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Changes loom as industry starts new year

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The new year has begun inauspiciously for chain drug retailing, an industry that is still trying to assess the results of the just completed Christmas selling season. By all accounts, December was a month of no great accomplishments, even if it was not the disaster some observers predicted.

Now it’s on to 2016, and the initial forecasts have the industry entering a period of consolidation following a hectic period of acquisitions and the ascension of new faces to the industry’s front ranks.

Initially, the major event, scheduled to be finalized in the second half of 2016, is the completion of the acquisition of Rite Aid by Walgreens Boots Alliance. In many ways, it is the most dramatic tie-up the chain drug industry has seen since, well, since forever.

cdr-filler-opinion-750For several years, the Big Three of chain drug retailing have been Walgreens, CVS and Rite Aid, though through much of that period Rite Aid’s survival was problematic. That chain’s turnaround, then, has to be rated one of the most dramatic chain drug stories of this new century, if not the most ­dramatic.

Now, Rite Aid, in the form that the industry recognized it, is about to disappear. In its place will come … what? The Rite Aid name will remain … possibly. Its format will be intact … maybe. But its ranks will thin, and the Walgreens emphasis will shortly be felt. So Rite Aid, the drug chain that has been as familiar as any in the industry, will cease to exist.

In its place will come … what? Walgreens will consolidate its position as one of the most dynamic retailers in chain drug retailing. Its store count, however it’s tallied, will increase. Its market penetration will grow. So too will its domination in many major American markets. And Walgreens will surely strengthen its position in its battle with CVS for chain drug dominance.

This development aside, chain drug retailing will settle down a bit. Still outstanding is the question surrounding several senior Rite Aid executives, Who, if any, will join Walgreens? Who will retire? Who will go on to new endeavors? Who will gravitate to other retailers not currently among the chain drug community? The ability of some is beyond question. But will these abilities find a place in chain drug retailing? It’s too soon to know. Indeed, even the Walgreens people generally do not yet know if their personnel ranks will swell or remain the same.

Beyond Walgreens-Rite Aid, the industry faces many of the same questions. Initially, the NACDS Annual Meeting looks strong. But it always does at this stage. Similarly, the association’s Total Store Expo event, now settling into early middle age, still faces doubters and second-guessers, as these things generally do.

Those events aside, NACDS remains an organization in transition, one with a growing need for new members, and an urgent demand to stretch its retail membership beyond the traditional chain drug ­boundaries.

Indeed, at a time when other retail trade associations appear to be locked into self-limiting membership qualifications, NACDS has an opportunity to break out of the pack — if it can shed its traditional pharmacy requirement and open membership to nonpharmacy ­retailers.

Elsewhere, other industry organizations face similar restrictions to growth, restrictions tied to definitions that no longer apply in an industry that’s changing dramatically. Clearly, the time has come for the emergence of a new kind of industry association. For that to happen, however, the past must be shed, at least in so far as limiting its access to new ­membership.

In terms of individual retailers, the chain drug community is collectively studying such mass retailers as Walmart, Target and some grocery chains to determine if the new directions they have chartered will exert a negative impact.

Certainly Target, which last year sold its pharmacy component to CVS, will offer a different competitive challenge in a retailing community that has, for perhaps too long, focused on pharmacy as the defining competitive component.  And Walmart is now operating with some new personnel faces, faces with a chain drug tint.

So 2015 is over — and 2016 is here, complete with many challenges, some new, others not so new. Only time will tell what the outcome will be.


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