Walgreens is one of the largest drugstore chains in the U.S., with over 9,000 stores spread all over the country. Along with pharmacy items, it sells a variety of grocery, electronics, and other convenience products.
Despite its popularity, customers repeatedly find that it is among the most expensive retail chains when compared to its competitors, such as Costco, CVS, and Walmart. This must make you wonder: why is Walgreens so expensive?
9 Reasons Why Walgreens Is So Expensive
1. No Government Regulation On Prices
In the U.S., the federal government does not regulate the prices of drugs sold around the country.
People can sign up for government programs like Medicaid, but other than these programs, there are no-cost controls for the private investment market and for payments made through cash.
This is one of the reasons that prices of the same drug can vary dramatically across different states, locations, and drugstores.
Pharmacies like Walgreens get to decide how much they want to sell the drug for, and this often results in them charging a very high price to get higher profits.
2. Offers A High Degree Of Convenience
With 9000+ stores around the country, Walgreens has made sure that around 78% of the entire population lives within a five-mile radius of a Walgreens store.
Moreover, most stores are open 24/7 so that you can visit them at any time of the day.
Because of all these conveniences, Walgreens raises the price of its products, making all items more expensive than any other grocery store (which would take extra effort and money to access).
3. Higher Prices For Those Without Insurance
Walgreens is particularly expensive for people who pay for their prescriptions out of their pockets.
This is because insurance companies negotiate discounted prices with drugstores like Walgreens for their clients.
To compensate for these reduced prices, Walgreens racks up the prices for people who are not using insurance to cover their prescription drugs.
4. Incentivizes People To Join Their Balance Rewards Program
Walgreens has a customer loyalty program called ‘Balance Rewards’ through which customers can get discount coupons and earn points on every purchase that can be redeemed later for discounts.
By keeping its prices high, on the whole, Walgreens creates an incentive for customers to sign up for their Balance Rewards program and get discounts to avoid paying so much.
This locks customers in, forcing them to continue purchasing their prescriptions from Walgreens.
5. Not A Specialist Store For Anything Other Than Drugs
Specialist stores like Lowe’s (focused on home improvement) and Best Buy (consumer electronics) sell their products for lower prices because they can leverage bulk discounts.
By zeroing in on one category, they can optimize their supply chains to reduce their costs.
Since Walgreens is not a specialist store for products other than drugs, it is not able to leverage these efficiencies and optimizations and so raises the price on items to cover its costs.
6. Changes Price Based On Buying Trends
If a certain medication is high in demand, customers will buy it regardless of higher prices because they cannot do without them. Walgreens makes use of these ‘buying trends’ to make certain pharmacy products more expensive.
This does not hurt its sales because customers have to buy these drugs anyway, and it goes the extra mile in offering a high degree of convenience to them for doing so.
7. Tracks and Matches Competitor Pricing
Another reason why a Walgreens store in a particular state or location would be so expensive is that it is simply matching the prices of its competitors.
For example, if the CVS or Costco store in an area is selling a particular drug for $150, Walgreens will make sure that it is selling that drug for at least $150.
It does not have to compete by lowering the prices because of all the other benefits and conveniences it provides.
8. Offers A Wide Range Of Services
Walgreens positions itself as more than a regular pharmacy store where you go to get your prescriptions filled.
Instead, it provides a range of value-added services like automatic refills of prescriptions, regular text reminders, free shipping of items, and a lenient returns policy.
Therefore, it charges higher prices from its customers because they are getting a lot more than just the item by regularly buying from Walgreens.
9. Products Made Expensive To Compensate For Cheaper Ones
Walgreens continually offers sales and promotional offers on a variety of items.
However, to compensate for the reduced profit margins on these items, it increases the prices (and thus the profit margins) on other items that are not included in the offers.
This is why certain products tend to be more expensive as compared to the same ones in other stores – they are being used to compensate for reduced prices on other items.
To learn more, you can also see our posts on Walgreens competitors, Walgreens statistics and facts, plus why Walgreens and CVS are always located next to each other.