CVS Closing Dozens of Pharmacies Inside Target

[Alpha8472]

CVS Caremark is focused on insurance. They don't care about retail or brick and mortar pharmacies.

[ClownLoach]

I think CVS wants it both ways.

They want to be able to close stores where their front end loses a lot of money near a Target and force the customers over to the Target CVS. CVS wins because they can make money on the pharmacy counter and don't have to deal with the money losing front end.

But then when the Target unit is too low of volume (since CVS ran it poorly and drove off customers), CVS wants to close that unit and leave the Target missing a key department expected in a mass merchandise store: a pharmacy.

The more I read that agreement, the clearer it reads to me that CVS is contractually obligated to run pharmacies in every single Target location built with such a facility (plus their HQ). Assuming that is the case, then I would assume that CVS is in breach of contract with these closures and as a result there will have to be some sort of remedy that Target is agreeable to or there will be a court battle. I would imagine that Target will come to the agreement that they can reopen the pharmacies, or this will be the beginning of the end of the entire CVS Pharmacy at Target program and result in Target buying out the agreement. If Target is smart they'll offer to buy out the entire program and sign a long term agreement to accept Caremark plans "in network" with the same rights as CVS. They are interested in brick and mortar, CVS is really more interested in Aetna and Caremark.

Target couldn't handle the distractions a decade ago and was contracting their business; they had closed the Garden Center division, Canada, and sold the Pharmacies, and were testing a fully outsourced electronics store within the store run by the people that operate cell phone kiosks. If I recall correctly the initial Starbucks locations were also tenants replacing Food Avenue (similar to Barnes and Noble before they switched to their own operated Cafe locations, I can only think of one actual Starbucks company owned location still operating in a B&N). Basically, Target was so badly in over their heads after the data breach they were trying to sell off entire sections of their business but then came to the realization that they don't play well with others. Garden and Canada never came back, Electronics outsourcing failed, and now pharmacy outsourcing is crumbling. Starbucks turned into Target operated licenses. Every deal since CVS with one notable exception has brought everything back in house. Also this is not the first bubble in the CVS deal, but rather the latest one. Under that agreement all Clinics inside Target were to be CVS MinuteClinic. That aspect of the agreement has already fallen through as well. There are a number of Kaiser Permanente clinics inside Target now; I haven't seen a single MinuteClinic. So I have to wonder how many other changes have been made since that nearly 10 year old agreement was drafted?

[storewanderer]

That was my understanding of this agreement from the start- basically if Target wanted a pharmacy, CVS was going to be operating the pharmacy in the store. It wasn't up to CVS to decide what store to have or not have a pharmacy in. It was up to Target.

So something changed.

One thing is I am not sure if Target has the competence to take the pharmacy operation back at this point. They will need to do a lot of hiring. Given the number of pharmacists out there who would love to get away from large chain drugstore chains with 5,000+ US Stores, not to name names, and of course available field management due to the downsizing of a currently 1,700 unit and falling large chain pharmacy chain, there should be people available at all levels to take the initiative to join Target to rebuild its pharmacy operation.

There are absolutely some Minute Clinic locations inside Target. I've seen them. I cannot remember where, but I have seen them. It wasn't in CA, NV, AZ, OR, or WA. Maybe it was in MN or IL.

[Romr123]

Amplifying that they are doing this hiring into a (still) relatively attractive retail setting from some relatively less attractive retail situations may well ease the way.

[veteran+]

I think CVS wants it both ways.

They want to be able to close stores where their front end loses a lot of money near a Target and force the customers over to the Target CVS. CVS wins because they can make money on the pharmacy counter and don't have to deal with the money losing front end.

But then when the Target unit is too low of volume (since CVS ran it poorly and drove off customers), CVS wants to close that unit and leave the Target missing a key department expected in a mass merchandise store: a pharmacy.

The more I read that agreement, the clearer it reads to me that CVS is contractually obligated to run pharmacies in every single Target location built with such a facility (plus their HQ). Assuming that is the case, then I would assume that CVS is in breach of contract with these closures and as a result there will have to be some sort of remedy that Target is agreeable to or there will be a court battle. I would imagine that Target will come to the agreement that they can reopen the pharmacies, or this will be the beginning of the end of the entire CVS Pharmacy at Target program and result in Target buying out the agreement. If Target is smart they'll offer to buy out the entire program and sign a long term agreement to accept Caremark plans "in network" with the same rights as CVS. They are interested in brick and mortar, CVS is really more interested in Aetna and Caremark.

Target couldn't handle the distractions a decade ago and was contracting their business; they had closed the Garden Center division, Canada, and sold the Pharmacies, and were testing a fully outsourced electronics store within the store run by the people that operate cell phone kiosks. If I recall correctly the initial Starbucks locations were also tenants replacing Food Avenue (similar to Barnes and Noble before they switched to their own operated Cafe locations, I can only think of one actual Starbucks company owned location still operating in a B&N). Basically, Target was so badly in over their heads after the data breach they were trying to sell off entire sections of their business but then came to the realization that they don't play well with others. Garden and Canada never came back, Electronics outsourcing failed, and now pharmacy outsourcing is crumbling. Starbucks turned into Target operated licenses. Every deal since CVS with one notable exception has brought everything back in house. Also this is not the first bubble in the CVS deal, but rather the latest one. Under that agreement all Clinics inside Target were to be CVS MinuteClinic. That aspect of the agreement has already fallen through as well. There are a number of Kaiser Permanente clinics inside Target now; I haven't seen a single MinuteClinic. So I have to wonder how many other changes have been made since that nearly 10 year old agreement was drafted?

So, what is wrong with Target and these unacceptable decisions and failures? Do they even know who they are anymore? It seems they continue to recruit really subpar leaders. How many decades is it going to take for them to figure it out?

I know their beginnings are not exactly like Walmart but they both are about the same age and Target is so far behind the success of Walmart (). I'm embarrassed for them and they should be ashamed. I say this as a former fan and defender.

[storewanderer]

So, what is wrong with Target and these unacceptable decisions and failures? Do they even know who they are anymore? It seems they continue to recruit really subpar leaders. How many decades is it going to take for them to figure it out?

I know their beginnings are not exactly like Walmart but they both are about the same age and Target is so far behind the success of Walmart (). I'm embarrassed for them and they should be ashamed. I say this as a former fan and defender.

You said it:
"they continue to recruit really subpar leaders"

This is the problem. They keep having to "recruit." Back in the 90's and 00's I think Target leadership was almost all promoted from within. That changed after the Canada mess (yes the company was already in a mess at that point) and they started to do a lot more external hiring. I think that is the period where things started to get even more messed up at Target. And since then it has been one yo-yo strategy change after another. As I keep complaining they cut garden which was a visible category in some markets, and the ongoing cuts to hardlines especially categories like hardware/auto/sporting goods make them not seem like a one stop shop. When Target has 2 poorly stocked/barely even merchandised aisles for hardware/auto and Wal Mart has close to 20,000 square feet of packed high shelves devoted to these departments in supercenters and still a good 10,000+ square feet in Div1 Stores, it is pretty bad. These categories are horribly under-assorted at Target. The ongoing strategy shifts at Target don't do them any favors. City stores, small stores, focus on grocery, stop focus on grocery, focus on Pride Month, destroy all the Pride Month items or move them to a back display, etc. etc. etc.

Wal Mart on the other hand seems to have a heavy promote from within mentality for its leadership. I know they do outside hires but those usually seem to be for some new position or some new initiative (that rarely goes anywhere). The core leadership almost all seems promoted from within and progression from lower leadership positions to higher leadership positions is very visible when you look at their leaders, and running them in various positions throughout the company often including some international position at some point. While Wal Mart seems to talk a lot about changing this or changing that or innovating this or innovating that when you go into their stores they aren't radically different than they were when they opened. Some different items get thrown in and the store layouts change with the resets/repaints they do to the interiors but at the end of the day it is the same basic store selling the same basic merchandise categories it always has. I can't think of one category they've exited other than in-store fish (both grocery service counter and pet department fish) and in some stores (not all, yet) guns, but how many people were buying fish and/or guns at Wal Mart or care about it? Not many. But how many people were buying and probably still want to buy garden, hardware, auto, etc. at Target? Probably quite a few. I know I am one.

[HCal]

I don't think many people consider Target to be a one-stop shop. Walmart is a supercenter where you can get everything you want. Target is, at least in California, viewed as a clothing and household store. No one thinks "let's go to Target!" when they need something for their car. (Perhaps it's different at SuperTargets, I don't have one of those near me).

Target was probably forced to cut assortment in these departments because of low sales. That is probably for the best. Target isn't Walmart and shouldn't try to be. They should focus on their strengths and not spread themselves thin by trying to sell everything. Clothing, home/bath items, a good grocery selection, and a pharmacy are all they really need. If they execute that well, they will have no problem attrating customers.

[pseudo3d]

I don't think many people consider Target to be a one-stop shop. Walmart is a supercenter where you can get everything you want. Target is, at least in California, viewed as a clothing and household store. No one thinks "let's go to Target!" when they need something for their car. (Perhaps it's different at SuperTargets, I don't have one of those near me).

Target was probably forced to cut assortment in these departments because of low sales. That is probably for the best. Target isn't Walmart and shouldn't try to be. They should focus on their strengths and not spread themselves thin by trying to sell everything. Clothing, home/bath items, a good grocery selection, and a pharmacy are all they really need. If they execute that well, they will have no problem attrating customers.

Not really. I've found Target to be good at nothing--their clothing selection isn't good, their grocery department is poor, and the other departments are hit and miss. It's a disaster especially at a time where grocery stores are trying to expand their non-food departments.

With the functional demise of Kmart and Walmart's Division 1 stores disappearing in all but the rural areas, there's a space for a general merchandise retailer with a good selection, but unfortunately, that's not what Target is anymore (and even in the 1990s their hardlines were pretty weak). If they want to go full speed ahead with food (if they want to make Target into a national grocery chain), they need to develop a grocery-only Target...and groceries need pharmacies.

[storewanderer]

I don't think many people consider Target to be a one-stop shop. Walmart is a supercenter where you can get everything you want. Target is, at least in California, viewed as a clothing and household store. No one thinks "let's go to Target!" when they need something for their car. (Perhaps it's different at SuperTargets, I don't have one of those near me).

Target was probably forced to cut assortment in these departments because of low sales. That is probably for the best. Target isn't Walmart and shouldn't try to be. They should focus on their strengths and not spread themselves thin by trying to sell everything. Clothing, home/bath items, a good grocery selection, and a pharmacy are all they really need. If they execute that well, they will have no problem attrating customers.

I think you are right that many people do not consider Target to be a one-stop shop. But a store of its size should be a one stop shop. Otherwise it is a waste of space and not using its square footage effectively. And this is why Target continues to lag behind Wal Mart as a whole. This is part of why Target continues to have issues on the grocery side (though they report they are having great success on grocery in recent years).

Target cut assortment in those departments because they were unhappy with margins and thought they were better off focusing on higher margin seasonal goods and such.

Clothing is not the strength for Target that it is made out to be. Their clothing areas seem to have traffic issues and the amount of kids and women's clothing they send to the salvage operator "FALLING PRICES" in CA/NV which only gets there after Target tries to sell it at 70% off for weeks/months is unreal. Their clothing prices have become very high, department store like, and I think they have been using price hikes to cover up volume declines on the clothing side for years now. Their clothing used to be "cheap chic" and "trend ready." Now it is "mall expensive" and "trashy." Home/baby seems to be a strength because certain competitors went out of business who focused on those categories. Their grocery selection is not very good and pharmacy is lacking.

[storewanderer]

I wanted to see how traffic was at the Reno CVS Target unit this weekend. The problem is the unit is only open Monday-Friday 10 AM to 6 PM and closed entirely Saturday and Sunday. Worse, there is nothing posted on the Target entry/exit doors with CVS hours at all. You have to walk all the way to the pharmacy and then find a little letter sized piece of paper announcing these new short hours for the pharmacy. So Target with one single Reno Store has a CVS pharmacy that operates 5 days per week for a total of 40 hours a week.

Wal Mart in Reno operates 5 stores each with pharmacies. These pharmacies operate 9 AM to 7 PM Monday-Saturday and 10 AM to 6 PM Sunday. So they operate 5 different pharmacies in Reno and these open every day for a total of 68 hours per week.

Target should have a problem with this as well. Their pharmacy tenant cannot be bothered to open the pharmacy 2 days a week and operates it for only 8 hours per day on the 5 days it is open. This is quite a lack in pharmacy services compared to what Wal Mart has. Further, Target gets significantly more weekend traffic than weekday traffic so this is further very lacking to many of Target's customers that the pharmacy is not even open on weekends. When Target operated the pharmacies they were open 7 days per week and into the evening.