Amazon launches online pharmacy store
Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland discuss Amazon's push into the pharmacy space, and how it's impacting other stocks.
Video Transcript
MYLES UDLAND: Some news today coming out of the pharmacy space. And we see some of the majors-- CVS, Walgreens-- under some pressure early today with Amazon announcing that they're going to get into the pharmacy space. They've already been in the space, right? They acquired PillPack a couple of years ago.
But they're now launching an online pharmacy store. And Brian Sozzi, this is a good old-fashioned Amazon enters space X, incumbents in that space under pressure as a result. Very 2017 vibes from this.
BRIAN SOZZI: Myles, yes. I will start off with that. You're seeing the stock reaction, CVS down 8%, RiteAid down 14%, Walgreen's 8%. To your point, I remember it was June 17, I remember running around my prior employer's newsroom, really five Red Bulls in, really excited about Amazon buying Whole Foods and how would change the landscape of retail.
The reality is it really didn't do much of anything. Whole Foods has continued to stink up the joint. And a lot of retailers, like a Kroger, Walmart, Target, are doing very well. But you are seeing the stock reactions today in response to Amazon pharmacy.
Really, all it is, if you're an Amazon Prime Day Prime member, you can get your scripts in two days delivered to your house. If you're not, you can get them in five days. An Amazon spokesperson tells me they will not be delivered to Amazon lockers.
JULIE HYMAN: I mean, to me, that's a real limitation, and something that investors need to keep in mind, is that time thing. I mean, if you are actively ill and you want your prescription, you want it right now. You want to be able to go over to your pharmacy and pick it up on the spot. So it feels like that there will be limited usage. I mean, this seems like it would be more useful for recurring prescriptions, ongoing things for treatment of various things.
Something else to keep in mind is the company is not going to deliver schedule II controlled medications. So that includes most opioids. It's not like this is going to replace your corner pharmacy. It doesn't look like at this stage because of these various limitations. That said, you do have to wonder how much market share this is going to potentially take away from the existing pharmacies.
BRIAN SOZZI: And Julie, it raises the question, at what point does Amazon say, if they want to be serious in pharmacy, you know what? Go out there and make a play for CVS. Go out there and make a play for Walgreens. Buy an existing operation that has all those relationships and get the job done.
JULIE HYMAN: Well, maybe to your point, they were burned by the Whole Foods experience, because that did not necessarily turn out as intended.
MYLES UDLAND: So and I do think that is an important thing to bring up when we think about Amazon's broader strategy. It was only five, six years ago that they went out and they said oh, we tried the Fire Phone and we're just going to completely get rid of this billion-dollar project. Amazon does not mind failure. I mean, I remember writing a story after the Whole Foods thing, saying I wouldn't be surprised if they eventually write it off and spin it out. I still think that's probably a possibility.
Amazon is basically testing, I would surmise, whether it's worth it for them to go buy one of these major pharmacy retailers, because it's an additional benefit for some Prime members. There will be some uptake. It will have some very nice benefits for the folks that it works for. But to go out and spend $20, $30, $40 billion buying one of these legacy giants, I think Amazon might just kind of kick the tires on this space for a little bit, see what comes back.
They know what they know from PillPack. And they'll kind of take it from there. And maybe that's sort of a learning they had from the Whole Foods episode, where that asset is sitting inside it.
And it's kind of like Sozzi said, Whole Foods stinks up the joint, right? I mean, it is what it is. But in a world where a grocery is killing it, they have certainly been a laggard.
