The online retail giant moved into the roughly $800bn U.S. grocery market in June by buying Whole Foods Market Inc. Drugs, a $450bn industry in the U.S., are likewise most often sold from brick-and-mortar stores. Shoppers filling prescriptions frequently pick up toiletries, beauty supplies and dish soap - all retail items Amazon already sells. And the distribution chain for drugs has lots of middlemen whose markups Amazon can seek to undercut.
No wonder shares of drugstore chains CVS Health Corp. and Walgreens Boots Alliance Inc. have dropped sharply since analyst speculation about Amazon entering the pharmacy business intensified last month. Last week, CVS Health said it would begin same-day delivery in several cities in early 2018, an apparent defensive move. Amazon has never commented on its pharmacy ambitions.
Drugs, which are light and don’t require in-person selection, “are a perfect match” for Amazon, said SSR Health analyst Richard Evans in a recent report. Here are six ways the retailer could overturn the American pharmacy market.
1. Use its shipping power to destroy rivals
Amazon has a massive logistics operation and could easily start its own mail-based drug-delivery business, cutting out drugstores and distributors in the process.
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