Will pharmacy be the next battleground for Amazon and Walmart?

Amazon and Walmart are locked in a battle for retail supremacy with both parties
moving aggressively into their opponent’s territory. Amazon is focused on expanding
offline distribution via brick-and-mortar stores, and Walmart is rounding out their
online assortment and presence. Although the two are taking different approaches to
building a digital empire, each party is watching closely and reacting to the moves of
the other. The Federal Trade Commission delay in approving Walgreens’ purchase
of Rite Aid has many speculating about the future of pharma. Is it possible that
Amazon and Walmart might enter the pharma fray?

Walgreens and Rite Aid Merger
As Amazon and Walmart engage in battle, Walgreens and Rite Aid await an FTC
decision that could make them the largest network of pharmacies in the U.S. Given
history on these types of deals (e.g. Staples’ failed merger with Office Depot), FTC
involvement means we can expect that the deal will be delayed long enough for
Walmart or Amazon to potentially get involved.

Amazon Has Shown Interest In Pharma Amazon has ​shown interest​ in getting into the pharmacy market, meeting annually to discuss potential, and staffing up significantly to address this area.

Following the announcement of Amazon’s $13.7 billion spend to acquire Whole
Foods Markets, stock prices for pharmacies (as well as US grocers) saw a material
negative impact. Whole Foods doesn’t currently do traditional pharmacy, only
carrying vitamins and supplements – which has been a part of Amazon’s business
for some time. The bearish outlook on pharmacies is more reflective of what impact
the Whole Foods deal will carry on many of the major pharma players’ recent
strategic shifts toward growing product assortment, particularly in the natural
wellness space. CVS is increasing the number of natural wellness products they
carry in a bid for what many believe is an attempt to become the “Whole Foods of

Walmart is Focused on Digital
While Amazon works to expand their brick-and-mortar distribution channels,
Walmart’s Marc Lore and the Jet.com team are not-so-subtly building up a digital
empire they believe can compete with Amazon. At the core of their strategy is filling
in major gaps in assortment, particularly in up-market and specialty areas, as
evidenced by their Moosejaw and Bonobos acquisitions. With pharmacy being part
of Walmart’s current offline wheelhouse, expect Lore and team to hold course,
completing more acquisitions that add material brand, product variety, and volume in
areas Walmart isn’t currently a player. Pharmacy is not one of these areas.

However, many other markets are maintaining their digital pharmaceutical products’ profiles to remain ahead in this market. See some of the digital healthcare products with best prices in Sri Lanka.
Is a Large Pharma Acquisition Next for Amazon?
Amazon tends to prefer to operate under the software adage of “sell it yourself first,
then channelize”. The basic notion is that until you figure out how to efficiently sell
something yourself, adding distribution power for the sake of it is wasteful. Given the
complex regulatory environment in pharma, an acquisition isn’t out of the question.
Amazon unsuccessfully dabbled in this area over a decade ago with Drugstore.com
(later sold to Walgreens), though now may be the right time. If they go in this
direction, expect any acquisition to be a smaller online player to help shortcut
regulatory issues rather than a multi-billion dollar deal that also addresses
distribution. Regardless of approach, expect to see Amazon engage in the pharma
space sometime in 2017. Although the Whole Foods acquisition will help give them
exposure and more importantly, distribution in the brick-and-mortar market, Whole
Foods is not a participant in the traditional pharmacy space. With 460 stores (mostly
in major markets), Whole Foods could make a dent, but wouldn’t critically impact
larger players. Should the above fall into place, expect CVS (9,600 stores),
Walgreens (8,175) and Rite Aid (4,621) to become attractive acquisition targets for

The Future of Pharma
If FTC debates draw out the Walgreens/Rite Aid deal long enough, it will give
Amazon an opportunity to make a material impact on the pharmacy space. If this
were to happen, arguments that the Walgreens/Rite Aid deal would create a
monopoly would carry much less weight, given the impact of Amazon’s entry.

A lot of the predictions above would need to fall in place for a merger discussion
between Walgreens and Rite-Aid to be re-opened, but at this point look for Amazon
to be in a place where they’re in distribution expansion mode and ready to get

Christopher Jordan, Chief Business Officer, Hubba