In November 2020, the pharmacy industry got a shake-up: Amazon (NASDAQ: AMZN) officially launched its online pharmacy service, aptly named Amazon Pharmacy. Customers can now order all of their prescriptions (the exception being certain highly regulated medications, like opiods) online and enjoy the benefits of cost savings and free expedited shipping. Amazon will even be providing its subscribers with access to actual pharmacists, who will be available to consult on patient questions.
Clearly, this is bad news for pharmacy chains like Walgreens (NASDAQ: WBA) and CVS (NYSE: CVS), many of which can't afford to lose out on foot traffic. When people come into these stores to drop off or pick up prescriptions, they often don't just hit the pharmacy and call it a day. Rather, they'll shop around or stock up on a few convenience items to avoid a trip to another store. These purchases serve as a key source of revenue for pharmacies just like prescriptions do, but with Amazon now entering the pharmacy space, those so-called impulse or nonmedication purchases could wane in time.
Pharmacies in heavily trafficked areas may not see such a hit now that Amazon has shoved its way in. But stores in remote, sluggish locations may take a serious hit. People in rural areas, for example, who normally have to drive 20 minutes to access a pharmacy, may instead opt to take their business to Amazon, thereby saving time and money on gas.
But still, there's one thing that could save pharmacies from taking too bad a near-term beating: coronavirus vaccines.
Vaccines could be a boon to struggling pharmacies
Amazon may be able to do a lot of things, but one feat it can't master is remotely vaccinating the public. For that, patients will need to walk into actual pharmacies to roll up their sleeves -- which is where stores will get an advantage in the coming months.
Though the rollout of coronavirus vaccines has been slow thus far, as production ramps up, pharmacies could see a substantial uptick in foot traffic as people rush to get their jab. That could, in turn, allow for added revenue at a time when some stores might really need it.
This is good news, not just for pharmacies, but for the shopping centers that count on them to pay rent as tenants. If pharmacies are forced to close, real estate investors stand to lose rental revenue, and at a time when so many retailers are going out of business, filling vacancies is easier said than done.
Furthermore, the need for coronavirus vaccines may not be entirely short-lived. As the virus continues to mutate, patients may need continuous boosters to help ensure they're adequately protected. Plus, it's still unclear as to how long immunity from an initial round of vaccines lasts, so coronavirus vaccines could become the new flu shot -- something needed annually. That could, in turn, help pharmacies stay relevant and draw in customers for many years to come.