Drug Stores Industry Overview

Excerpt from Drug Stores Report

Companies in this industry sell prescription drugs and other products including over-the-counter medications, health and beauty products, and greeting cards. Major US companies include Walgreens, CVS Caremark, and Rite Aid.

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 concentrated: the 50 largest companies generate about 70 percent of revenue.

Products, Operations & Technology

Drug stores sell two main 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 drug store chains typically generate about 70 percent of their sales from prescriptions; front-end items account for 30 percent. The number of front-store items has increased in recent years, as stores have started to offer a wider variety of items to customers.