Why are so many Rite Aid and Walgreens drugstores closing in the US?

Rite Aid, the third largest standalone drugstore chain in the United States, announced that it had filed for Chapter 11 bankruptcy on Sunday. Heavily indebted and facing over a thousand lawsuits related to its part in allegedly fueling the opioid epidemic it will now have some protection and be able to halt the legal complaints against it.

But like its competitors, Rite Aid has been struggling from competition elsewhere as the dynamics of the business change after a period of overexpansion.

The Philadelphia-based company has around 2,200 locations in 17 states. A few weeks prior to filing for bankruptcy, as the company negotiated with creditors, it proposed closing up to 500 stores, with one group of bondholders pushing for even more to be liquidated according to reporting for the Wall Street Journal.

This comes after Walgreens told shareholders that it would be further downsizing its brick-and-mortar footprint by an additional 150 stores by August 2024 on top of 200 that had been tagged for closure in 2019. CVS placed on the chopping block even more stores, with plans to close 900 by 2024.

Further reading:

Why are so many Walgreens and Rite Aid drugstores closing in the US?

The majority of drugstores’ sales come from filling prescriptions with the remainder coming from the front of the store selling everyday convenience goods. In the case of CVS the breakdown is around 75 percent to 25 percent, respectively, according to Forbes. However, customers are finding it more convenient and pleasant to pick up their prescriptions at grocery stores or other big-box stores where they can buy a lot of the same products and more while they wait for their order to be filled.

Customer ratings of their experience while filling a prescription is usually higher at these non-drugstore alternatives according to a 2023 JD Power study. Also, neighborhood pharmacies, which were decimated by the drugstore chains, are gaining appeal once again for their personalized service.

And then there is the perception that other stores do a better job or have more customer loyalty for selling different products that drugstores are trying to flog at the front of the store. Furthermore, while each chain has tried to differentiate themselves from the other, they all sell more or less the same items and provide the same service making them interchangeable in the view of customers.

Theft has also been sighted as a reason behind some the drugstore chains’ woes. The products that they carry from personal care to cleaning products were high-demand items that were easy to turn into cash making drugstores prime target for the organized retail crime spree in 2020. In response, the stores put their products behind glass, but the theft-prevention measure turned off customers further eroding retail sales.