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Time was when a chain drug retailer’s success was measured, along with revenue, by the number of stores the retailer operated. So it was that Walgreens and CVS, along with Rite Aid, vied for industry leadership by opening a record number of new stores each year. Ultimately, each of the two industry leaders fielded upwards of 10,000 outlets, virtually blanketing the nation.
Times have changed.
Today, the race for industry supremacy has pivoted in reverse. Success, it appears, is now measured by how quickly Walgreens, CVS and Rite Aid can close marginally performing stores and, in the bargain, exit markets once believed by the chains’ top managers to promise a new, golden frontier of sales while solidifying industry leadership.
Two questions emerge in the wake of this new direction: How many units do these three drug chains ultimately plan to close? And how quickly do they plan to shut them?
The current figures boggle the mind. The three largest drug chains are in the process of closing hundreds — no, thousands — of stores once believed, at least internally — to present the chains’ managers with new, hard-to-resist opportunities for growth and success.
How quickly they plan to shut them? At this point, that’s anyone’s guess. To judge by the most recent headlines, this time out of Walgreens’ Deerfield, Ill., headquarters, there appears to be no bottom.
Same goes for both CVS and Rite Aid. Each intends, at this point, to close stores until profitability returns. When will that magic number be reached? Apparently no one knows for sure.
The real question that emerges from this rush to downsize is this: Is downsizing the best way to grow? Other mass retailers, in addition to drug chains, appear to believe so. The magical thinking appears to go this way: Close the stores that are performing least successfully and the remaining outlets will return the retailer to profitability.
Is this a viable strategy? Or, put another way, is it worth trying?
Opinions differ widely — and run the gamut from those firmly believing that closing stores is, in today’s environment, the shortest route to profitability to those who believe, with equal certainty, that, once begun, store closings are the quickest route to failure.
The belief among the editors at Chain Drug Review can be simply and honestly stated: We don’t know.
Still, we can state, with equal honestly and perplexity, that this strategy goes against a history wherein opening new stores guaranteed future leadership.
On the other hand, perhaps chain drug retailing has embarked on a new chapter in its long history, one that equates growth with a headlong rush to shutter underperforming stores and so remove a burden that has become a drag on all stores.
But on the other hand …
