Amazon Disrupts High Street Pharmacies

Here’s a fake fact you often overhear in New York. The city’s popular and ubiquitous pharmacy chain, Duane Reade, is named after the intersection of Duane Street and Reade Street in lower Manhattan.

I believed that for years, until I was taking a stroll one day and realized Duane and Reade actually run parallel. There is no intersection. (True version, the chain was born in a warehouse on Broadway, between Duane and Reade.) This morning, however, I’m wondering whether this story will make any sense in a few years’ time.

“You used to buy medicine from a store?”

In one simple move, Amazon just disrupted the whole concept of high-street, brick and mortar pharmacies. Okay, mail-order pharmacies have been around for years, but with its acquisition of PillPack, Amazon puts its almost infinite muscle behind a direct home-delivery pharmacy service. And that was enough to wipe $12 billion off the value of Rite-Aid, CVS, and (Duane Reade-owners) Walgreens.

No small potatoes. The wonder is that it hadn’t already happened. Following the model of disrupting high-street book stores, Amazon already pounced on the grocery delivery market with AmazonFresh. But books and food — fresh food, at least — have one thing in common. There remains a significant segment of consumers who like to flip the pages, or squeeze the tomatoes before they buy. 

That’s one reason the brick and mortar bookstore is unlikely to go the way of the Dodo. And it’s one (among many) reasons Amazon is keeping its options open when it comes to high-street grocery stores. 

Pills are different. If you have a good customer experience in a physical pharmacy — it’s possible — it’s not because you enjoyed browsing the analgesics and hemorrhoid creams. Who enjoys shopping for meds? It’s a category closer to batteries, cables, and coat-hangers. You need them; you don’t need to make a ritual out of buying them. Did someone say AmazonBasics?

From pills to batteries to (potentially) staple cupboard items (coffee, rice, canned food), Amazon seems positioned to drive competition out of the market. It’s a staggering prospect.

The lesson for the market? If your products and services are vulnerable to this kind of disruption, you need to be building a direct-to-consumer relationship with your customers, and nurturing customer experiences so stunning that nobody would consider buying a generic version from a general market-place. And that means an experience which runs seamlessly from discovery to conversion, and from delivery to after-sales service, however your customer chooses to buy. It means building brand affinity, in a way that Apple (for example) has; and the high-street pharmacies arguably have not.

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