Drugstore Product Managers Try To Solve The Last Mile Problem

CVS wants to find ways to cross the last mile to get to their customers
CVS wants to find ways to cross the last mile to get to their customers
Image Credit: Mike Mozart

One of the things that every product manager would like to have would be a guaranteed customer base. We’d all love to know that there was a group of customers out there that really needed our products and would probably always be buying from us. It turns out that there are a few markets that are like this. One that comes to mind is your local drugstore. If a customer needs a prescription filled, they’ll probably be going to their local drug store to have it taken care of. However, this market is starting to get competitive and the product managers at the drugstore chain CVS are going to have to do something about that. What should they do?

A Changing Market

Just like me, you’d think that being in the drug store business would be a good business to be in. I mean, people need your prescription products so all you have to do is open your doors and the customers will come to you. However, it turns out that things are not working out that way right now for the drugstore chain CVS. CVS currently operates over 9,800 pharmacies. Right now, they are experiencing falling sales at their stores. It only looks like things are going to become more competitive in the future. Perhaps its time for the CVS product managers to make a change to their product development definition.

One of the biggest sources for future competition for the CVS product managers will be coming from Amazon. Amazon has considered launching a prescription business at the same time that they have been making a bigger entry into the medical supplies market. Even as CVS is  preparing for this competition, they are at the same time facing new competitors from a number of startup firms. Companies like PillPack and Capsule provide home delivery of medicine that their customers have ordered from them. Just to make things a bit more complicated for CVS, Amazon has announced that they are buying PillPack.

Filling prescriptions for customers has always been a good way for the CVS product managers to get people to come to their stores. Once there, CVS could sell them other goods also. At CVS, retail sales accounts for about 40% of the company’s total revenue. As changes have been occurring in the health care business, CVS has shifted its attention to the insurance and pharmacy business. One of the major steps that CVS has taken was to purchase insurer Aetna for US$66B. Things like this can look good on a product manager resume.

The Way Forward

In order to deal with all of the new competition, the product managers at CVS are going to have to be willing to do new things. As a first step in this process, CVS has struck a deal with the U.S. Postal Service to start to pick up prescriptions at CVS stores and deliver them to customers homes in one or two days. Customers who elect to use this service will pay an extra $4.99 per delivery. Customers will also be able to order other over-the-counter items such as face wash and aspirins.

The Postal Service will be handling the so called “last mile delivery” for CVS. This is a task that other retailers have been willing to hand over to companies such as UPS and FedEx. Amazon is currently relying on the Postal Service to deliver roughly half of its U.S. packages every day. The Amazon service that is being used requires Amazon to sort its packages by zip code and postal route before dropping the packages off at the closest post office for delivery.

The reason that the CVS product managers are having the Postal Service pick up prescriptions at CVS stores is to avoid the logistical problems of getting their packages to the correct post office. There may still be challenges in using the Postal Service to complete this part of the delivery process. The Postal system was originally built to deliver letters, not packages. However, if CVS can make this new way of getting prescriptions to its customers work, then perhaps they will have found yet another way that they can stave off Amazon and the other rivals that they are now facing.

What All Of This Means For You

Although you would think that operating a drug store chain would be a great product manager job because your customers really need the products that you are providing them with. However, over at CVS they are starting to run into some problems. More and more competition is starting to show up as other firms see the prescription market as being a good market to be part of. The CVS product managers are going to have to take a look at their product manager job description and make some changes if they want to remain in business.

Currently CVS operates just under 10,000 stores in which they fulfill prescriptions for their customers. Recently, sales in these stores have started to drop off. CVS is starting to face some real competition in their market for prescription drugs. Amazon has indicated that they are interested in entering into this market and they have even gone so far as to purchase one of the main startups that is currently shipping prescription orders to customers. CVS uses prescription orders to get people into their stores where they then buy additional goods. CVS has attempted to expand their business into the insurance market by buying the company Aetna. In order to stay ahead of the competition, CVS has entered into an agreement with the Postal Service to deliver prescription orders to customers within one to two days. CVS chose the Postal Service over other carriers including UPS and FedEx. Using the Postal Service allows CVS to solve the so-called “last mile problem” and get prescriptions to their customers.

Joining up with the Postal Service was a smart idea on the part of the CVS product managers. They needed a way to get prescriptions to each one of their potential customers no matter where they live. Since the Postal Service already delivers mail to everyone in the country, they appeared to be a natural fit for this task. Since the Postal Service is already working with Amazon to deliver packages, they should be used to working with outside firms. Let’s see how this particular solution to the dreaded last mile problem turns out for CVS.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that CVS is going to have to take care in how any specialty drugs get delivered to special customers?

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What We’ll Be Talking About Next Time

I am willing to bet that just about everyone who is reading this is currently a subscriber to the Netflix video service. Yes, there might be a few of you who don’t currently send the company a check each month, but even you have gone over to friends’ houses and sat around watching Netflix movies or shows at some point in time – we all have. There is no doubt, Netflix is currently the king of online streaming video services. However, the times are changing. There a number of serious new competitors that have shown up on the scene and the Netflix streaming product managers are going to have to make some changes to their product development definition if they want to remain the king of the hill.