There is a constant in the universe, and it is change. Hericlitus said if more eloquently: “Change is the only constant in life.” We have seen this in the world of business, and 2022 promises to bring more change. Dating to the days of my youth, there was revolution in retail.
Prior thereto, there was a day when American retail was dominated by the catalog store and the "five and dime." The catalog revolution began late in the nineteenth century with a watch company called Sears and Roebuck. It developed retail stores and names like Craftsman tools, Kenmore appliances, and Allstate insurance, until it declared bankruptcy in the 1990s, according to History. CNBC reported that at its peak Sears operated more than 3,500 stores. It had competitors like Montgomery Ward, which operated a similar store/catalog combination that thrived, but limped to its demise as the 20th century closed. Others that employed the catalog model, such as J.C. Penney evolved away from that model and thus far have survived.
Not every town had the population for a full-scale department store. Therefore, some of those 3,500 Sears stores were instead fairly basic "catalog stores," that featured very limited inventory and customer assistance with the significant volume of items available for order. Home delivery was not what it is now, and many such catalog orders had to be retrieved from such a catalog store. Sears was a retail icon. Smaller towns were also likely to have at least one "five and dime," in which products literally sold for nickels and dimes, much in the way dollar stores persist today.
According to MeTV, his market included names like Woolworth's TG&Y ("turtles, girdles and yoyos"), McCrory, Ben Franklin, S.H. Kresse, J.J. Newberry, W.T. Grant, G.C . Murphy, and more. Of these, only Ben Franklin survives today, but a shadow of its former self.
A "5 and dime" that evolved from a partnership with McCrory was S.S. Kresge. In 1962, Kresge evolved further and opened the first K-Mart store, and its stores either transitioned to the K-Mart paradigm or were eventually sold to the McCrory company. Later in the 1960s, Sam Walton opened the first WalMart store in Rogers, Arkansas. The "big box" era had begun, and the days of the "five and dime" were limited. However, in the 1970s, many television commercials still featured references to product availability at a list of those stores. For some of us, their names will remain synonymous with such products as the chia pet, the smokeless ashtray, the clapper, the pocket fisherman, and worse. I can recall when those ads also included the names of drug store chains.
Many of the five and dimes included services as well. The lunch counter was often featured, offering access to a sandwich or entrée. Those were at times segregated, and protests erupted in the 1960s. Woolworth's was the sight of a famous sit-in in 1960 that led to a "quiet" integration that summer, followed by various other eating establishments. Though Woolworth's did not survive into the twenty-first century, two of its lunch counters survive according to Atlas Obscura. The concept is today one of pure nostalgia rather than competitive market, but their existence marked an adaptation of those retail stores to customer needs and demands.
On a parallel path to the "five and dime" was the idea of a drug store. The nineteenth century paradigm for a druggist was more usually a small independent shop, which also offered sundries and in some instances a similar lunch counter. Remember, this evolved long before there was "fast food," or drive-through service. The Greatest Generation was born into a world with neither, and many of them never did accept them.
Early in the 20th century, the United Drug Company created a franchise system for Rexall Drug stores, and many local entrepreneurs adopted the brand. At one point perhaps 20% of all American pharmacies sported the Rexall banner. I recall a time when Rexall was commonplace, even dominant. I ate many a $.25 ice cream cone from my favorite Rexall. See Shrinkflation (December 2021). When Rexall was purchased by McKesson Drugs in 2018, it was down to just over 400 stores, largely in Canada. Pharmacies evolved into retail outlets, expanding offerings to include groceries, gifts, health and beauty aids and more.
As the market segment evolved beyond the pharmacy, it also encountered competition from the food industry. Today, according to Statista, the largest pharmacies include CVS, Walgreens, Health Mart, and Rite Aid. However, the list also includes Walmart and Kroger. Many grocery chains include a pharmacy in their offerings. The retail pharmacy saw consolidation and smaller chains slowly disappeared. In addition to Rexall, some will remember chains such as Eckerd, Revco, and K&B. At their peak, these chains represented thousands of outlets.
But, the convenience of mail-order has come to the pharmacy. The top 15 largest pharmacies by prescription volume include four that are categorized specifically as "mail/specialty," including "Cigna, UnitedHealth, Humana, and Diplomat." The grocery stores like Delhaize (Food Lion, Giant), Kroger, Albertsons, and Publix occupy a third of the top spots, and with Walmart and Costco, account for 7 of the largest 15. Surprisingly, Amazon Pharmacy is not on these lists yet, but the keyword in that sentence may well be "yet."
The largest U.S. Pharmacies characterized as "chain drugstores" include only CVS, Walgreens, and Rite Aid. Of those, only Rite Aid is listed without the additional characterization of "mail." A third of the 29,881 drugs stores, according to Scrape Hero, are operated by CVS (9,968) and another third by Walgreens (9,024), and they are both engaged in the mail-order paradigm to some extent.
This little trip down memory lane, and the thoughts about retail giants of the past, came from CVS' announcement late in 2021 that it would close about 10% of its stores (900) over the next three years. According to RIS News, "CVS has a new strategy," and is adapting to "evolving consumer needs." It intends to remain "focused" on retail, but also a "rapidly expanding digital presence." As noted above, the retail space is largely influenced by grocery (5 of the top 15), "mass merchant" (WalMart and Costco, 2 of top 15), and Mail suppliers (3 of the top 15). The "chain" drugstore, though significant in location volume is facing significant retail competition.
RIS News also reports that the CVS closures will be accompanied by adjustments to the retail environment. Stores may evolve to "offering primary care services" (CVS already has deployed the "minute clinic" in some 1,100 locations). A variation on that paradigm is something called a HealthHub which includes a wellness theme beyond the treatment focus in the clinic. Despite these foci, some volume of the "traditional CVS pharmacy" will reportedly remain. One might see this as dipping a toe in the "lunch counter" (service) side as an adjunct to retail, or perhaps the vision is for service to supplant the retail element and leave that to the "big box," online, and other merchants?
Some have been critical of the chain's "neglected stores," and see these closures as directed at those locations. Others see failure of local government, noting that shoplifting and assault occur in some locations. Yahoo News reported recently that Walgreens has closed 17 stores in the San Francisco area (in 2019, it announced a broad plan to close 200 locations nationwide). NBC reports that some of the 2022 CVS closures will likewise be in that city, leaving 15 stores open. Notably, some of the stores closing are within a half mile of another CVS (an example of what some refer to as "overlap" in explaining the need for closure).
The underlying theme in this is change. Retail has evolved, from storefronts, to massive catalogs, to large retailers, and back to mail order in the modern "Internet" catalog form. Over the last century, we have witnessed the local druggist become a broader retail store that included pharmacy and more. And now, we see the largest remaining "chain drugstore" entering the commercial health insurance market (CVS bought Aetna in 2018), and expanding into the health care delivery business (clinics and hubs, above).
As the market share of e-commerce continues to rise (Statista says that "over two billion people purchased goods or services online" in 2020), are local "chain drugstores" destined to be the next "five and dimes?" As the concept of telehealth gains acceptance (Telehealth is growing exponentially according to the CDC), will the corollary be less desire to "speak to the pharmacist" and more growth in the "digital presence?" As companies like Amazon focus on pharmacy, in addition to the presently notable "mass merchants" (WalMart and Costco), will it bring an un-survivable level of competition for the chain drugstore?
Will the retail offerings of the "chain drug store" survive the other onslaught of twenty-first century retail evolution? ABC recently reported that an amazing 45% of new retail stores that will open in the U.S. in 2021 represented only three companies: "Dollar General, Dollar Tree, and Family Dollar." These are perhaps not the celebrated "5 and dime" of the nostalgic past (ever grabbed a burger at one of their lunch counters?), but they offer some similar non-prescription/medication products as the "chain drug store," and harken to the price-focused model of the "5 and dime." These may not yet be seen as a threat; Dollar General has only 940 stores, but Dollar Tree has almost eight thousand, and Family Dollar has just over eight thousand. The "dollar" store market is strong with almost as many outlets as Walgreens and CVS combined, and growing at an incredible pace, while the "chain drug" segment seems to be in retreat.
Believe it or not, markets change. The retailers noted herein (Sears, Wards, Woolworths, and more) all earned and enjoyed significant breadth and depth in the retail world. Each was a common site in our communities, and ultimately each failed to compete with the next paradigm, just as the 9,000 plus Blockbuster video stores and their 84,000 jobs evaporated in the twenty-first century. There is precedent in such market-dominant extinction seen further in the retailers noted above.
The working world will continue to evolve. That is not new to these pages. See Nero May Be Fiddling (April 2017); Robot in the News (October 2021). Do the changes forecast for this one retailer suggest future adaptation of the "chain drug store" model more broadly? As technology continues to evolve, will the corner drug store successfully adapt, diminish, or become extinct? What will it mean for jobs in the local community? What will it mean for injured workers in terms of care at such clinics, or obtaining medication?
