasized the rise of online pharmacies as a primary factor.

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Palmer said, “More consumers buy online than ever before and with next-day delivery in many cases – the value proposition of retail pharmacy isn’t as compelling.”

While Palmer suggested that pharmacies can be a convenient place to shop for various household items, he warned that pharmacies are often more expensive places to shop than other stores. “They’re at a significant premium to a Walmart or a Target,” Palmer said. 

The senior health care analyst explained that consumers also have more alternative places currently available to shop for pharmaceutical goods, such as Amazon Pharmacy, GoodRX, and Cost Plus.

“Whereas once virtual care wasn’t common, suddenly online was the only option and with that adoption of virtual care there was a greater recognition that online pharmacy was also a viable route,” Palmer said. “Everyday there are more patients who have only lived in a world where online shopping was the norm and that slow demographic shift is also a contributor.” 

In addition to the rise of online pharmacies, Wentworth indicated that inflation is causing consumers to resist current prices. The Walgreens CEO said, “The consumer is absolutely stunned by the absolute prices of things, and the fact that some of them may not be inflating doesn’t actually change their resistance to the current pricing.”