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Amazon Launches Online Pharmacy Service: How Will It Impact Real Estate Investors?

Nov 17, 2020 by Maurie Backman
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These days, there are very few things Amazon (NASDAQ: AMZN) doesn't seem to have its hands in. The online retail giant recently opened its first self-named grocery store, Amazon Fresh, and while its latest venture is online-based, it's definitely something with the potential to shake up the world of commercial real estate.

Introducing Amazon Pharmacy

Amazon is barging into the healthcare industry with its newly launched Amazon Pharmacy. Amazon customers can sign up for the service and use it to order commonly prescribed medications, like insulin or other drugs used to treat chronic conditions. However, Amazon Pharmacy will not offer Schedule II medications like opioids through its online pharmacy.

Amazon Prime members will get a number of perks should they choose to use the new pharmacy service. These include free two-day shipping as well as discounts on medication. In fact, Amazon claims that those who use its pharmacy service will be able to save up to 80% on generic medications and 40% on brand-name medication when paying without insurance. The pharmacy program will be in place in 45 states this week, and Amazon expects to expand soon.

A mixed bag for real estate investors

Amazon's entry into the pharmacy space doesn't come as a shock. For consumers, the convenience of prescription delivery makes it an extremely valuable offering. But on the real estate investing end, there may be some concern that Amazon's arrival into the world of pharmacy products will hurt brick-and-mortar stores.

If customers can get their prescription refills through Amazon, they won't need to visit their local pharmacies in person, which means those stores will lose the revenue that comes with added purchases -- things like over-the-counter medication, beauty products, snacks, and other pharmacy staples. A substantial loss of revenue could cause pharmacies to close up shop, resulting in shopping center vacancies.

Of course, the one thing Amazon Pharmacy can't replace in the pharmacy experience: the concept of getting to talk to a pharmacy technician in person and ask questions when picking up a prescription. But between the savings and convenience, there's a good chance Amazon's new pharmacy offering will really take off, which could be bad news for physical stores. Plus, Amazon claims that those who use its pharmacy service will have the option to speak to an actual pharmacist for advice.

That said, as part of Amazon's new pharmacy program, Prime members will have the option to save on medication bought in person at over 50,000 pharmacy locations across the country, including Walgreens (NASDAQ: WBA), Rite Aid (NYSE: RAD), and CVS (NYSE: CVS). Those savings could prompt consumers to continue to visit pharmacy chain locations, despite the option to order prescription drugs online.

The Millionacres bottom line

It's too soon to predict how Amazon's latest offering will impact the pharmacy business. If pharmacy chains are able to partner well with Amazon, it could create a situation where everyone truly wins out, giving real estate investors much less to worry about.

But if Amazon's pharmacy service starts to negate the need for stores, it could result in nationwide vacancies that hurt shopping center REITs (real estate investment trusts) -- and the people who invest their money in them.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends CVS Health and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.