Rite Aid is a famous brand in the U.S. primarily working in the healthcare sector. The company was founded in 1962 by Alex Grass. It began operations in Scranton, Pennsylvania in the form of a health and beauty store. In this article, we’ll discuss the Rite Aid business model in length.
It was formerly called Thrift D Discount Center. In the year 1968, the company changed its name to Rite Aid Corporation just before its IPO or initial public offering on the AMEX or American Stock Exchange. The company later moved its stocks to the NYSE or New York Stock Exchange in 1970.
Let’s take a closer look at the Rite Aid business model and what happened next for the organization. We will dwell on how the company grew, the scandals it had to face, and especially its deals with Albertsons and Walgreens.
About Rite Aid Business Model
Rite Aid Corporation is primarily responsible for operating a large retail drugstore chain. The business is involved in providing services to the communities and customers via a range of programs. They have business segments that include pharmacy services and retail pharmacy.
Out of these, the retail pharmacy segment sells generic and branded prescribed drugs together with other pharmacy services. They are also into the sale of front-end products such as health and beauty aids, seasonal merchandise, and personal care products.
The retail pharmacy segment of the business operates close to 2400 retail stores that are spanned across 17 states. The pharmacy services segment gives the customers, a range of services by using Elixir. Elixir offers specialty pharmacy services and integrated mail orders, by using the Elixir Pharmacy. This pharmacy services segment of the company provides traditional and transparent PBM alternatives. PBM stands for Pharmacy Benefit Management. The clientele of the organization includes insurance companies, their employees, and different unions.
Rite Aid business model
The Rite Aid business model canvas is called a mass-market business model. There is no significant difference between their different customer segments. The organization targets all the consumers that are looking for retail pharmacies. These people are looking for their products and services. There are three fundamental primary value propositions or strategic factors used by Rite Aid. They include cost reduction, status/branding, and convenience.
- Cost reduction: The organization decreases the costs by using a range of alternatives. It operates a wellness+ loyalty program with Plenti. This program offers the consumers great in-door savings and the capability of redeeming coupons. The company members can also earn points for buying, which can be up to 20% off on non-sales pricing.
- Branding: Rite Aid has established a strong brand because of the success they have received recently. This is the 3rd largest retail drugstore chain in America. It is the largest one on the East Coast when you consider revenue and the number of stores. They currently have in the excess of 4500 stores, operating in more than 30 states.
- Convenience: This organization gives you simple accessibility by making some of its services easily usable. They have a subsidiary known as RediClinic that can be used to operate retail clinics in many regions. Their outlets are filled with board-certified nurse
practitioners and physician assistants that are capable of treating 30 commonly found conditions such as blood pressure. They can write prescriptions for it. There is a wide range of preventive services available. They include medical tests, screenings, immunizations, and fundamental physical examinations. These clinics are great for the patients and consumers that cannot access conventional healthcare facilities at a time.
The main channel used in the Rite Aid business model is the network of retail drug stores located all across the country. Rite Aid promotes its offerings to the consumers via social media pages, loyalty programs, their website, digital advertising, educational programs, and contests. The educational programs concentrate on specific health concerns.
The customer relationship department of Rite Aid is a self-driven one. Customers use their products by employing little conversations with their employees. Having said that, RedClinics offers a personal assistance component. This is done via the provision of health care services for the customers.
Key resources and activities
The Rite Aid business model provides a distribution of retail pharmacy products and it also delivers related services to the consumers. The main sources used by Rite Aid are physical
ones. For their thousands of retail drug stores spread across the country, they mainly utilize human resources. They also maintain significant human resources with more than 88000 retail pharmacy segment associates and pharmacists. There are also in the excess of 1500 pharmacy services segment associates working for the company.
Cost structure and revenue streams
Rite Aid uses a completely cost-driven structure for its business. They are constantly looking to minimize the expenses by using significant automation and lower price value propositions. The biggest cost driver for the organization is the cost of the revenues which is a variable expense. There are other significant drivers as well that work in different areas of administration, marketing, and sales.
All of them are fixed costs. There is just a single revenue stream used by the company and that is, revenue generated from the sale of the products. These products are prescribed drugs and merchandise.
Rite Aid’s financial performance
Rite Aid 2019 announced that it has received notices from the stock exchange about the company no longer being compliant with all the rules of the standard listing. This problem happened because the average closing price for the organization sank below $1 for every share threshold in 30 days consecutively.
The share prices of the company dropped drastically after they had to announce a couple of failed mergers. This problem was somewhat rectified after the company executed a reverse stock split of 1 to 20. This brought their share prices above the required threshold. After this, the Rite Aid stocks hovered around the $10 mark per share.
In April 2021, Rite Aid reported earnings for the full fiscal year 2021. Rite Aid benefited from various government programs that promoted the coronavirus vaccination. The company administered more than 14 million doses in the early part of 2022. They also sell sanitizers, masks, and viral testing kits.
Acquisitions for fuelling the growth
In 10 years after Rite Aid opened its first store, it grew to 267 locations in ten states. Rite Aid initially in 1983 achieved a figure of $1 billion in sales. After they acquired Gray Drug in 1987, they have access to 420 stores within 11 states. This meant that Rite Aid became the largest drugstore chain in America as they overall had in the excess of 2000 stores.
Rite Aid doubled its size by 1996 to around 4000 stores after it performed several acquisitions. These acquisitions include Lane Drug, Harco, Perry Drug Stores, Read’s Drug Store, Hook’s Drug, K&B, and Thrifty PayLess.
Rite Aid developed a partnership with General Nutrition Companies in the year 1999. It allowed GNC to open several mini-stores in the locations where Rite Aid operated. Apart from this, Rite Aid also partnered with drugstore.com and offered their customers the capability to place prescribed orders online. They also ensured that the pick-up was organized on the same day.
In 1999 the company acquired PCS Health Systems which was a pharmacy benefits manager. In the year 2007 alone, the company added close to 1500 stores as they acquired Eckerd and Brooks. These companies in themselves were drug store chains. After another 8 years, the company acquired Envision Pharmaceutical Services which was another pharmacy benefits manager, for $2 billion. In the latter half of 2020, they agreed to buy Bartell Drugs a Seattle-based organization. This deal was closed for $95 million.
The mission of Rite Aid is to improve the health and wellness of its different communities. They provide engaging experiences for this. They are giving their clients the best available products, services, and a piece of advice catering to their specific requirements.
There are two main business segments used by Rite Aid’s business model. They are the retail pharmacy segment and pharmacy services segment. The retail pharmacy segment operates through RediClinic, Health Dialog, and Rite Aid stores. While the pharmacy services segment operates through EnvisionRx which is a PBM (Pharmacy Benefit Management) provider.
If you wish to develop an online marketplace for pharmacy delivery, the right place to visit is Jungleworks. They can provide a range of solutions to cater to all your requirements such as delivery management, hyperlocal ordering, and customer engagement.
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