Edition 21: Why Is Foot Traffic to Pharmacies Lagging?

Welcome to the 21st edition of the PlaceIQ Social Distance Tracker. 

We’ll have to see if these gains subside beyond the holiday (after the lack of visits on the Fourth itself), continuing the regressive trend we saw following outbreaks along the Sun Belt.

We’re continuing to monitor reemergence at the category level, and today we’ll be examining pharmacies. Despite being a top three category during the first two phases of our post-COVID lives, drug stores have been slow to recover. We’ll take a look at the three challenges facing the likes of Walgreens and CVS, and show how they relate to the overarching themes we’re seeing associated with success during COVID.

We are gratified to see our analyses being included in various reports, since it is our goal to contribute to the #dataforgood effort. If you choose to re-use one of our analysis, all we ask is that you attribute the analysis or content to PlaceIQ. Thank you!

Why Is Foot Traffic to Pharmacies Lagging?

A couple weeks ago we introduced the plot below which illustrates how different categories were clustering into three main groups: Still Empty, Beginning Reemergence, and Steadily Reemerging. There were three categories which bucked the trend:

At the time we wrote: 

We believe fast food restaurants are experiencing such high demand because they are nearby, safe, and affordable entertainment. It’s an easy option when you need to get out of the house. And categories that can match these attributes (see: beaches) will continue to grow beyond pre-COVID norms, absorbing foot traffic from categories that are not nearby, safe, and cheap. 

Dealerships, it turns out, are also governed by our ‘nearby, safe, and cheap’ maxim. As noted in a previous report: part of auto’s strong reemergence is likely due to car purchases made by people trying to avoid public transit or air travel. 

Our final outlier to examine is pharmacies. Pharmacies are really interesting because during the Panic and Prepare and Quarantine Routine phases they were a top three business. Yet, during the Reemergence Ramp they haven’t kept pace:

Foot traffic percentages calculated against a February Pre-COVID average.

Pharmacies have dipped from the third ranked business category to the ninth. We’ve been watching pharmacies for a while now, looking for data that might explain their dormancy. After a few weeks of monitoring, we’ve come up with three reasons we believe traffic is lagging:

1. Mission Trips Are in Decline

At a high level, there are two kinds of shopping trips: large regular trips where people buy their usual fare and “mission” trips where a need for a specific item initiates a quick trip. For example, you might fill an entire shopping cart with a week or two of groceries every Sunday, then run into the store during a commute home for a specific ingredient you need for that night.

During COVID, “mission” trips are an endangered species. Consumers are looking to go to stores less, not more, and they’re spending more money to buy larger baskets when they do (as we discussed this week during our webinar with IRI). Since many people are still working from home, the commute reduces the opportunity for convenience-driven quick trips.

As you can imagine, convenience and drug stores rely heavily on mission trips. If people leave their home less, plan their shopping trips more carefully and continue to work from home, an entire segment of pharmacy shopping will struggle to return.

2. Prescription Delivery Is the New Normal

There has been much written about how COVID is accelerating certain trends, at-home delivery being one of them. Grocery delivery and parking lot pick-ups have seen massive adoption as people looked to reduce their exposure to others, especially during the Quarantine Routine. While many have strong desires to venture back into grocery stores (to select your own produce or get ideas for dinner) there isn’t much driving consumers to switch off prescription delivery and return to the pharmacy. This is especially true when many of the services are free or being offered at a reduced price.

With no steady stream of regular prescription pick-up traffic, convenience-driven shopping will fall at pharmacies because, well, it’s no longer convenient. Drug stores will keep their customers, but their basket sizes will shrink as they see little reason to return to the store.

3. Less Prescriptions Are being Written as People Avoid the Doctor’s Office

People are visiting the doctor less because they’re concerned about COVID exposure and/or are unable to afford services due to new financial pressures. Either way, patient visits are down 20-30% for many physicians.

We had a hunch this trend was affecting drug stores, but could not directly confirm it (partially because PlaceIQ does not associate any mobile visits with doctor’s offices, hospitals, or other medical venues).

But this week, Walgreens connected the dots in their earnings report to explain their recent losses: “Globally, pharmacy volume was impacted by a drop in doctor visits and hospital patient admissions.”

Reviewing these three challenges, it’s fascinating to realize that pharmacy retailers are a lagging outlier because their businesses go against our maxim for success: be nearby, be safe, and be cheap. 

People aren’t commuting to work and limit their shopping to their local grocers and big box retailers. They don’t need convenience options because they aren’t traveling far from their stand-bys. Therefore, quick mission trips are in decline. 

People quickly adopted home delivery for prescriptions and aren’t looking back. It’s a safer, socially distant option, especially for at-risk groups which might have more regular orders.

And, people are avoiding the doctor’s office because it’s neither cheap nor perceived as safe, dragging down new prescription orders.

Despite their initial, relative success during the opening phases of our COVID era, pharmacies are facing significant challenges today. Their lines of business are dependent on behaviors consumers are actively avoiding. To recover to levels experienced by their retail brethren, serious innovation will have to take place. New services and experiences that are nearby, safe, and cheap will need to emerge. Thankfully, these businesses have strong relationships with their customer bases and the successful adoption of prescription delivery can serve as a foothold from which to build.