Is CVS Taking over Center City Businesses?

Jennifer Kramer
March 13, 2007
Com 300 Final Story

“They’re killing my business,” Spruce Food Market owner, Stephen Do said near tears in response to how the opening up of CVS on the corner of 15th and Spruce in Center City is devastating sales to his family-run food market down the block.
On Monday, November 6, 2006, CVS the second biggest pharmacy chain in the United States opened its door to business and began the possible closing of many family-run, small business on the block.
A native of Seoul, South Korea, Do moved here with his wife about 11 years ago and they have been operating this mom- and- pop outlet in Center City, Philadelphia ever since.
While the regular customers from residential buildings on the block and wait staff from area restaurants still loyally come in to get cigarettes, flowers or a 6-pack for the night, the grocery prices at the food market just don’t compare to the cost efficiency and ease at CVS.
“As far as the residents in the community are concerned, the prices are great (at CVS), its convenient, but for store owners its really negative,” Jean Siplin, the front desk person at The Drake Apartment Building, said.
CVS, a multi-billion dollar corporation has the funds to promote business with coupons, price breaks and offers of already low prices on pharmaceuticals and groceries.
Spruce Food Market does not have a pharmacy. While picking up a prescription at
CVS, there is that all too easy opportunity to pick up the milk for the week toilet paper or even dog food.
With it’s wide aisles, bright lighting and carpeted floors, CVS has a much more Wal-Mart designed shopping environment that Americans feel at home with.
CVS stores are well-run, efficient, customer friendly, and their prices are competitive. Small businesses are the backbone of the nation’s economy but the government supports big corporations.
Do is not the only business owner in the area who has felt their sales plummet since CVS opened up.
“We’ve already felt the loss of business,” said Joan Ippoliti, the owner of the Jomici Apothecary across the street from CVS.
“About 15% of the business we do is from health and beauty aid products. Since CVS moved in across the street we’ve already lost that almost entirely and the over the counter drugs such as cough drops, gum, aspirin and sucking candies are dwindling in sales recently,” said Ippolita.
Redken, Paul Mitchell, Aveda and Tigi BedHead are among some professional hair care products now being marketed at CVS pharmacies negatively affecting sales of these products at local salons as well as apothecaries.
The salon hair care market in total is valued at $2.2 billion in the US. $93 million dollars were estimated to be lost due to mass- market chains selling these hair care
products.
CVS has an extensive beauty care department specializing in skin care products. In the past three years, skin care has been its fastest growing market. Big name companies such as Finland’s Lumene skin care line sell its products to CVS to reach a larger demographic.
Bald Guyz, a men’s sunscreen line for balding heads to appear non-greasy has also marketed many new products at CVS stores nationwide as of recent.
Small apothecaries and pharmacies will not even get the chance to expand from new brands. Start-up brands are searching for corporations already in power to gain more profits by marketing their product.
With over 6,200 CVS stores in operation in 45 states in America, the company is far from sympathizing with these local shopkeepers or cutting marketing of products.
CVS Corporation Reports recorded its October revenue of $3.5 billion. How can a single family-owned business possibly compete with that number but what other options are there for them?
More than 70% of revenue from CVS is produced through prescriptions being filled by one in every eight retail prescriptions being filled at CVS pharmacies around the country.
Prescription drugs are not the only purchase consumers are making at CVS in center city.
“A lot of grocery products have been flying off the shelves,” CVS pharmacist Rakesh Patel said. “We took over the Food Rite so people who used to rely on Food-Rite to get groceries have been buying out our food products like crazy.”
“A lot of people have come here who don’t have health insurance. Our customers come for the customer service. I always try and make my pharmacy run smooth, no lines and fast, easy service,” Dan Heller, pharmacist at Medical Tower Pharmacy, said.
Panic is not here now but apprehension is stirring in small businesses, even if sales haven’t yet dropped.
“They (CVS) just opened so we don’t really know if it will affect us,” Delores Blakly, cashier at Medical Tower Pharmacy, said.
“We have a built-in customer base from the medical tower next door,” Heller said. But this is a unique situation. Most local apothecaries and pharmacies aren’t so lucky.
As IMS Health suggests, CVS pharmacy sales are expected to grow incessantly at a five to eight percent compound annual rate. As the number one drugstore chain in America this number is not surprising.
The already increasing use of lower-cost drugs or generic equivalents, CVS is boosting their consumer base everyday which is 20 million people on average today and is expected to grow by 3.5 million more who have not had any prior prescription drug coverage.
With condos being built by the second, the increase in residential living in Center City will hopefully lend to stable business competition between CVS and mom-and-pop outlets and some shopkeepers are optimistic.
“Hopefully they’ll filter back after a while,” Ippoliti said. “Most of my customers are residents from the apartments next door and in time they’ll come back and see my prices are more competitive.
Elimination of the small family –run business is one step closer to the elimination of the middle- man in the US economy.
The next step is the loss of a stable economic system in this community.
CVS is expanding and early last week announced its $21 million deal to buy the medical distribution group Caremarx Rx, creating new benefits for employers, more choice for consumers and ultimately more competition for local business.