The coronavirus pandemic has made pharmacies all the more relevant. Not only have pharmacies served as coronavirus testing hubs, but they've also played a huge role in getting the U.S. public vaccinated. And with talks of booster shots being needed in the fight against COVID-19, pharmacies are likely to solidify their staying power in the coming years.
That's really good news for real estate investors. Shopping centers commonly rely on pharmacies to serve as anchor tenants, and now, even those located in less trafficked areas have reason to keep their doors open.
But Amazon (NASDAQ: AMZN) isn't about to sit back and let pharmacy chains enjoy that glory. Now it's considering opening its own physical pharmacies, which could spell trouble for a number of shopping center mainstays.
Digging deeper into the pharmacy industry
In late 2020, Amazon launched an online pharmacy service, which allows customers to order medications at discounted prices. Those who use Amazon Pharmacy enjoy perks like free two-day shipping as well as access to actual pharmacists in case questions arise.
That news wasn't exactly stellar for pharmacy chains, which don't want to lose customers to Amazon. And now, if the online retail giant expands to physical pharmacies, it could be a major shake-up for chains like Walgreens and CVS.
So far, Amazon hasn't made any concrete plans to open physical pharmacies. Rather, it's an idea being floated and discussed.
But one seemingly easy solution for Amazon could be to test out pharmacies within its Whole Foods supermarkets. Many supermarkets have a pharmacy already, so this certainly wouldn't be a stretch. Amazon may also seek to open stand-alone pharmacies outside of Whole Foods, which could take a lot of business away from established chains.
A larger customer base
Setting up physical pharmacies could help Amazon grow its customer base substantially. While its online pharmacy service is a great solution for people who take medications to manage chronic conditions, it's often the case that customers need prescriptions filled on a same-day basis -- such as to address viruses or infections that strike out of the blue. In those situations, Amazon's otherwise reasonable two-day shipping falls short, and so if the online giant really wants to corner the pharmacy market, it will need to open actual stores where people can walk in and wait for a prescription to be filled.
A mixed bag for real estate investors
If Amazon expands into the physical pharmacy market, it could end up being a mixed bag for investors. On the one hand, shopping centers could gain a new tenant -- one with vast financial resources behind it. On the other hand, Amazon's physical pharmacies could drive some existing ones out of business, so all told, real estate investors may not gain or lose shopping center tenants at the end of the day, but rather, break even.
It will take some time for Amazon to build out pharmacies, and it will likely start out by testing just a handful of stores before going all in. But Amazon has a tendency to be successful at whatever it does, so if it sets out to shake up the pharmacy market, there's a good chance it eventually will.