Amazon has added supermarket superstar Whole Foods Market to its shopping cart and proceeded to checkout.
Immediately, speculative conversation shifted from the $13.7 billion purchase price to drones delivering watermelon juice and shipments of fresh kale via Amazon Prime Now.
Others have gone on to speculate that Amazon’s supply chain mastery and keen understanding of consumer desire might open doors for the commerce titan to stake its claim in the health and wellness space. From bricks and mortar supermarkets with healthy fruits and veggies, it’s an easy jump into the retail pharmacy space offering access to health-providing medicines.
The supply chain disrupter of commerce has an extensive list of credentials: a sophisticated order and fulfillment system supported by cutting-edge technology, delivery crowdsourcing, and impeccable customer service. An estimated 65 million Amazon Prime subscribers become sticky through free shipping and same-day delivery. The company has capitalized on consumer demand for lower cost and greater convenience. Now apply that process ability and scale to medication.
This “on-demand” generation touches every industry sector including healthcare. For example, the Finn Futures Health survey found two driving factors in selecting a primary care provider are cost and convenience. Why spend time sitting on the phone waiting to speak with an administrative assistant to set up an appointment weeks in advance when it’s more convenient to visit a local walk-in clinic, or, when law permits widely, tap a call-in medical service.
“On-demand” comes at a time when consumers have a primary care relationship for three-to-five years tops, which, increasingly, is turning the sacred doctor-patient relationship into a transactional connection. Could it do the same to the pharmacist-patient relationship? Supply chain expertise helps consumers as they increasingly shop for healthcare services and products at their convenience – and at a lower cost. Amazon might be mapping out how to improve what is no longer seen as an optimal experience in this new age of consumerism in healthcare.
Knowing consumer frustration relating to the health system, Amazon is likely considering how to use its supply chain acumen to usher in a new convenience model for retail pharmacies. The company has already shown numerous signs of a desire to enter the $465 billion-a-year U.S. pharmaceutical market -- launching a one-hour delivery service for non-prescription drugs in Seattle, seeking strategic hires with deep pharmacy background, and sparking rumors at recent shareholder meetings about the prospect of entering the pharmacy business.
The Whole Foods acquisition gives Amazon brick and mortar real estate to enter the pharmacy market, and home delivery of medication presumably wouldn’t be far behind. If this happens, Amazon could mount a considerable challenge to the Walgreens’ and CVS’s of the world along with the, albeit well-entrenched, mail-order drug environment.
Among the wild cards Amazon brings are supply chain brilliance, yes, and an ability and willingness to lose money on the logistics piece for the sake of disrupting well-entrenched markets toward securing long-term market share and eventual profitability. Amazon lost more than $7 billion on shipping costs in 2016.
Perhaps what Amazon could bet on, ultimately, in the pharma market, is shaving logistics costs as consumers began bundling home delivery of groceries with drug prescriptions. Delivering lots of items in a single shipment is the Holy Grail of eCommerce.
After all, it’s estimated that Amazon fulfillment locations were within approximately 20 miles of 50-65% of its target market – the Whole Foods acquisition moves them centrally into neighborhoods with health-minded customers.
With Amazon’s considerable cash war chest, vast supply chain and eCommerce expertise, fast-developing logistics infrastructure, newfound physical store presence and penchant for disrupting whatever massive industry it so chooses – how long do you think it will be before they move into prescription drugs? Tell us what you think – and would you be comfortable with this non-traditional pharmacy experience?