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Target And CVS Vs. Walgreens And Rite Aid: Drugstore Wars Heat Up

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Target has begun converting its in-store pharmacies and health clinics to CVS/pharmacy centers and MinuteClinics, furthering the pharmacy’s footprint expansion, which will total approximately 20% more store locations.

The first pharmacy-within-a-store conversion took place in a Target store in Charlotte, N.C. The companywide process is expected to take place over the next six to eight months, all stemming from CVS Health’s acquisition of all of Target’s 1,672 pharmacies and 70 clinics for approximately $1.9 billion in December 2015.

The transition period brings an intriguing dynamic to the Target-CVS partnership. When the conversion is complete, the retailer will direct customers to use CVS.com and its mobile app to refill prescriptions, while Target gradually discontinues its pharmacy app.

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The store-within-a-store model is becoming more commonplace in the industry as a way for a host retailer to broaden its appeal among new consumers, while enabling the partner retailer taking residence in the space to display a new product or service. However, this partnership appears to be designed to take the pharmacy business operations off Target’s hands completely, while giving free rein to CVS to achieve the pharmacy footprint it wants without having to build its own stores.

Prior to the partnership, CVS Health was already the largest pharmacy by store count, and had the highest revenue from prescriptions in 2015, outpacing second-place Walgreens by $30 million. With Walgreens announcing a pending merger of its own with Rite Aid in October 2015, the combined company is expected to be a neck-and-neck competitor with the CVS/Target combination, essentially turning pharmacy into a two-party race.

The budding rivalry puts more pressure on other retailers’ pharmacy businesses, such as those operated by Walmart and Kroger, as well as Express Scripts and its network of participating retail pharmacies.

Upon expansion, CVS Health is set to enter new markets such as Seattle, Denver and Portland, Ore., according to the StarTribune.

As far as the physical conversion of the Target pharmacies goes, CVS will rebrand the signage in the space, switch internal technologies and systems and retrain all employees. With the rebrand, workers in the former Target pharmacies will no longer wear the retailer’s flagship red and khaki uniforms, instead wearing business casual clothing.

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