Walgreens will close a lot of stores

Tim Wentworth’s Analogy of Walgreens: “The Pharmacy Chain Will Close in a Turn Around in the Next Three Years”

The pharmacy chain said on Tuesday that it will close 1,200 stores over the next three years. It’s part of the plan for a turn around, as it faces retail competition and lower prescription payouts.

Not too long after Tim Wentworth became CEO of Walgreens, he revealed a stunning figure: Roughly a quarter of the pharmacy chain’s stores do not make money.

Some differences have been found in the relationship betweenCVS and Walgreens. Walgreens is the only one that’s focused on its pharmacy business. CVS has expanded further into health care through mergers with insurer Aetna and Caremark, a pharmacy benefit manager that helps insurers negotiate prescription drug coverage and costs. Both companies have made mistakes.

The convenience-store section of pharmacy chains has been losing customers to other stores. Many of those rivals also fill prescriptions, competing for pharmacy customers, too.

Pharmacy chains have over-expanded to thousands of locations over the years, signing long-term leases for pricey corner locations. The quality of stores has been criticized by many shoppers, who complain about understaffing and the fact that items are locked up to prevent theft. Pharmacies, for their part, have complained about shrinking profits for filling prescriptions, citing dramatic declines in reimbursement rates.

“I’m very confident that we’ll have a new framework for reimbursement discussions in two to three years,” the Walgreens CEO said on Tuesday.

Why Should I Suggest Chicken Soup as a Product Recommendation? The Case of CVS & Walgreens

On Tuesday, he said 1,200 of those stores will close over three years. That’s two weeks after rival CVS announced layoffs of 2,900 corporate staff. Both chains are on a multi-billion-dollar cost-saving spree – closing hundreds of locations, cutting thousands of jobs and, really, reconsidering their role in Americans’ lives.

Now, shoppers regularly complain about stores being chronically understaffed, and products locked up to prevent theft. The purpose of the shelves of snacks, makeup, greeting cards and cleaning products was to boost profits. But sales have sagged for years — a result of a losing battle with Amazon, Walmart, Costco, grocery and dollar stores.

The chains have failed to add new incentives for shoppers, beyond printing photos or dropping off shopping returns, says Anshuman Jaiswal, a longtime consultant to retailers and pharmacies. Neither chain has a website designed to give customers what they need.

If you’re ordering cough syrup from either drugstore, why don’t I suggest chicken soup as a product recommendation? Jaiswal said so. “It’s about reimagining the business model.”

This theory was tested by Walgreens about a decade ago when it became involved in a public fight with Express Scripts.

Over the years, CVS and Walgreens attempted to reframe themselves as health care hubs, expanding primary-care clinics. But these operations cost time and money.

Both companies are trying to figure out how to pay for filling prescriptions in new structures, hoping this will give them the shot they need.