The Boston Globe the other day had a really interesting story about how CVS's ambitions to become a healthcare powerhouse have gone largely unrealized.
"CVS’s vision for now remains largely aspirational," the Globe writes. "The company faces challenges — some born of its own success — with no easy solutions."
The Globe writes that "the economics underpinning the company’s core retail business have been eroding. As a result, the company is paradoxically generating record revenues but much smaller profits. CVS has also acknowledged an 'unprecedented' labor shortage among pharmacists and other staff, which has led to some customers complaining about longer lines, unanswered phones, and unclean stores … Experts say these problems undermine the company’s efforts to forge a sophisticated health care business beyond a chain of stores that sell candy, shampoo, deodorant — and, of course, all manner of pharmaceuticals."
DeAnn Campbell, who heads the retail practice for AAG Consulting, puts it this way to the Globe: “Health care is about impressions. You need an environment that feels clean and safe. If they can’t even clean a bathroom, how can they present themselves as a provider of health care services?”
Michael DeAngelis, a CVS spokesperson, concedes that there is a “subset of stores that require additional investment," but argues that "challenges that are specific to retail is not an impediment to our ability to provide high-quality health care delivery and primary care services."
- KC's View:
I've actually been making this argument for some time now - that the priorities of a retailer are not necessarily in synch with the priorities of a health care provider. CVS may want to believe that this only is the case in a small subset of stores, but I never have been in a CVS - or a Walgreens, for that matter - that made me want to do more there than pick up a prescription or pick up some OTC product or a package of Twizzlers. And, to be honest, I've switched my Rx business over to a local independent that is a lot more responsive, and can pick up most of the OTC stuff via Amazon.
CVS's ambitions may be achievable, but I think it is going to be a long and rocky road.
And one more thing - CVS's failed ambitions should be enough for regulators to stop any subsequent acquisition attempts by the retailer.