Health Care

April 28, 2013

CVS’ Wichita stores will mean more options for customers

CVS officially enters the Wichita market Sunday with the first of several stores, and customers are likely to feel the benefit even if they don’t shop there.

CVS officially enters the Wichita market Sunday with the first of several stores, and customers are likely to feel the benefit even if they don’t shop there.

“The more competitive a market it is, the better off it is for the customer,” said manager Rodney Brockhoff.

He’s the store manager for the first CVS at the southwest corner of 13th and Maize Road and will help oversee the stores opening in July at Central and Oliver and 21st and Amidon.

“We do have others in the pipeline,” said CVS spokesman Mike DeAngelis.

He won’t say how many.

“Wichita was one of the few remaining … top 100 drugstore markets where we didn’t have a presence,” DeAngelis said.

“We’re bringing the largest pharmacy store in America to Wichita,” Brockhoff said. “We’re here to improve people’s health.”

Rhode Island-based CVS Caremark has more than 7,400 stores nationally and in Puerto Rico and more than 600 MinuteClinic walk-in clinics, though there won’t initially be any in Wichita.

That compares to Illinois-based Walgreens, the most direct competitor to CVS in Wichita, which has more than 8,000 stores nationally and in Puerto Rico and almost 370 Take Care Clinics.

Jim Hertel of Illinois-based Willard Bishop, a food and consumables consultant, said both chains are “robust and important players” with subtle differences.

“They’re probably slightly divergent in strategy,” Hertel said. “Walgreens is doing a lot with fresh foods.”

That includes fresh fruit and premade sandwiches.

“The benefit of fresh food … is it can drive even more trips,” Hertel said. “It starts to promote what I would characterize as different usage of the store, almost more like a convenience store.”

He said front-of-store sales have higher margins than prescriptions.

“They’re not minding that you’re spending time in the food part,” Hertel said.

The sight lines to the pharmacy are not as clear at Walgreens as at CVS.

“CVS is more focused on presenting themselves as maybe a part of a health care solution,” Hertel said.

A wide aisle “kind of meanders back toward the pharmacy so your sight line is immediately drawn toward the pharmacy.”

Hertel said the stores are similarly priced.

“They’re actually pretty aggressive on the high side in terms of their pricing. A lot of times our supermarket clients are astounded by the level of prices that exist.”

Supermarkets often have significant price advantages, he said.

“It’s a testimony to the power of that format and the brand equity of Walgreens and CVS that they’re able to sustain higher prices.”

Hertel said it makes sense that CVS would bring a number of stores to match the Walgreens presence in the greater Wichita area.

“There’s a notion of having a critical mass, especially from a … supply chain standpoint,” Hertel said. “A lot of this … will come down to a real estate strategy and the execution of it.”

He said one approach is to understand driving patterns and where growth is in the city and then position stores accordingly. In other cases, CVS could want to locate on the same corner as competitors.

“If you’re right across the street from somebody, then you’re pretty much going head-to-head with them and pretty much daring them to react.”

Healthy competition

The ramifications of another major chain entering the city are far-reaching for customers, competitors and the retail industry in general.

“It’ll be interesting to see what happens,” said Cindy Claycomb, Wichita State University professor of marketing.

Even though there will be more stores, Claycomb said the market isn’t likely to grow.

“To get customers, CVS is going to have to attract customers from their competition,” she said.

Claycomb said that could hurt marginal stores or mom-and-pop shops.

“It could also, though, lead to price competition, which could be good for customers,” she said. “Initially, they’re going to get more options.”

CVS may capture some areas Walgreens isn’t in.

“It still probably means that somebody that’s already serving the market is going to lose customers,” Claycomb said.

Other companies nationally even outside of the drugstore business are likely to notice CVS’s entry into the market.

“If we get more of those chains like that, it does help,” Claycomb said. “Retailers will look at … what’s already here.”

Walgreens spokesman Robert Elfinger said the company isn’t going to change in response to CVS.

“We’ll continue with our strategy and operating our store locations and providing good customer service,” he said. “We’ll focus on our strategy.”

Elfinger said the chain has been offering more fresh food items lately.

“We stock a lot of … local products that have a high demand in local areas,” he said. “We have local purchasing power as well.”

Like CVS, though, Elfinger said the Walgreens goal is to help people with their health and daily living.

“Roughly two thirds of the Walgreens sales … are in the pharmacy,” he said. “We compete with national pharmacies, grocery stores and independent pharmacies across the country.”

In some stores, managers organize community events related to health.

DeAngelis said 70 percent of CVS’s retail business is retail prescriptions.

“The core of our business is our pharmacy.”

He said the company also has a mail service pharmacy.

Hertel said the health of CVS and Walgreens is good.

“They were on a tear until … four or five years ago,” he said. “For each of them, growth may have slowed a little, but it has for a lot of different people.”

It may be gearing back up. DeAngelis said CVS plans to open 100 stores a year for the next several years.

“We are in an expansion phase.”

He said CVS will continue to look for easily accessible, highly visible locations.

“Those are the attributes we look for.”

DeAngelis acknowledges that that’s what Walgreens seems to want, too.

“The end game for that is we wind up on opposite corners from one another.”

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