An Introduction: Pharmacies Are Dying – What Will Replace Them?
Welcome to the era of change where traditional businesses are facing an inevitable crisis. Today, we will dive deep into the current landscape of pharmacies and the external pressures causing their decline. I’m your host, Victor Menasce, using my expertise in real estate to understand the ripple effect on retail spaces as the once Triple A tenants begin to exit.
The Existing Scenario of Pharmacy Chains
Big pharmacy chains like Walgreens and CVS were considered safe investments by landowners due to their preference for prime locations with high traffic and willingness to pay high rental rates. They used to sign primary leases for 25 years. The building structures ranged from 9,000 to 30,000 square feet depending on the location and type of store. A typical Walgreens store being 14,500 square feet and located on a land area of one to two acres.
The Rise of Pharmacy Deserts
The U.S. has now identified over 4,600 ‘pharmacy deserts’ – areas where the nearest pharmacy is either too far for the average resident or non-existent. The lack of disposable income among consumers and changing trends in the pharmacy space has started impacting the performance of the big chains. The business model seems to have broken with no easy solutions in sight. Furthermore, issues like high rates of merchandise thefts have lead many stores to lock high-loss items behind glass cabinets which deters paying customers.
π Replacement Alternatives for Pharmacies | π Impacts on the Pharmacy Chains |
---|---|
Grocery chains | Increasing competitiveness |
Dollar stores | Undercutting for household necessities |
Self-service checkouts | Reducing number of staff |
Prescription Medications: The Crumbing Business Model
Prescription counters accounted for the majority of store sales yet it’s a shrinking business. The decision-making power lies in the hands of the claims processor who negotiates pricing with pharmacies, decides who can go where, and is pushing for the use of generic drugs. This is causing large chains like CVS and Walgreens to lose control of their own destiny.
Emerging Trends
Now, grocery chains are incorporating pharmacies while supermarket chains are buying out existing pharmaceutical chains. These combinations provide more convenience to customers, as they can have their prescriptions fulfilled while shopping for groceries. Unfortunately, this trend does pose a threat to standalone pharmacies who will need to rethink their business model.
The Future of Pharmacies: A Potential Transformation?
The demise of pharmacies presents a chance for retransformation. Prime commercial spaces at high-traffic intersections could see a wave of new opportunities in the next five years. While current attempts to combine pharmacies with medical clinics have seen mixed results, the right strategy could uncover a success formula in this sector.
As Victor Menasce, I encourage you to intentionally consider the potential of these transformations. Let’s make great things happen. Keep tuning in till we talk again tomorrow.
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