Your Local CVS Drugstore Is About to Look Very Different
CVS Health (CVS) wants its stores, and the sales they generate, to be healthier.
The company, which operates 8,000 drugstores as well as the Caremark pharmacy benefits manager, announced on Wednesday plans to dramatically upgrade hundreds of its stores, with a much bigger focus on health and wellness products like skin care regimens and nutrition bars.
Take the new beauty sections being opened at 2,000 stores. New “trend wall” displays have been added to showcase new launches, make them stand out more within the store, and emphasize CVS’ exclusive brands. The druggist recently added an area to showcase Korean products to ride the surge in interest in skin care products from that country. There will be also be more prominent displays for trendy brands like Wunder2 and Tigi.
CVS is also expanding its healthier food options within its own Gold Emblem Abound brand. Overall, CVS says it will raise its healthy food selection by 50% at stores getting an upgrade. It is adding several aisles worth of new health, beauty, and food in a new layout aimed at positioning itself as a health retailer.
The changes comes as CVS looks to end several years of declining comparable sales of general merchandise in its drugstores, even as more people come by to get a prescription filled. They just haven’t been stocking up on every day items as much.
Initially those sales declines stemmed from its 2014 move to stop selling tobacco products, a move that earned it a lot of goodwill even as it gave up $2 billion in sales and a ton of shopper foot traffic. Three years later, it’s clear the company needs to further overhaul its retail. So the company is doubling down on its bet that its sprawling retail business will thrive if it focuses on the “Health” in its name.
“The consumer said, ‘Wow you don’t sell tobacco, why don’t you have healthier food?” Helena Foulkes, president of CVS Pharmacy, tells Fortune at a presentation of the new store look in Manhattan. “The consumer is always ahead of us, pushing on that path to really being a healthcare company.”
The latest moves are also an extension of changes brought in 2015, which CVS put more health food near cash registers and added beauty consultants at some stores. To be sure, these newer changes, at differing degrees, are coming to less than half the CVS fleet, meaning you can still expect many stores to have an abundance of candy bars and other junk food prominently placed near the cash registers.
Bolstering the ‘Health’ in ‘CVS Health
CVS’ retail business brought in $81.1 billion last year, making it a bigger chain than the likes of Target (TGT) and Sam’s Club. (Some two-thirds of that figure come from filling drug prescriptions.) But CVS Health gets even more from its PBM business, where it competes with Express Scripts. (ESRX) among others.
To win big contracts from employees and major health plans, CVS sees the need to ramp up its healthier offerings, hence the 2014 tobacco move. But perhaps more fundamentally, CVS cannot afford to let its drugstores turn into glorified neighborhoods stores that offer the same stuff as the local Walgreens, Target, or 7-Eleven.
Certainly not at a time the likes of Ulta Beauty (ULTA) are stealing market share, and Target and rivals like Walgreens have long been raising their beauty and food games. Walgreens for instance has overhauled many beauty sections and added a number of higher end brands under its own Boots No. 7 brand. Rite Aid, the No. 3 U.S. drugstore chain, could become an even fiercer rival if the government signs off on its acquisition by Walgreens.
For years, CVS and its rivals were focused on buying up local chains, rather than top merchants. “Get those corners,” was the mantra in terms of snagging the best locations. But now, as they compete with each other and everyone from Walmart to Kohl’s to J.C. Penney too, the fight has moved beyond a land grab and forced each chain to define what makes it different. For CVS Health, it has been a pivot to health and whatever stores can do to bolster the PBM business.
“It emboldened our merchants to say we’re not just going to have a lot of categories and be a convenience store, we’re going to stand for something,” says Foulkes. “The marketplace will continue to reward those who stand for something.”