CVS Competitive Advantages in 2024 (9 Key Factors)

ByCharles Scott Last Update on

As one of the largest pharmacy retailers and healthcare providers in the United States, CVS leverages its competitive advantages across business capabilities that span retail offerings, integrated healthcare services and digital capabilities.

With close to 10,000 retail stores nationwide and over 200,000 employees, CVS has strengthened its value proposition to consumers through innovation and partnerships. Down from over 9,900 stores in 2021, CVS has focused on optimizing its retail footprint rather than aggressive new store openings. This along with its competitive strengths contributes to its #5 ranking within Fortune 500 companies as of 2023.

Let‘s examine 9 key factors that contribute to CVS sustaining a leading market position in retail pharmacy against competitors like Walgreens and Rite Aid.

1. Integrated Retail Healthcare Services

Unlike pharmacy chain competitors, CVS has aggressively expanded healthcare services in tandem with its retail arm:

  • More than 1,100 HealthHub locations offer expanded healthcare services for chronic conditions, primary care etc. along with retail.

  • Around 1,500 MinuteClinics provide walk-in basic care. MinuteClinics handled over 40 million patient visits in 2022 for services like vaccinations and screenings.

According to CVS Health CEO Karen S. Lynch, this "further differentiates CVS from our pharmacy competitors." With rising health spending expected to hit $7 trillion by 2028 in the US, CVS is strengthening convenience and affordable care access which should drive customer acquisition and retention.

2. Robust Omni-Channel Capabilities

While expanding healthcare services nationwide, CVS continues to lead industry growth in omni-channel retail capabilities:

  • CVS online retail sales grew over 15% YoY in 2022, higher than competitors
  • In 2024, Buy online pick-up in store options available in 100% of CVS locations
  • Same-day prescription delivery offered in virtually all markets currently

As consumers increasingly expect on-demand retail pharmacy offerings, CVS‘s omni-channel dominance stands out versus Walgreens which has had challenges adapting stores for ecommerce. This convinces customers to stick with CVS when shopping online for pharmacy and retail goods. Their new partnership with DoorDash for same day delivery stands to increase share of online pharmacy sales.

3. ExtraCare Loyalty Membership Growth

With over 10 million reported households enrolled in its ExtraCare loyalty rewards program, CVS drives customer retention through personalized promotions and deals.

  • ExtraCare members account for >75% of sales in retail stores per CVS 2022 annual report
  • ExtraCare enrollment continues to grow thanks to enhanced digital benefits

Loyalty and personalized offerings keep customers more engaged with CVS for their healthcare and retail needs. Expanded e-commerce rewards for ExtraCare members with free shipping and targeted promotions help defend market share as consumers migrate online.

4. In-Store Brands Innovation

CVS has leaned into offering affordable own in-store products under brands like Gold Emblem as shoppers look for value:

  • More than 2,400 CVS Health branded products across grocery, personal care categories
  • Premium own brand range Simply Dressed also launched recently

According to Neil Saunders of GlobalData Retail, “CVS now has strong private label offerings that can easily compete against the most compelling premium and mass market brands.” As consumers remain cost conscious amid inflation, improved quality and smart pricing of CVS in-house brands boost store trips and conversion.

5. Digital Health Capabilities

With its integrated payor-provider model spanning insurance services, retail pharmacy and healthcare services, CVS Health has focused innovation around digital health to engage consumers:

  • Patient-centric digital tools for prescription management, vaccination records etc

  • Features like two-way messaging with providers make CVS pharmacy services stickier

Per CEO Lynch, telehealth offerings and digital capabilities “will be key differentiators..to lower cost and drive greater access.” With personalized web and mobile tools, consumers gravitate to CVS for convenience managing health needs.

6. Competitive Economies of Scale

In an industry dealing with strained pharmacy profits, CVS leverages its enormous size relative to distribution, procurement costs and more:

  • 30% Rx market share offers unmatched negotiating power with PBM middlemen

  • Bulk purchasing deals with suppliers, distributors paper over thin margins

Consolidation in recent years like the Aetna acquisition provided economies of scale most smaller players can’t match. This helps shore up profitability as an industry laggard while still keeping consumer prices competitive. CVS’s scale also supported their ramp up of in-house brands and personalization capabilities at lower costs versus rivals.

7. Strategic Health Partnerships

Beyond retail, CVS forged value-based partnerships around care provision, benefits management and addressing social determinants of health:

  • Key preferred relationships with major insurers like Aetna to drive consumer steering

  • Risk-sharing agreements tied to cost savings CMMI programs for Medicare etc

Per CEO Lynch, CVS is focused on "delivering better health outcomes at lower costs". Tight alignment with health plans, care providers and life sciences partners around connected data and shared incentives moves CVS higher up the value chain to enable this.

8. Localized Store Optimization

Rather than rapid greenfield openings, CVS has prioritized market-by-market optimization of stores and in-store assets in recent years:

  • Rightsizing retail space and inventory tailored to local needs
  • Location remodeling to emphasize pharmacy services

In 2024 and beyond, most net new stores come from relocations not new builds. This keeps expenses manageable while letting stores better serve what unique neighborhood needs whether seniors coverage gaps or Hispanic assortments.

9. Community Impact Initiatives

With 90% of Americans living within 10 miles of a CVS pharmacy, the retailer influences community outcomes through several health impact initiatives:

  • Multi-year lead sponsor of American Diabetes Association’s Health Equity Now platform

  • $100M commitment towards increasing health access in Black communities

CVS‘s community investments target issues like chronic conditions in minority groups and opioid abuse. This focus on local health system needs powers referral relationships with providers and payors while attracting ESG-focused consumers.

With integrated healthcare services combined with multi-channel retail at scale, CVS retains key structural advantages versus pharmacy chain rivals in 2024 and beyond. Strategic moves spanning M&A, partnerships and technology investments reinforce these strengths in what remains a rapidly evolving landscape.

Ultimately CVS’s competitive edge lies in strategically translating its enormous brick and mortar and data assets into consumer health solutions that uniquely meet desires for connected, convenient and affordable care.

Charles Scott is a dynamic professional whose academic and career achievements demonstrate a strong commitment to excellence in the retail and consumer service industry. Graduating with an MBA from New York University in 2013, Charles has built a diverse and impressive career portfolio. He has held significant roles as a manager, advisor, and marketer, showcasing his multifaceted skills and deep understanding of the industry.

Beyond his direct professional engagements, Charles has made a notable mark as the head writer and founder of ExpertBeacon.com. This platform stands as a testament to his dedication to consumer empowerment and education. ExpertBeacon.com is a resource designed to assist consumers in addressing their persistent questions about products, services, and companies. Under Charles's leadership, the site provides in-depth, well-researched, and accurate information, all structured in easy-to-follow guides and articles. His work here not only highlights his expertise in the field but also his commitment to providing valuable, actionable information to the public.

Charles's approach is centered on a keen understanding of consumer needs and market dynamics, making him a respected voice in the industry. His contributions through ExpertBeacon.com and his professional roles reflect a blend of strategic thinking, practical knowledge, and a genuine desire to enhance consumer experiences in the retail and consumer service sectors.

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