When I was a kid, I was one of those folks that got to experience the drug store in its classic form. In my small town, it was one of those places where it seemed like you could get pretty much anything…
A tremor is set to shake the American retail landscape as CVS Pharmacy, a household name, prepares to slash its store count, closing underperforming outlets in a strategic shift that will redefine its business model.
The ubiquitous presence of CVS Pharmacy across America is poised to dwindle in the coming years, with an announcement that it plans to shut down roughly 900 stores that have been underperforming, a move designed to streamline their operations and maximize their focus on the high-performing outlets.
Over the course of the next three years, these 900 stores will cease operation, marking a significant shift in CVS’s strategy. The company intends to transition from the commonplace convenience store, pivoting towards a more health-centric model. This is seen in their push towards the promotion of their HealthHUBs and Minute Clinics, offering a cost-effective alternative for customers to traditional, expensive healthcare options such as emergency room visits or trips to the doctor’s office.
This decision comes in response to a growing demand for digital experiences and the company’s increasing focus on healthcare. Approximately 10% of the company’s 10,000 stores are slated for closure, with 300 stores closing their doors each year until the 900 store mark is reached. The first round of closures is set to commence in the spring of 2022.
In a move to preserve their workforce, CVS plans to reallocate the employees affected by these closures to different locations within the company. They aim to minimize the impact on their dedicated employees, striving to avoid layoffs by providing opportunities within the larger national company structure.
However, this doesn’t signify an abandonment of physical stores for CVS. Despite the increased focus on digital customer experiences, the retail pharmacy chain’s CEO, Karen Lynch, affirmed that physical stores remain a crucial part of CVS’s strategy and identity. She emphasized the value of their wide physical presence in communities across the country, acting as a complement to their rapidly expanding digital operations.
Industry analysts, such as Neil Saunders, managing director of GlobalData, aren’t shocked by CVS’s decision. He views the closures as a problem of CVS’s own making, accusing them of long-term neglect of their stores, pushing some into what he terms a “downward spiral of irrelevance.”
Saunders criticizes the current state of CVS’s retail side, lamenting poor lighting, dismal interiors, disorganized merchandise displays, and an uninspiring product assortment in many stores. He suggests that this lack of attention to retail experience has cost CVS customers, who have turned to competitors such as Target and Sephora.
“Their future relies on proper investments being made in both retail and healthcare services,” he said. “And it is no good simply investing in health services if the environment in which they are presented is poor: consumers have a choice and will simply take their business elsewhere.”
To regain these customers, Saunders insists, CVS needs to undertake a serious cleanup operation. He underlines the necessity of investing not just in health services but also in the retail environment itself. Otherwise, he warns, customers may simply take their business elsewhere.
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