This Is How CVS Is Attempting To Expand Its Reach Even Further

by Trefis Team
CVS Health
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After a better than expected performance in its Q2 earnings, CVS Health (NYSE:CVS) is taking initiatives to boost its sales even further through the introduction of vending kiosks. The pharmacy giant has decided to put vending machines in areas that experience high traffic, such as airports, college campuses, bus terminals etc, so that busy customers have the convenience of accessing its products through these outlets. It plans on launching 25 such vending machines this fall through New York and New England. An additional 50 more machines will be installed in the next phase.

The first kiosk is already operational in the South Station bus terminal in Boston. Through the new CVS Pharmacy vending machine program, the company can reach its customers beyond the traditional brick-and-mortar setups. The machines will carry items that can be convenient to pick up by a busy traveler. Those include deodorant, toothpaste, contact solution, healthy snacks, batteries, lint rollers, and stain removers, and so on. The kiosks will be touchscreen and carry more than 70 products.

Some industry experts think that this might be CVS’ way to gear itself up to compete against Amazon, which is rumored to soon start its online pharmacy segment. The convenience of online shopping over traditional brick-and-mortar setups has already made a lot of industries such as apparel and beauty companies make their business models more digitally oriented. Though pharmacy is not traditionally a segment that might be greatly impacted given the regulations of selling most drugs only with prescriptions, however, the other generic healthcare products can easily be bought online. Hence, CVS’ recent initiative might be relevant and effective for helping it maintain its competitive edge.

CVS’ Year So Far

CVS’ Q2 2017 earnings showed that the company is recovering from the difficulties of recent times that dampened its first quarter results. In 2016, the company lost contracts with the Department of Defense and Prime Therapeutics to its rival Walgreens. The new deals came into effect in December 1, 2016 and January 1, 2017, respectively, and is slowing down CVS’ performance in 2017. The company took several measures to counter the loss of contracts including the expansion of its ongoing partnership with Optum and the offer of bundled service offerings to its customers. A partnership with Cigna Health Works has been announced in June. It has also partnered with Express Scripts’ Diabetes Care Value program to be their retail network option. The company is in talks with many such PBM health plans to expand the reach of its network. It plans to improve its productivity by focusing on store rationalization and optimizing its delivery platform. These measures are expected to bring savings to the tune of $3 billion by the end of 2021.

CVS relocated 10 retail stores during the quarter and opened another 27, which took its store count to 9,700 at the end of Q2 2017. The company expects to close around 70 retail stores in 2017, out of which 63 have been closed in the first half of the year. CVS expects the current year to be one for “rebuilding” as it continues to look for avenues to compensate for the loss of contracts.


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