Does CVS have the cure for retail’s woes?
The merger with Aetna is a response to digital disruption
Why does CVS want to reinvent its drugstores?
That’s a question on many minds after one of America’s biggest pharmacies acquired Aetna, one the country’s biggest health insurers. According to a CVS statement [1], the merger of the two companies will change CVS stores into an “entirely new health services offering” with space for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty, and medical equipment. It will be, in other words, a “community-based health hub.”
The company has been working to reposition itself as a health care business rather than a drugstore chain for some time, said IBM global consumer industry solutions leader Mark S. Yourek. In 2014, for instance, it changed its corporate name from CVS Caremark to CVS Health and stopped selling tobacco products. [2]
At least in part, said Yourek, the motivation for this effort is the same one driving many other retail transformations these days: The fear of competition from online retailers.
“CVS is looking for ways to differentiate itself in anticipation of Amazon maybe getting into the pharmacy business in ways that no one can anticipate yet,” he said.
The Angle
Though it’s not clear whether Amazon will step into the pharmacy market as many experts predict, pharmacy companies are already “alarmed by the specter of competition” from the online retail giant [3]. They’ve seen Amazon’s impact on bookstores, department stores, and other major categories, and they don’t want to wait to find out if they’ll endure a similar fate.
“Until Bezos experiments, you can’t tell what kind of business model they can come up with that would be killer,” Yourek said.
CVS’s merger with Aetna, Yourek said, is a way for CVS to preemptively address digital disruption. By making its stores a more integral part of peoples’ lives, it has a better chance of holding on to customers in the event of a shake-up from Amazon.
“It’s almost hard to remember now that Amazon was still just mainly a book store 10 years ago. Now look how it’s transformed. Now no one assumes Amazon will be unsuccessful going into anything it wants to go into,” Yourek said.
Learn more about how IBM solutions are helping retailers transform their stores.
