Marketplace Briefing: Amazon & Walmart ramp up same-day pharmacy delivery while other drugstore chains struggle
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
As the nation’s largest drugstore chains close thousands of stores and reexamine how they do business, Amazon and Walmart are stepping onto their turf by making major investments in same-day prescription medication delivery.
The retail giants are competing both with each other as well as CVS Pharmacy and Walgreens, which have had similar services since 2021. Earlier this month, Amazon announced it would more than double the number of cities where it offers same-day pharmacy delivery in 2025. Two weeks later, Walmart said Tuesday it launched its own program that will deliver prescriptions alongside groceries and other items in almost every state within months. Walmart previously only offered prescription deliveries through mail orders separate from its other products.
This all comes as lower reimbursement rates for prescription drugs, increased competition and failed growth strategies have created problems for the most established drugstore chains that have led to closures.
In 2021, USA Today reported CVS would close about 900 stores over three years — about one in 10 of its more than 9,000 locations. Last week, Walgreens said it plans to close 1,200 of its 8,700-plus stores over the next three years. Rite Aid filed for Chapter 11 bankruptcy in October 2023 and emerged in September after closing hundreds of pharmacies and eliminating about $2 billion in debt.
That leaves room for competitors to swoop in.
In its announcement, Amazon pointed to a study finding that almost half of U.S. counties were home to residents who lived 10 or more miles away from the nearest pharmacy. Neither Amazon nor Walmart have close to the number of locations as CVS and Walgreens. Walmart said its store footprint enables the company to deliver to more than 86% of households. The service is now available in six states and will be in 49 states by January 2025.
Beyond these pharmacy chains’ closures, both Walmart and Amazon are using these services as a way to boost their e-commerce offerings. For Walmart, it marks another example of the retailer adding new services to add more value to its membership program, Walmart+. On a larger scale, Walmart’s investments in the program fuel an Amazon-like flywheel of services attracting more customers and advertisers as it grows.
“If this could be a renewal driver, this could be a very good idea for Walmart+,” Bryan Gildenberg, founder and CEO of Confluencer Commerce, told Modern Retail. He said he sees it as a more compelling addition to Walmart+ than things like veterinary telehealth services or fast-food discounts, as it directly enhances the core offering of free delivery.
Amazon has been growing its pharmacy program over the last few years with a $5 per month subscription program called RxPass and a prescription savings benefit for Prime members that provides up to 80% off generic medications and 40% off brand names.
Amazon has offered two-day pharmacy delivery since it launched Amazon Pharmacy in 2020. By the end of 2025, almost half of Amazon’s customers will be eligible for same-day delivery of their medications. The company is doing this by opening “modular” pharmacies of various sizes within its same-day delivery centers, where clinical teams will review prescriptions and packaging. The new pharmacies will be smaller than its existing pharmacy fulfillment sites that have robotic arms and other automation.
Busy families have requested same-day pharmacy delivery the most, according to Walmart. The company said more than half of its customers in a recent survey said they wanted their prescriptions delivered in a single order with other items.
“Patients and families want to just get their medications with everything else that they order,” said Kate McCarthy, a healthcare and life sciences analyst for Gartner. “It seems like a logical extension of the kind of service that they’re trying to deliver to their customers to create a more holistic journey.”
Still, pharmacies are a business subject to a lot of oversight and regulation that can be a challenge to navigate. Many of the major pharmacy chains have had to pay major settlements, often in the billions. “You can’t underscore some of the risk around certain types of medications enough,” McCarthy said. Regulations like the Health Insurance Portability and Accountability Act (HIPAA) limit companies’ use of healthcare information.
Retailers have previously struggled in expanding to new sectors within health care. Walmart closed its 51 health centers earlier this year, challenged by the costs of operating them in the difficult health care system. In 2022, Amazon shut down its telehealth business Amazon Care because it “wasn’t a sustainable, long-term solution for its enterprise customers” and later bought One Medical for $3.9 billion, which it continues to operate.
Tom Ward, executive vice president and chief eCommerce officer, Walmart U.S., said in a news release that by adding prescription medications into orders, it is strengthening its goal of providing everything they need, whenever and wherever they need it. “If you’re sick, we can deliver the necessary medicine along with everything else you need to feel better: cough drops, a heating pad, blanket and orange juice,” Ward said. “Walmart’s size, resources and expertise set it apart from other retailers.”
The choice of those items in Ward’s statement was no coincidence, according to Gildenberg. He said that’s because the real opportunity for Walmart is in acute care — treating brief episodes of illness like the flu — and delivering other items alongside it at a moment’s notice. Chronic prescriptions are often already fulfilled by mail order.
“The things that you need in addition to the prescription are a really big opportunity for Walmart, markedly bigger than for a drug store, because Walmart just sells more categories and more stuff that you can add in,” Gildenberg said.
Marketplace news to know
- Amazon is reportedly shutting down its same-day delivery service Amazon Today that attempted to use retailers for fulfillment.
- Gopuff fired its CTO Sreekant Kotay after an earlier battery arrest.
- A Barclays analyst downgraded UPS stock citing increased competition from FedEx and Amazon.