Walgreens is set to close a significant number of its stores throughout the United States. The exact number of closures nationwide, including those in Michigan, remains unknown. Several factors contribute to these decisions, primarily underperformance and shrinkage, which occurs when a company loses money on inventory that can’t be compensated for through sales. Shrinkage can result from various issues, including theft by customers and employees.
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Walgreens
Dr. Russell Zwanka, Director of the Food Marketing Program and Associate Professor of Marketing, explained, “Whatever you’re billing into the store and whatever you’re not getting out through a sale is considered shrink, and that can also come from declining prices if you’re a retail inventory model, those kinds of things.” He emphasized that companies often need to consolidate their stores to stop financial losses. “You have to go in there at some point and say, ‘Okay, this operating model doesn’t work,'” he added.
Amar Sappidi, owner of Westlake Drug and Giftshop, anticipates an influx of customers due to the closures. While increased business can be beneficial, it can also lead to overwhelming volumes. “If it is multiple stores, it’s definitely going to cause some shift of customers into different stores, so that’s going to create a problem,” Sappidi told News Channel 3.
Sappidi’s store is also facing challenges, particularly with reimbursement rates from insurance companies. “The reimbursements from a lot of these insurance companies are very poor, way below our costs, so it’s hard for us to stay in business,” he said. Despite these struggles, Sappidi remains optimistic about the long-term outlook. “We have times when we have to think, ‘Do we fill this prescription or not?’ Because we lose a lot of money, way below costs,” he said. “But so far, we’ve been lucky. We lose on one prescription, hopefully, we can make our next prescription.”
Sappidi also mentioned that he is unable to contact insurance companies directly to express his concerns.
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