CVS is using its 9,800-location store network to play in Amazon’s court, and fend off increasing competition.
Its latest move: A Prime-style membership network hinged on in-store benefits. For a monthly fee of $5, or an annual fee of $48, subscribers can get free one-to-two-day delivery on most prescriptions and other purchases, access to pharmacists around the clock, member-only discounts and a $10 monthly credit on selected items each month. The retailer is testing the program at more than 350 locations in the Boston area right now. It gave no indications about the duration of the pilot or whether it will scale nationally.
It’s a data play and a defensive move against Amazon’s entry into healthcare, which was solidified by its acquisition of online pharmacy PillPack last June.
“It’s a preemptive strike to protect their consumer base from Amazon,” said Jeff Becker, senior analyst at Forrester. “[Amazon] is bringing their supply chain expertise to pharmacy distribution, and with CVS being a leader, it needs to respond to that, and it makes sense to start a prescription delivery solution of their own; rolling it up in a package that looks and smells like Amazon Prime makes sense from a marketing standpoint.”
A CVS Prime-competitor isn’t going to steal Amazon share, but it can help it win where Amazon is less advantaged: in stores. The retailer has been modernizing store locations to improve service efficiency, including moves to put in place Apple-style cashierless checkout. It’s also using stores as delivery hubs. In June, CVS rolled out prescription delivery from all locations along with same-day delivery for a one-time fee of $8.99 in selected urban centers.
With the membership program, new insights will let the retailer better understand the triggers for physical visits.
“They’ll understand what are real trip divers for physical purchases and the drivers for what can be delivered, and what the difference is in basket composition overall,” said Curt Munk, evp and head of strategy at FCB/RED, the retail arm of agency FCB.
Brand trust and a holistic view of the customer from a data perspective are also important advantages over Amazon.
By moving prescriptions to a digital-first, delivery-based format, CVS is simply responding to customer expectations arising from other areas of retail — the “Amazon effect,” where goods are delivered to homes on a regular basis, and services are accessed through mobile devices. But its more cohesive view of overall customer health profiles and the convenience of physical locations can set it apart. Customers can review their prescription records through its mobile app and chat with pharmacists around the clock. CarePass lets members engage in live conversations with pharmacists who have secure access to their prescription history with CVS.
“It’s hard to imagine anything CVS does as not being a data play in some manner; what CVS still has that Amazon doesn’t is a comprehensive, quantified portrait of how Americans manage their health,” said Daniel Black, strategy consultant at Vivaldi. “CVS has an undeniable human advantage over Amazon by offering timely, informed advice, flu shots and other services from credentialed healthcare professionals.”
As CVS’ acquisition of health insurer Aetna moves forward, keeping a close eye on customer health will positively affect the company’s bottom line, said Becker.
“This makes them a payer, and they have a much more vested stake in solidifying their population health efforts, ensuring patients are taking their medications and addressing any barriers to medication access,” he said.