A friend of mine recently told me a story that illustrates the challenges national chain drug stores face in the e-commerce era.

Todd Maute

Her local pharmacy texted her to let her know that her prescription was ready. She dropped everything, hopped in the car, drove to the store, waited in line (all while wearing an uncomfortable mask) — and then learned that the text had been sent in error. In fact, the prescription would be ready later that afternoon.

“That night I got something from Amazon about its online pharmacy offering,” she explained. “When I checked the prices, they were 70% cheaper. It’s pretty tempting when you consider that your prescriptions will come right to your door.”

It’s clearer than ever that e-commerce competition threatens to undermine chain drug stores’ traditional business model, in which the brick-and-mortar pharmacy (as opposed to the rest of the store) is the primary driver of traffic and sales.

Escalating disruption

The problem is only going to get worse: According to researchandmarkets.com, U.S. online pharmacy revenues are expected to grow at a strong compounded rate of about 19% annually from now through 2026. One Bloomberg headline from this past June says a lot about the rising intensity of competition here: “Walmart Offers Low-Priced Insulin to Counter Amazon’s Drug Push.”

If we can count on that e-commerce arms race to keep on escalating, what can national chain drug stores do to defend their brick-and-mortar channels? Cheap insulin is one (commendable) approach. Another is to ramp up the shopping experience and drive greater loyalty by using store brands as the centerpiece of an all-encompassing wellness strategy.

Indeed, some national chain drug stores have already made a good start on this score. They aim to close the gap between their health care-focused, better-for-you brands and the sometimes unhealthy (or just ho-hum) products in their stores.

Some of these realignment efforts are well established. For instance, CVS’ Gold Emblem Abound has offered the likes of Unsalted Whole Cashews, Organic Apple Cider Vinegar and Organic Unrefined Extra-Virgin Coconut Oil since 2014.

But last year CVS made an impressive leap forward with CVS Health Live Better. The new line offers more than 80 vitamins, supplements, probiotics, and other health and wellness products, with mostly recyclable packaging, as well as ingredients like elderberry, ashwagandha, turmeric, kelp, maca, ginseng and charcoal.

Naturally (pardon the pun), these SKUs bear labels like “USDA-certified organic,” “non-GMO project-certified,” “gluten-free,” “cruelty-free” or “vegan.” CVS even went so far as to point out that its new bamboo toothbrush was “made from Moso bamboo, which is not part of a panda’s diet.”

I love it — and not just because I’m part of the industry. As a longtime vegan who is interested in preventative approaches to integrative health and wellness, I’m now finding a better selection at my local drug store. Why should I have to drive to a specialty grocer? Couldn’t my local chain drug store, located just two minutes from my house, give me the same products related to diet, exercise and a healthier lifestyle?

Moreover, the corner health food stores of 20 years ago couldn’t yet benefit from a fast-emerging opportunity in this space today: Tech that puts more control into consumers’ hands with wearables that track their steps, heart rate variability and even, coming soon, real-time blood glucose levels. Traditionally, you went to a pharmacy because a doctor said you needed a prescription drug. Now the major national chains can use their proximity to provide a wide array of new products and services in self-health.

The right move

Distinctive store brands — especially those that offer strong value propositions and are drawn from emerging consumer insights and trends — are a powerful tool in these efforts to give people additional reasons to walk through the door. CVS, for one, is clearly on board: This past May, the company announced the launch of more than 150 brand additions “that shoppers won’t find anywhere else.”

Even with all the focus on diagnostics, flu shots and the like, the store experience doesn’t have to be clinical — drug stores can add a lot of warmth, color and feeling by introducing better-for-you brands in categories like self-care, consumables and beauty.

Walgreens Boots Alliance’s No7 Beauty Company, announced this past April, is a case in point. The new initiative brings the likes of No7, Liz Earle Beauty Co., Botanics, Soap & Glory, Sleek MakeUP and YourGoodSkin under one banner. With this elevated platform, WBA will be able to create a more unified experience at shelf and other touchpoints. The brand promise is to create “beauty brands for every skin type, ethnicity, age and texture, that everyone can trust.”

It’s easy to imagine WBA using this platform to further evolve some of these brands. For example, the retailer Buff City Soaps is growing amazingly quickly across the United States, with dozens of operating and planned stores. The pitch is plant-based soaps, free of harsh ingredients, handmade daily. With throwback shave bars, beard care products, foaming hand soaps and the like, newly opened Buff City Soaps locations tend to have lines stretching around the block.

WBA’s Botanics is also all about plant-based approaches. Is there an opportunity here to beat Buff City Soaps on price and proximity? National chain drug stores have already shown the ability to do some disrupting of their own: CVS’ new Goodline Grooming Co., announced this past May, could be seen as a run at Dollar Shave and its ilk, as could Kroger’s men’s personal care brand Bromley’s.

Next steps

In visiting national chain drug stores around the country, I am starting to notice a shift in the overall vibe. On one local visit, I said to myself, “This part of the aisle actually feels almost homeopathic.” What’s doing the work here? Well-executed private brands focused on niche areas of health, wellness, beauty and self-care.

In one store, which had undergone a light remodel, the experience felt far less mainstream, with lighting, shelf angles and merchandise presentation that felt more like what you’d see in a bath and body store. It’s a direction that expands the opportunity to elevate the store’s private brand offer.

I’d like to see the national operators take this even further by rationalizing mainstream consumables and other products that are out of step with their health-and-wellness-oriented identities. With a broader array of their own specialty seltzers, plant-based soaps, veggie chips and the like, they stand to close the brand-product gap even further. Better-for-you alternatives — think baked organic potato chips or dry-roasted, unsalted cashews — can still provide consumer choice without running afoul of chains’ stated principles.

Meanwhile, national drug stores have broad potential to drive more traffic and sales by taking elevated approaches to wholly new categories. Pet care is a great example. Despite the proliferation of specialty (and often overly expensive) pet retailers around the country, this category continues to be quite small at most drug stores. Find a way to compete on brand, price and quality, and your private label program could score a big win.

Likewise, operators could benefit by getting more segmented with different sections of the store. Think Gut Health and Immunity Enhancement rather than the comparatively bland Vitamins & Supplements.

And it must be said: All over the country, people are able to buy apples, bananas, oranges, peaches and plums at their local gas stations, but not yet at their local drug store. When will that change?

As they build private label programs that address a wider array of consumer wants and needs, national chain drug stores will certainly face some challenges — such as greater requirements for refrigerated supply chain infrastructure or new manufacturer relationships. But their incredible proximity, as well as the buying power that comes with their scope and scale, also gives them huge advantages.

As we all strive to live healthier lives, drug stores stand to build tremendous loyalty by transforming their brands in ways that answer that call.

Todd Maute is a partner at New York-based brand strategy and design agency CBX. He can be contacted at [email protected].