Drugstore stocks, such as CVS Health (NYSE:CVS), Walgreens Boots Alliance (NASDAQ:WBA), Goodrx Holdings (NASDAQ:GDRX), and Rite Aid (NYSE:RAD) are taking a beating on Tuesday following news from Amazon (NASDAQ:AMZN).
The bad news for these drugstore stocks is that Amazon is joining the pharmacy business. The e-commerce company has launched Amazon Pharmacy, which can be accessed from a web browser or inside the retailer’s app.
Amazon Pharmacy offers benefits for Prime members. That includes unlimited free two-day shipping. Customers also can enter their insurance information and handle payments before checking out.
Another draw of Amazon Pharmacy is its benefits for the uninsured. Prime members that don’t have insurance will see massive discounts when using the service, or one of its 50,000 partner pharmacies in the U.S. That nets them as much as 80% off generic and 40% off name-brand prescriptions.
So why exactly does this news have holders of drugstore stocks losing confidence? To put it simply, no retailer wants to see Amazon step into their market. Take the physical bookstore industry, which Amazon almost completely slaughtered with its online offerings. Now the company operates its own physical bookstores after pushing out much of its competition.
The online retailer is slowly moving in on physical retailers all while continuing to expand its online offerings. Sure, it’s working with CVS, Rite Aid, and other pharmacies for right now, but how long will it be until AMZN ditches them in favor of its own physical pharmacies? Maybe they could even be located inside of Whole Foods locations, which Amazon owns.
CVS stock was down 7.2%, WBA stock was down 8.9%, GDRX stock was down, 18%, and RAD stock was down 14% as of Tuesday morning. Shares of AMZN stock were up 1% at the same time.
On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article.