Kroger Offloading Specialty Pharmacy Suggests Sometimes Less Is More

With Kroger selling off its specialty pharmacy business, it seems that retailers’ efforts to pack more and more into their stores may not always be the right move.

The Kroger Company announced plans to sell the business to CarelonRx, a subsidiary of Elevance Health, earlier this week, with the sale expected to close in the second half of the year.

“As part of our regular review of assets, it became clear that our strong specialty pharmacy business unit will better meet its full potential outside of our business,” Colleen Lindholz, president of Kroger Health, said in a statement.

Many major retail grocers have added healthcare arms to their businesses. Walmart and Costco, for instance, both have pharmacies, as do some smaller supermarket companies such as Publix and H-E-B.

Yet Kroger is not the only company in the space pulling back on the category. Late last summer, for instance, southern supermarket chain Winn-Dixie began shuttering pharmacy locations, AL.com reported, in the leadup to a planned merger with Aldi, which does not have a pharmacy business.

In the past, the idea has been that by offering pharmacy services, grocers and general retailers could provide added convenience to their customers, enabling shoppers to buy their day-to-day goods while also getting their prescriptions filled in the same location, saving them time and effort.

Plus, having a pharmacy could attract more customers to the store, potentially increasing foot traffic and leading to additional sales. Adding a pharmacy allows these retailers to diversify their product and service offerings, making them more of a one-stop shop for consumers’ needs.

Additionally, providing pharmacy services could theoretically enhance customer loyalty and retention. Once customers become accustomed to filling their prescriptions at a particular store, the concept goes, they may be more likely to continue shopping there for other items as well.

Kroger’s latest move may serve as a testament to the model used by Target, which partners with CVS on in-store pharmacies rather than running its own business. The collaboration enables the retailer to benefit from the foot traffic without having to sink the cost into operating its own healthcare subsidiary.

A similar ethos has been many retailers’ store-in-store expansions outside of the pharmacy space. Kohl’s, for instance, is opening up in-store baby care shops in partnership with Babies R Us. Lowe’s has expanded its in-store pet shop efforts with Petco. Walmart has been introducing new in-store restaurants. Macy’s has added more Claire’s jewelry shops to its stores.

Offering specialized products or services within the main retail space provides customers with a more comprehensive shopping experience. It allows them to fulfill multiple needs in one location, improving convenience and satisfaction.

These moves to link two previously disparate brick-and-mortar occasions come as consumers continue to demand on-site experiences. The PYMNTS Intelligence study “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar™ Shopper and What It Means for Merchants,” commissioned by Visa Acceptance Solutions and drawing from a survey of nearly 14,000 consumers across seven countries, found that 71% of shoppers prefer to interact with stores when they shop.

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