In news that was labeled as a shock to the retailing industry, Target is selling its pharmacy business to CVS Health in what I find as no surprise at all.
The $1.9 billion Target CVS deal simply says that the CVS brand is stronger than the Target one because, other than some superficial changes, little will be different as it stands now.
Oh, the signage will change and there might be some minor hassle with customers, but CVS will remain in the Target stores, including at its 80 clinic locations. There will just be more outlets for CVS.
Like we need more of them.
Right now, the retail pharmacy war is being fought between CVS, Walgreen’s and, to some extent, RiteAid. And, as of now, the battleground is based almost entirely on location, which is why CVS is making this acquisition simply to purchase more locations.
It’s a shortsighted strategy because the pharmacies could go the way of banks, in which those who actually visit a bank mostly go through the drive-thru instead of inside (where, at least in retail, consumers buy more). The pharmacies will end up with the most expensive billboards on the street.
What this says about Target.
But this acquisition says more about Target than it does about CVS. Target says it is making the deal so it can be better focused.
Target does have a lack of focus, and has essentially lost the war to Walmart over low-price retail. It has been a follower, adopting “Expect More. Pay Less” not long after Walmart positioned itself as “Save Money. Live Better.”
Even when Walmart introduced grocery across all its stores, Target followed suit. Pretty soon, Target became a copycat of Walmart only in the color red. And when you copy the market leader, that market leader becomes the default choice.
Now what does Target do now? Well, the obvious is that it needs to rebrand after an intensive, quantitative study that finds the highest emotional intensity in the retail market. It also, as we’ve said with all retail outlets, needs to own something that is unique.
In Target’s announcement of this sale, Brian Cornell, Target chairman and CEO, detailed the sale as a partnership with CVS and will enable the retailer to “sharpen our focus on elevating the way we deliver wellness products and experiences to our guests.”
Now, if I’m a Target shareholder, that statement makes me nervous. This is not a partnership because Target is hoping the CVS brand will bring in customers for the CVS brand. The brands are not on equal footing. CVS is the driver.
Target needs to realize that to compete and win in the retail category, its brand needs to be the driver. And it needs to be something totally different than Walmart. It also needs to be something different than a house of brands because anyone can do that.