This week I checked in with retail analysts to unpack the changes happening in American drugstores and how they could impact the beauty and wellness industries. This includes the “drugstore deserts” popping up across the country due to the closure of 586 CVS locations, 408 Rite Aid locations and 259 Walgreens stores in 2024 alone.
How will the mass beauty and wellness industries respond as “drugstore deserts” spread across the country?
2024 was a bad year for American drugstores. According to experts Glossy spoke to, 2025 could be even worse.
In 2024, CVS closed 586 locations, Rite Aid closed 408 stores, and Walgreens closed 259 locations, which has created “drugstore deserts” across the U.S., according to data from Coresight market research company.
But this is just part of the picture. CVS announced in October it would lay off 2,900 employees as a cost-saving measure, which is part of its plan to close 900 of its more than 9,000 stores between 2021 and 2024. As of August, it had closed 851.
Meanwhile, Walgreens plans to close 1,200 stores of its 8,200 stores in the next three years, and Rite Aid, which emerged from its 2023 bankruptcy filing in September, is plagued by debt and ongoing opioid litigation, according to Coresight.
“Drugstores and pharmacies are struggling from various ends, be it reimbursement pressures [from drug manufacturers], [pharmacist] labor shortages, cautious consumer spending, a changing consumer landscape, competition from online pharmacies, [or] non-specialty pharmacies such as grocery stores and Walmart’s pharmacy,” Aditya Kaushik, an analyst at Coresight market research, told Glossy. “Overall, the consumer behavior and landscape [around pharmacies] is changing after the pandemic.”
According to December 18 reporting by Forbes, legislation in Congress to regulate pharmacy benefit managers, which act as middlemen between drug companies and consumers, could be good news for pharmacy chains like CVS, Walgreens and Rite Aid. Earlier in the week, President-elect Donald Trump said, “We’re going to knock out the middleman,” in reference to PBMs. This could help lower costs.
Still, according to all of the analysts Glossy spoke to, regulation cannot right-side the larger issue: Pharmacies are too big to support sales on non-drug items, labor costs are too high, and the aging business model cannot win when set against changes in consumer shopping habits.
This includes a change in consumer reliance on next-day delivery through Amazon and Walmart. Meanwhile, in-person shopping in drugstores has become more inconvenient due to an increase in valuable goods locked in plastic cases, under-staffed stores and an overall lack of fresh merchandise.
“The issue with Walgreens and CVS and those types of businesses is that consumers change,” Howard Meitiner, former CEO of Sephora and current managing director at Carl Marks Advisors, told Glossy. “Distribution has changed and technology has improved. Everyone wants to do things in the most efficient way, and the only reason people will go into a retail store is if it’s convenient, in terms of their local community, or it’s providing an experience or satisfaction you cannot get online.”
Meitiner told Glossy that drugstores must right-size their businesses to survive, which includes cutting costs by shrinking stores and reducing cheap merchandise, like toilet paper, that can be purchased online and cannot support the rising cost of commercial real estate. “The stores are way too big,” Meitiner said. “And you can buy 90% of what they sell at Walgreens online.”
“The secret of the drugstore industry is that they made a ton of money in their urban stores for years, where their stores were more of a convenience store for urban young women than they were a healthcare destination for older Americans buying prescriptions,” Bryan Gildenberg, founder and CEO of Confluencer Commerce business consultancy firm, told Glossy. Today those shoppers are buying online.
“I’m old enough to remember when the minimum wage in the United States was $3.35 an hour; that’s when all these stores were designed,” Gildenberg said. “That’s how the square footage layout and staffing model were designed. Now it costs $25 an hour [all in for a worker], and the sales haven’t gone up by 6 times in that time.” But moving a pharmacy into a smaller location is just as challenging as justifying the current space.
According to Coresight’s Kaushik, beauty and personal care sales at American pharmacies only make up around 4% of American pharmacy sales, while “major sales come from [over-the-counter] medicines and vitamin supplements, which make up more than a quarter of total sales,” he told Glossy.
According to Jessica Ramirez, senior research analyst at Jane Hali and Associates market research firm, masstige, mass and value beauty and wellness brands have found surrogates for the drugstore closures within off-price stores, like TJ Maxx and Ross; big box stores like Walmart and Target; and beauty retailers that offer mass and wellness products, like Ulta Beauty.
Wellness, having lost part of its footprint in drugstores, will continue to grow within these stores, she said.
“In the past three years, right around the pandemic, is when we started to see wellness come under the beauty umbrella,” Ramirez told Glossy. “And it’s only going to grow.” As previously reported by Glossy, off-price chains like TJ Maxx and Marshalls stock many mass and value wellness products, like supplements and products for relaxation, while Ulta Beauty has been doubling down on wellness offerings for the past year with a new influx coming in 2025.
Earlier this month, the Wall Street Journal reported that Walgreens could be selling to private equity firm Sycamore Partners. If it happens, Sycamore Partners is likely to break up and sell various parts of the business, Gildenberg told Glossy. It did the same with Shields Health, a specialty pharmacy business it purchased in 2022 for $1.37 billion.
“It wouldn’t surprise me to see Walgreens’ and/or CVS’s retail business end up merged with something else,” Gildenberg said. “If antitrust consideration wasn’t an issue, the most logical retail business in the physical retail business for Amazon to buy is Walgreens because Amazon’s got aspirations in both the healthcare and urban retail space.”
Earlier this month, a potential merger between Albertsons and Kroger was killed due to antitrust laws, but Gildenberg told Glossy that things are likely to change in 2025. “The merger fell apart because it was filed at the wrong moment in history,” he said. “The incoming head of the FTC has a different attitude toward mergers and acquisitions.”
