Large pharmacy chains including CVS, Walgreens, and Rite Aid are experiencing a very rough stretch with massive closures nationwide. For the second time in just two years, Rite Aid has filed for bankruptcy due to decreased drug sales margins. The mass closures are not just happening to large pharmacy chains either. Familiar companies such as Bahama Breeze, Macy’s, Denny’s, Forever 21, and Joann have also announced mass closures. The retail landscape in the country is currently changing drastically, especially in markets with many competitors controlling a small market share and relatively easy entry and/or exit. These market conditions, which are known as monopolistic competition, tend to create excess capacity with firms operating at higher costs than a more optimal output level would create.

Rite Aid plans to close approximately 316 stores and transition pharmacy services to CVS, Walgreens, Albertsons, Kroger, and Giant Eagle as part of the sale agreements. Rite Aid operated in over 1,200 stores across 15 states before filing for bankruptcy this month. Rite Aid CEO Matt Schroeder wants the agreement to ensure that their existing customers experience a smooth transition and promises that jobs will be preserved for some of their team members. Rite Aid was successful at finding buyers for their customer prescription files at 810 locations but was unable to find buyers for 200 locations. Critics of this recent bankruptcy deal argue that too much emphasis was placed on the transfer of prescription services for Rite Ad’s previous customers at the expense of store landlords who might suddenly lose many of their tenants as many former Rite Aid stores begin to close.

Discussion Questions:

  1. When was the last time you shopped at CVS, Walgreens, or a Rite Aid store?  Describe what economic factors such as price, convenience, or availability. Exaplain what influenced your decision.
  2. In your opinion, does it make sense to have a CVS on the opposite corner of a Walgreens location and a Walmart across the street? Discuss any issues that could potentially arise with this intense competition. Explain.