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As drug dispensing continues to drive revenue, pharmacies look to shed retail.
Walgreens’ latest move is reminiscent of corner neighborhood pharmacies. The chain is testing very small stores that are only a pharmacy with a small front-end section.
“The stores will offer a full pharmacy and limited front-end offering, which would include FedEx and also ship-to-store services,” Jim Cohn, a spokesperson for Walgreens, tells Drug Topics. Some over-the-counter products may be included in the front end as well, Cohn says.
The small-format stores are being tested in a handful of locations, Cohn says. He declined to give further details on the test sites.
GoUpstate.com reported that the first store is opening in Boiling Springs, SC, in an area where a nearby Rite Aid store recently closed. “The new Walgreens will focus on filling prescriptions and will not have an attached grocery,” says Andy Hayes with Spencer/Hines Properties, which leased the 2,000-square-feet space in a shopping center to Walgreens.
The small format is not that far of a departure from the on-site pharmacies that Walgreens manages in health systems and at corporate clinics, says Ash Shehata, principal at KPMG and partner of the firm’s Global Healthcare Center of Excellence. “Walgreens has traditionally been one of the more savvy real-estate investors in the retail sector when it comes to picking locations. Also, the merchandising dynamics are changing with pharmacy sales driving most of the growth and consumable sales not [driving growth],” Shehata told Drug Topics.
In certain markets, it might make sense for Walgreens offer a pharmacy-only location. “Sales per square foot could make these locations extremely productive for Walgreens. Retailing is one of the most competitive segments of the U.S. economy, and it makes sense to play to one’s strengths, such as Walgreens and its peers focusing on pharmacy and health,” Shehata adds.
CVS’ HealthHUBs concept stores focus on goods such as sleep apnea masks and services that help customers manage chronic conditions. Meanwhile, Walgreens’ newer health-centric stores offer hearing and eye services, along with point-of-care lab tests.
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“Most retail pharmacies are looking to increase their capabilities to better engage their customers, whether that’s through home delivery services, opening urgent care centers, or focusing on wellness,” Shehata says. “So, it is not clear that other pharmacies are looking to go to a 2,000-square-foot footprint, but many are willing to reduce general merchandise and shift to health and wellness products.”