CVS Pharmacy is evolving its business model by focusing on smaller store formats primarily dedicated to pharmacy services. This initiative aligns with broader industry trends aimed at managing costs and meeting shifting consumer behaviors.

Introduction of Smaller Store Formats

In a strategic move, CVS plans to introduce at least a dozen smaller pharmacy locations in select communities over the next year. These new outlets will typically span under 5,000 square feet, featuring a full-service pharmacy coupled with a limited selection of over-the-counter products tailored to the specific needs of the surrounding community.

Industry Context and Competition

The announcement comes amid intense competition and ongoing challenges in the pharmacy retail sector. According to CVS, adapting their storefronts to better meet community-specific needs is essential for maintaining a relevant pharmacy business. Despite the new smaller locations, CVS will continue to open traditional pharmacies, integrating nearly 30 new stores, including those within Target locations, this year.

Challenges in the Pharmacy Retail Sector

The pharmacy sector has faced mounting pressure due to the consumer shift towards online shopping for general retail products. Emarketer senior analyst Rajiv Leventhal noted the difficulties CVS and similar companies face in balancing retail with pharmacy services as shopping habits change.

Over the recent years, CVS, alongside other major pharmacy chains like Rite Aid and Walgreens, has initiated numerous closures in response to the evolving market. Over the span of 2022 to 2024, CVS has closed 900 stores while only adding 100 new locations, with plans to shutter an additional 270 locations in 2025.

Recent Developments in the Industry

Rite Aid recently filed for bankruptcy and announced plans to close 154 stores, while Walgreens is set to close at least 1,200 locations over the next three years as part of its cost-reduction strategy. The recent announcement from Walgreens regarding its transition to a private entity further complicates the retail landscape.

Leventhal predicts a continuing trend of store closures across major brands as they pivot their focus towards pharmacy services in the remaining locations. “Consumers are prioritizing price, speed, and convenience above all,” he stated, stressing that these shifts largely affect customer interactions at the front of the store rather than pharmacy services.

The Path Forward for CVS

While navigating these challenges, CVS’s focus on smaller pharmacy formats is seen as a tactical decision to lessen dependence on traffic generated from traditional retail operations. This approach may enable pharmacists to take a more proactive role in the health management of their patients, reinforcing the importance of medication access amidst changing shopping behaviors.

Leventhal characterized this shift as a “savvy play,” suggesting a stronger emphasis on the consistent demand for prescriptions and over-the-counter medications that are foundational to the pharmacy business model.