Drug Stores

Drug Stores

Brief Excerpt from Industry Overview Chapter:

Companies in this industry sell prescription drugs and other products including over-the-counter medications, health and beauty products, and greeting cards. Major US companies include Walgreens, CVS Caremark, and Rite Aid.

The US drug stores industry includes about 42,000 establishments (single-location companies and branches of multi-location companies) with combined annual revenue of about $230 billion. The industry is expected to grow at a high rate over the next two years. Key growth drivers include demographics, medical advances, and consumer spending.

COMPETITIVE LANDSCAPE

Demand is driven by the aging of the US population and advances in medical treatment. The profitability of individual companies depends on access to medical insurance groups. Large companies have economies of scale in purchasing and in access to large groups of customers. Small companies can compete effectively through convenient location or special merchandising. The industry is concentrated: the 50 largest companies generate about 70 percent of revenue.

Chain drug stores account about 50 percent of the retail prescription market, according to Drug Channels. Independent drug stores and mail-order sales each account for about 20 percent; pharmacies at supermarkets account for the remainder. Drug stores that also sell general merchandise compete with grocery stores, discount department stores, and other retailers.

PRODUCTS, OPERATIONS & TECHNOLOGY

Drug stores sell two main types of products: prescription drugs, and "front-store" products, including over-the-counter (OTC) drugs, health and beauty aids, greeting cards, photo-finishing services, and general merchandise. Prescription drugs draw customers to the store, and...