[UNITED STATES] A paradoxical trend is emerging across the United States. The very stores that once epitomized convenience – pharmacies and corner stores – are rapidly disappearing from America's retail landscape. This shift is not just changing how we shop; it's reshaping communities and raising serious questions about access to essential goods and healthcare services.
The state of America's pharmacies is, in a word, bleak. Despite the fact that seven in 10 Americans take some form of prescription medication, creating a massive potential revenue stream, even pharmacy megachains are struggling to survive in the current environment. This decline is part of a larger trend known as the "retail apocalypse," which has intensified since the onset of the COVID-19 pandemic.
The Fall of Pharmacy Giants
Walgreens, one of the nation's largest pharmacy chains, recently announced plans to close 1,200 stores over the next three years, citing that approximately 25% of its outlets were unprofitable. This move follows similar actions by competitors:
CVS has shuttered hundreds of stores in recent years and announced plans to cut nearly 3,000 jobs to reduce costs.
Rite Aid closed numerous stores after filing for Chapter 11 bankruptcy protection in late 2023.
These closures are not isolated incidents but symptoms of deeper issues plaguing the industry. Elizabeth Anderson, a senior managing director and healthcare-equity research analyst at Evercore ISI, explains, "None of these things is a new factor. But you compound that for years and years and years, and eventually you get to kind of a breaking point".
Factors Driving the Decline
Several interconnected factors are contributing to the downfall of pharmacies and convenience stores:
1. The Rise of E-commerce
In the age of Amazon, consumers can easily purchase everyday items online, often at lower prices and with greater convenience. This shift has significantly impacted foot traffic in physical stores.
2. Increased Competition
Pharmacies face competition not just from online retailers but also from big-box stores like Walmart and Target, as well as dollar stores catering to budget-conscious consumers.
3. Oversaturation
Chain pharmacies have expanded rapidly in recent years, often resulting in stores competing with their own brand. Neil Saunders, a managing director at retail consultancy GlobalData, notes, "Walgreens and CVS have been on a massive expansionary push. They've just opened stores willy-nilly, and they've ended up with portfolios that are too big. There's too much overlap".
4. High Operating Costs
Running a pharmacy is expensive, with high fixed costs for rent and skilled staff. This leaves little room for cost-cutting without compromising service quality.
5. Pressure from Pharmacy Benefit Managers (PBMs)
PBMs, which act as middlemen in the pharmaceutical supply chain, have been squeezing pharmacies' profit margins. Douglas Hoey, CEO of the National Community Pharmacists Association, states bluntly, "The simple part is that prescriptions are not profitable".
The Ripple Effects
The closure of pharmacies and convenience stores has far-reaching consequences:
Pharmacy Deserts
An estimated 15.8 million Americans – about 4.7% of the population – already live in "pharmacy deserts," areas with limited access to pharmacy services. This number is likely to increase as more stores close.
Impact on Rural and Underserved Communities
Rural areas and communities of color are often hit hardest by these closures. Nick Fabrizio, a senior health-policy lecturer at Cornell University, explains the impact: "You're talking about closing a store that not only is important for a community for their prescriptions, but they can pick up other supplies at that store. If it's gone, now they're driving 20 miles or 30 miles to find another option".
Changing Consumer Behavior
As physical stores become less accessible, consumers are forced to change their shopping habits. This shift can be particularly challenging for older adults or those without reliable internet access.
The Changing Face of Convenience
The concept of convenience is evolving. Jason Goldberg, chief commerce-strategy officer at Publicis Groupe, points out that pharmacies "were never designed to be an appealing place to go and get toilet paper. Toilet paper was a profitable item to sell to someone that came in for a Lipitor prescription". As prescription fulfillment moves online or to alternative locations, the traditional pharmacy model is becoming obsolete.
The Broader Retail Landscape
The struggles of pharmacies are mirrored in other convenience-oriented businesses. 7-Eleven, the iconic convenience store chain, recently announced the closure of hundreds of stores nationwide. This trend reflects changing consumer habits, including reduced commuting and smoking, which have traditionally driven foot traffic to these stores.
Looking Ahead: Uncertain Future for Convenience Retail
The future of convenience retail remains uncertain. While some see these closures as a natural evolution of the retail landscape, others worry about the long-term implications for community health and access to essential goods.
Steven Anderson, CEO of the National Association of Chain Drug Stores, calls for "urgent" congressional action on PBMs to address some of the industry's challenges. However, with the continued growth of e-commerce and changing consumer preferences, a return to the heyday of corner pharmacies seems unlikely.
As we navigate this changing landscape, it's crucial to consider the broader implications. What does it mean for a society when the concept of "running out to the store for a minute" becomes obsolete? How will we ensure equitable access to healthcare and everyday necessities in a world where physical stores are increasingly rare?
The decline of pharmacies and convenience stores marks more than just a shift in retail trends; it represents a fundamental change in how Americans access goods and services. As we move forward, finding ways to balance the convenience of e-commerce with the necessity of accessible, community-based services will be crucial for ensuring that no one is left behind in this new retail reality.
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