Buffalo, NY (WBEN) Experts say there were a number of factors in Rite Aid's filing for bankruptcy and closing of all its stores in New York. This comes years after Rite Aid scored with customers who didn't necessarily need to wait for a prescription to be filled.
"It did not have to happen," analyst Burt Flickinger tells WBEN. He says one reason was it did not receive subsidies from governors or the federal government the way Wegmans, Walmart, Costco, Amazon or Target have received. "(They received) $10 billion in taxpayer funded subsidies, while Rite Aid, the 41st of the top 100 chains unsubsidized, which is very unfair from the leaders of both the Republican and the Democratic Party to let these subsidies for the wealthiest family in the world, the Waltons, the wealthiest man in the world, Jeff Bezos and the wealthiest family in the state, Wegmans to get subsidized, while companies Like Tops and Rite Aid without subsidies," leading to Rite Aid having financial challenges without the subsidies that Wegmans and Walmart and Amazon get.
Flickinger says Rite Aid was a success in areas where supermarkets didn't tread. "Rite Aid was fantastic at taking care of the local consumers and competitively pricing the local hometown favorite brands and having the best promotional prices," says Flickinger. He says that could allow them to sell more pop per Rite Aid than they could at Wegmans. "They could sell more branded cookies and crackers, more salted snacks." He adds Rite Aid became the substitute supermarket across the Buffalo Niagara region and across America. "Wegmans had had over 1,000 people of color march on one of their suburban stores for Wegmans abandoning the inner city in Rochester, Buffalo, Baltimore, Binghamton, Boston, other places, and Rite Aid was the last, best and final retailer that really embraced and served the inner city so well."
UB's Charles Lindsey says Rite Aid was in a tough space. "If you look at chain pharmacies, that area for the last ten years, there were really a lot of changes in terms of how consumers shop, how they get their prescriptions, and part of that has to do with Amazon," says Lindsey, who adds there were other brick and mortar challengers. "Competitive inroads from supermarkets changes and how consumers shop, also the opioid crisis and the fines that have been levied due to that, and additional factors to such as we're seeing greater theft over the last years," says Lindsey.
Lindsey agrees with Flickinger about Rite Aid being able to score with people not necessarily waiting for prescriptions. "You could wait for your prescription, pick up a few unrelated items, milk, makeup, so forth and so on. It was pretty convenient. Think, a convenience store, but a different format," says Lindsey. "A convenience store that you know also offers prescriptions, not as big as a hyper market, a supermarket, a grocery store. So it really offered convenience, a quick in and out, and you could get your prescription filled as well."
He says the last decade has seen prescription benefit managers, which have really squeezed the margins in terms of how much these pharmacy chains make off of filling a prescription. "The middle player between the insurance companies and consumers, and when it comes to getting their prescriptions filled, and they really cut in that that is really cut into the how much these chains make prescriptions He says Wegmans and Costco are not as affected. "They're not as dependent on their their overall revenue stream, the percent that comes from filling prescriptions," adds Lindsey.
Rite Aid filed for bankruptcy Monday.
