Is CVS a Pharmacy? A Toy Store? A Convenience Store? Yes.
(I am writing “Boston Days” as a series of articles for quick reference for myself and other retail pilgrims. This article covers the “Positioning” of a Retailer)
After pondering for several minutes, reading the name printed on every miniature car, I picked up three — all American icons.
A Ford, a Chevrolet, and a DHL pickup truck that has moved American commerce and economy since 1969. Three satisfying finds.
I placed them on the counter and looked up. The backlit signage above the cashier read: CVS Pharmacy. I had just spent ten unhurried minutes choosing toy cars inside a pharmacy.
What exactly is this place? Pharmacy, convenience store, seasonal gift shop, beauty destination, or a toy aisle with a dispensing counter? Walking through CVS, the answer changes with every aisle.
CVS was born in 1963 as Consumer Value Stores in Lowell, Massachusetts. Today it operates roughly 9,000 stores across the United States, present in 3,486 cities nationwide.
Applying a Pareto lens, New York leads with 183 stores. Houston follows with 119, Los Angeles 105, Chicago 73, Philadelphia 63. Dense urban concentration — by strategy, not accident.
Each store typically occupies around 4,000 square feet in dense urban neighbourhoods. Large enough to carry pharmacy, merchandise, beauty, food, seasonal gifting, and apparently, a very respectable toy section.
For readers in India, here is essential context. Most Americans pay little or nothing at the pharmacy counter — their health insurance, managed by intermediaries called PBMs, pays instead.
PBM stands for Pharmacy Benefit Manager — a powerful third party sitting between insurer, drug manufacturer, and pharmacy. It determines exactly how much the pharmacy gets reimbursed for every prescription dispensed.
Reimbursement rates have fallen relentlessly for over a decade. CVS’s pharmacy segment operating margin compressed from 9.9% in 2015 to just 3.5% today, on revenues of $139.4 billion. The arithmetic is punishing.
Walgreens, CVS’s closest comparable, ran a negative 5% operating margin on US pharmacy retail before being taken private by Sycamore Partners in 2025. The industry’s economics are structurally broken.
Which brings us back to the toy cars. The prescription customer walks in, hands over their insurance card, pays a nominal copay or sometimes nothing at all, and waits.
CVS needs that customer to also pick up candy, a greeting card, or three miniature diecast cars. Front store margins are meaningfully better than anything earned from a reimbursed prescription.
The business model, stripped to its core, is converting compulsory prescription footfall into discretionary front-store revenue. It is not irrational thinking. It is, in fact, survival thinking.
Except the consumer has not fully cooperated. CVS’s front store same-store sales declined 2.1% in 2024, recovering to just 1.2% in 2025. Customers tolerate the format. They do not embrace it.
The result is a retail identity no shopper can define in one sentence. A pharmacy barely profiting from prescriptions it fills, surrounded by merchandise it hopes will subsidise the enterprise.
The DHL truck, the Ford and the Chevrolet sit on my desk here in Boston. Charming mementos of a pharmacy still searching, with some urgency, for its own positioning clarity.
(I am writing “Boston Days” as a series of articles for quick reference for myself and other retail pilgrims.)
Read Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8 and Part 9 here.
