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After 2020, no industry assumptions are safe

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When industry observers look back at a given year, all too often they resort to hyperbole, making shaky claims about the long-term significance of events. The year just ended eliminated that pitfall, at least temporarily: 2020 crystallized several issues — the nation’s deep political divide, the quest for racial justice and the need to act to stave off the most devastating effects of climate change — that will reverberate far into the future. First and foremost, it was the year of the COVID-19 pandemic, a global phenomenon that will leave an enduring mark on health care, retailing and many other aspects of everyday life.

The outbreak and spread of the novel coronavirus has caused untold human suffering and economic damage. As of this writing, there were 16,725,039 cases in the United States, according to Johns Hopkins University, with 303,867 those people succumbing to the disease. Signs pointed to an escalation of the situation as new cases, hospitalizations and deaths set single-day records.

The economic repercussions from COVID-19 were equally harsh. At the beginning of 2020, the U.S. economy was, by most measures, in very good shape. The pandemic quickly changed that, with government restrictions and shifts in attitudes triggering disruptions in the supply chain and consumer behavior. Millions of people lost their jobs, businesses retrenched and food insecurity became all too real for many families. The severity of the downturn — the worst since the Great Depression — portends a long, difficult road to recovery.

The COVID-19 crisis thrust the nation’s retail pharmacies into the spotlight. As physicians and hospitals in some parts of the country were turning away all but emergency patients, pharmacies became, more than ever, the locus of community health care. Deemed essential businesses, pharmacies remained open throughout the pandemic, providing customers with needed health care advice, along with prescriptions, over-the-counter medications and other household essentials. Many pharmacy operators quickly stepped up and began to administer coronavirus tests, and the industry is now mobilizing to play a pivotal role in immunizing Americans against COVID-19.

The experience of the last 10 months should solidify and accelerate the transition of the drug store into a true neighborhood health care destination. Building on easy accessibility and the trust that pharmacists have earned with patients, a growing number of pharmacy operators are extending their reach in acute and chronic care. The help people received at the pharmacy during COVID-19 will raise their comfort level in seeking a range of health care services at such retail formats as the CVS HealthHUB, Walmart Health and VillageMD at ­Walgreens.

Another result of the pandemic is increased reliance on digital technology as a means to obtain care. Pharmacy operators report a big jump in patient use of apps and other digital tools to manage their prescriptions, and telehealth services have become a preferred way to consult with a health care provider for routine conditions. From here on, pharmacies need to be ready to interact seamlessly with customers in person or via a variety of digital tools. In addition, the big chains will have to embrace such advanced technology as artificial intelligence and machine learning to keep pace with rivals in the delivery of personalized service to large numbers of patients.

The digital revolution is also making a profound impact on nonpharmacy categories. E-commerce business is surging, with online sales up 53.1% during the 52 weeks ended October 4, according to IRI’s “E-Commerce Dashboard.” The $145.4 billion generated represented 19% of total omnichannel volume, and 49% of overall growth.

For the most part, pharmacy operators were quick to adapt to the migration to online shopping. Click-and-collect services, including the use of drive-thru windows normally limited to prescriptions, proved popular. Many retailers supplemented those offerings with local home delivery or national shipping companies. The omnichannel options enabled consumers worried about exposure to COVID-19 while shopping in-store to continue to meet their health, beauty and other needs, and the experience will surely change the way many of them obtain CPG products after the pandemic has ended.

The extent of that shift will have profound implications for a host of merchandise segments, where the routine nature of purchases renders shopping in person unnecessary. Expect auto-replenishment services to become more prominent, especially in grocery categories, and to a lesser degree in health and beauty care. That, in turn, will free space in the store for new services and a shopping experience centered on trial and discovery, rather than refilling depleted supplies.

COVID-19 has upended a lot of prevailing assumptions in retail pharmacy, creating a high level of uncertainty in the sector. Companies determined to cling to established ways of doing business could find their very existence threatened; those prepared to adapt to new actualities may well succeed in finding ways to make a bigger impact in both health care and retailing.


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