By Sharon Terlep 

CVS Health Corp. has enlisted the U.S. Postal Service for a new home delivery service, as the drugstore giant strives to stave off Amazon.com Inc. and other rivals.

CVS struck a deal with the Postal Service to pick up prescriptions at CVS stores and bring them to customers' homes in one or two days. Customers will be charged $4.99 per delivery, which could include over-the-counter products such as aspirin or face wash.

CVS is rolling out the nationwide service as it fights falling sales in its roughly 9,800 pharmacies and braces for potential competition from Amazon, which has considered launching a prescription offering and has made a bigger push into medical supplies. CVS is also facing competition from venture-backed startups like PillPack Inc. and Capsule Corp., which provide home delivery of medicines.

CVS executives last year said they would launch the service, but didn't say how they would handle the last-mile delivery, an expensive service that has vexed many businesses. It has chosen the Postal Service to carry out a mission that other major retailers have tasked to parcel giants like United Parcel Service Inc. or FedEx Corp. -- or turned over to startups.

Target Corp. last year paid $550 million to acquire grocery delivery startup Shipt Inc., in an effort to quickly expand shipping services. Walmart Inc. plans to offer grocery delivery in 100 cities by the end of the year. It is using several services that use contract workers similar to Uber, and a handful of stores is testing a program in which store workers deliver some orders placed on Walmart.com.

For years, filling prescriptions was a reliable way for CVS to draw shoppers to its stores, where it could also sell other items. Last year, retail accounted for about 40% of the company's total revenue. As the pharmacy industry shifts, CVS has focused on the insurance and pharmacy benefits businesses, including a $66 billion bid for insurer Aetna Inc. CVS offers mail-order prescriptions through its pharmacy-benefits manager.

Amazon relies on the Postal Service to deliver about half of its U.S. packages every day, according to analysts' estimates. The service Amazon primarily uses requires the shipper to sort its packages by ZIP Code and postal route, and drop off the parcels at the closest post office for delivery. Letter carriers bring the boxes to recipients' doors.

CVS, by having the Postal Service pick up packages at stores, will avoid the logistical challenge of getting packages to the post office. Still, the Postal Service's network was built for letters, not parcels. The deal also comes at a time that President Donald Trump has criticized the quasigovernmental agency's dealings with Amazon and launched a task force to examine its finances.

Write to Sharon Terlep at sharon.terlep@wsj.com

 

(END) Dow Jones Newswires

June 19, 2018 08:14 ET (12:14 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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