Drugstores Industry Profile

The US drugstores industry includes about 20,000 companies with combined annual revenue of about $220 billion. Major companies include Walgreens, CVS Caremark, and Rite Aid. The industry is concentrated: the 50 largest companies generate about 70 percent of revenue.

Pharmacy locations inside discount stores such as Wal-Mart and grocery stores such as Kroger are competitors and are not included in the overall drugstore industry numbers. They are covered in the Discount Stores and Grocery Stores and Supermarkets industry profiles.

COMPETITIVE LANDSCAPE

Demand is driven by the aging of the US population and advances in medical treatment. The profitability of individual companies depends on access to medical insurance groups. Large companies have economies of scale in purchasing and in access to large groups of customers. Small companies can compete effectively through convenient location or special merchandising. The industry is capital intensive: average annual revenue per employee is $300,000.

PRODUCTS, OPERATIONS & TECHNOLOGY

Drugstores sell two types of products: prescription drugs, and "front-store" products, including over-the-counter (OTC) drugs, health and beauty aids, greeting cards, photo-finishing services, and general merchandise. Prescription drugs draw customers to the store, and stores focus their efforts on the number of new prescriptions they fill. The larger drugstore chains typically generate about 70 percent of their sales from prescriptions, while front-end items account for 30 percent. The number of front-end items has increased in recent years, as stores have started to offer a wider variety ...