Why You Always See CVS and Walgreens Stores Together
If you’ve ever noticed CVS and Walgreens pharmacy locations situated right next to each other, you’re not alone. There are strategic reasons these two pharmacy chains tend to set up shop in close proximity.
The Power of Drugstore Duos
Today, CVS and Walgreens are the two dominant national pharmacy chains in the United States. According to Drug Channels Institute, together they capture over 50% of the retail pharmacy market share.
| Company | Number of U.S. Locations |
|---|---|
| Walgreens | 9,021 |
| CVS | 9,814 |
With so many locations, it’s no surprise you’ll often spot these familiar drugstore logos side by side in commercial centers and busy intersections. Consumers have come to rely on convenient access to pharmacy services in multiple locations.
Strategically placing stores together benefits each company. According to the Hotelling model in economics, competitors that sell similar products will naturally gravitate together in a given market. It’s the best way to capture the largest combined share of customers.
The Hotelling Model in Action
Imagine a commercial block with space for two pharmacies. If Walgreens claims one end, and CVS grabs the other, customers in the middle would likely choose just one or the other store. But if the stores locate right next to each other instead, they essentially split the market down the middle between them. Together they can capture a larger portion of potential sales.
This “Nash equilibrium” means neither company can gain an advantage by moving. If Walgreens relocated to try to capture more customers, CVS could just follow to neutralize the effect. Staying clustered together stabilizes market share.
Zoning Laws and Site Selection
Beyond the strategic factors, zoning laws also play a role. Many municipalities limit the locations available for commercial pharmacies. This further encourages drugstores to group together in the same approved districts and shopping centers. There are also benefits to foot traffic when situated near other anchors like grocery stores.
Here are some other key factors in pharmacy site selection:
Visibility and Accessibility: Locations should be convenient for customers with parking and public transit access. High visibility from main roads and intersections also helps drive customer traffic.
Population Density: Areas with dense residential populations guarantee built-in demand. Clustering together allows multiple pharmacies to serve the same urban zone efficiently.
Hospitals and Medical Centers: Situating near major health centers provides ready access to patients needing prescriptions filled.
The History of CVS and Walgreens
To understand how they came to dominate pharmacy markets across America, it helps to look at the history of each company:
CVS: CVS originally stood for “Consumer Value Stores” when it was founded in 1963 in Lowell, MA. The chain grew rapidly through acquisitions, merging with pharmacy benefits manager Caremark in 2007. Today, CVS manages over 4,000 in-store pharmacies and more than 1,100 walk-in health clinics.
Walgreens: Walgreens has even older roots, opening its first store in 1901 in Chicago. It expanded across the Midwest and went public in 1927, opening its 100th store in the 1930s. Walgreens surpassed 1,000 stores by 1975 and tripled its size after acquiring Duane Reade in 2010.
After decades of growth, it’s no surprise CVS and Walgreens have blanketed towns across America. Consumers can now conveniently find a familiar drugstore logo nearly everywhere they go. And when you see two or more together, it’s all part of each company’s strategy to capture the most customers.
