A new report from Coresight Research is taking a look at how leading drug chains are adapting to digital trends within health and beauty. Authored by Coresight CEO and founder Deborah Weinswig, the report examines strategies at CVS Pharmacy and Walgreens — including increasing focus on health care, how they are differentiating their beauty offerings, loyalty programs and the key role partnerships are playing in their business strategies — and how private brands are central to both retailers’ efforts to set themselves apart.
As pharmacy reimbursements continue to trend downward, the front end is an increasingly important part of the drug business, and beauty plays a central role in growing front-end sales. As both Walgreens and CVS Pharmacy try to reach younger consumers, they are revamping their private label offerings to include more premium brands in-store and online, Weinswig notes.
Walgreens’ “Beauty Differentiation” effort, which began in 2016, has especially leaned on private brands, with the company rolling out Soap & Glory and No7 (popular across the pond at Walgreens’ U.K. counterpart and sister company Boots) to 1,800 stores and its e-commerce offering. These private brands also are getting a fresh set of eyes thanks to the retailer’s partnership with Kroger, which in addition to bringing Kroger’s private label offerings to Walgreens stores, brings OTC, personal care and its private brands into Kroger stores in 17 Kentucky stores. Outside of beauty, CVS CarePass offers in-store and online benefits to members, including free delivery, access to a round-the-clock pharmacist hotline and discounts on private label CVS brand products in OTC, vitamins and personal care categories.
Beyond private brands, in beauty, partnerships are coming into play as differentiators, too. CVS Pharmacy has revamped its beauty section and is testing a format called BeautyIRL — which doubles the size of the retailer’s typical beauty section — in 50 stores that features an expanded selection, a tester bar and beauty services from GlamSquad, offering in-store hairstyling, makeup services, face and eye masks and manicures. The partnership also is bringing to CVS Pharmacy the GSQ by GlamSquad product line exclusively to the retailer. Walgreens has been working with Birchbox to offer store-in-a-store areas curated by the beauty box company that offer exclusive prestige beauty items.
As they build out beauty offerings, both retailers also are making a push to better utilize their formidable store footprints as points of contact for helping patients on their healthcare journey. In particular CVS Pharmacy, now that parent company CVS Health owns insurer Aetna, has rolled out a new format, HealthHub, which dedicates 20% of their space to healthcare services, as well as wellness products and personalized care — including dietitians, diabetic screenings, blood tests and sleep apnea assessments. After a three-store pilot in Houston, CVS Pharmacy plans to roll the format out to 1,500 stores by the year’s end.
Not to be outdone, in November, Walgreens piloted in-store Medicare service centers in partnership with longtime compatriot UnitedHealthcare. Additionally, Walgreens has partnered with VillageMD to open primary care clinics next to five of its stores in Houston. Dubbed Village Medical at Walgreens, the clinics offer chronic care management services, preventive care checkups, women’s health services, smoking cessation, vaccines, diagnostics and some specialty care. Walgreens also has expanded its in-store diagnostic partnership with Quest Diagnostics and there are a handful of stores with adjacent Aspen Dental locations. The two retailers have seen overlap in a partnership with Smile Direct Club to bring the tooth straightening start-ups offerings to their stores.
The report also highlights how the companies are bolstering their loyalty offerings. CVS Carepass has two membership levels, and Walgreens piloted Walgreens Plus in Florida in 2018. These efforts come as digital start-ups start to nip at their heels. Online pharmacy PillPack has long been seen as the biggest potential threat to the pharmacy department of drug chains, due in large part to its acquisition by Amazon — said to have valued the company at $1 billion — and its slowly collecting wholesale licenses in various states. Other threats include New York-based Capsule, another online pharmacy, and NowRx, which offers prescription delivery. As a result, both CVS Pharmacy and Walgreens are offering prescription delivery services in certain markets, with CVS working with Shipt to make deliveries happen.
To read the full Coresight report, click here.