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[8 comments]

Rite Aid to take on CVS and Walgreens in clinic business

May 1, 2014

With Rite Aid's announcement earlier this month that it has acquired RediClinic, it's quite clear that the company, along with larger rivals CVS and Walgreens, sees in-store clinics as an increasingly important element in driving revenues and profits.

RediClinic, which currently operates 30 clinics in Texas, primarily in H-E-B stores, will operate as a wholly owned subsidiary of Rite Aid. The drugstore chain doesn't currently operate stores in Texas, where its presence could raise competitive concerns for H-E-B and other retailers that may be considering adding in-store clinics.

Most importantly, RediClinic will now provide Rite Aid with the means to open clinics in its own stores. While Rite Aid has not opened clinics, it has used NowClinic, a telehealth service that enables customers to speak with a doctor online. One major downside to the program is that it does not accept health insurance.

"Retail clinics play a critical role in today's health care delivery system and will play an important role in Rite Aid's overall health and wellness strategy, said John Standley, chairman and CEO of Rite Aid, in a statement when the deal was announced. "We are committed to working with RediClinic to expand its current footprint in Texas and, in the near future, begin to bring its expertise in delivering convenient healthcare and wellness programs to Rite Aid customers in select Rite Aid markets."

After years struggling under heavy debt and poor sales, Rite Aid has changed its fortunes in recent years through cost-cutting moves, an expansion of its loyalty program and store remodels. The company, which currently operates 4,584 stores, has seen same-store sales and company profits on the rise in recent quarters.

FINANCIALS:     [NYSE:RAD] [ ]

Discussion Questions:

What will the addition of RediClinic mean for Rite Aid in its competition with CVS, Walgreens and others for consumers' health and wellness expenditures?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is Rite Aid to succeed with its acquisition of RediClinic?

Comments:

The addition of the clinics inside Rite Aid stores will definitely increase traffic in the stores and here is why: when the public wants to see a nurse practitioner they will go from store to store, regardless of which drug chain, until they find one readily available without a long wait.

In the beginning, Rite Aid will pick up the overflow from Walgreens and CVS. Eventually, if the clinics at Rite Aid are superior or if they do a great job, Rite Aid will win many of its own clinic customers. There is a huge demand for these clinics and most of them at Walgreens and CVS currently have lots of overflow. And of course the clinics result in lots of incremental customer spending in the store while the consumer waits for attention, and afterwards too, on the way back out the door. In addition, Rite Aid will gain additional fast-Rx business.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Rite Aid stands to gain here. Not because it is "following" CVS and Walgreens, but because the RediClinic offering in Rite Aid will reach a new consumer. That consumer is lower income and will be very receptive to a walk-in clinic on the retailer's premises. In fact, the Rite Aid shopper may be more receptive to this kind of service, even than the CVS shopper.

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Liz Crawford, VP, Strategy & Insights, Match Drive

This is a defensive move. While not adding its own point of differentiation, it is conceptually removing one from both Walgreens and CVS.

I say conceptually because the addition of 30 clinics (none of which is in any of the state Rite Aid operates) does not impact the company's competitiveness in its existing markets. Given the high demand for nurse practitioners and physician assistants, time to remodel its stores, etc. will take time for this acquisition to have any real impact on Rite Aid.

Eventually it will allow consumers an alternative. I await the clinic wars, i.e., our clinic is better than theirs because....

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Steve Montgomery, President, b2b Solutions, LLC

This is simply a necessary move to stay competitive with other retailers who are moving in this direction. As health care and wellness migrate to some extent from the old time doctor's office to convenience, location and timeliness, these clinics will be an important addition to a retailer's offerings.

Health care is one of the few services that cannot all be done online from devices. It requires a visit in many instances and in this fast moving world a close-by clinic with a trusted retailer is the way many consumers will go.

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J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

It takes money to make more money. This is a basic business practice that never relies on luck or the misfortunes of others. Rite Aid is short on investment funds and lower on outside investment interest. I see this as a move that the C *.* O's within the company can point to in their quarterly and annual report to divert the negative rhetoric from the street. It is a far cry from what the competition is doing to address the developing consumer needs to find affordable health care in the 21st century. This is not to say "too little, to late," it is simply a move in name only.

'gjarnoldjr'

Not every retail location can support a walk-in health clinic, as CVS, Walgreens and Walmart have learned from hard experience, so it was smart of Rite Aid to buy an established business with presumably profitable -- or at least break-even -- clinics, as a way to learn how to pick the right markets and locations for future growth in a very challenging and expensive area of operation.

'brucebuck'

A wise path taken at the right time. Walk-in clinics make sense and have proven to be viable inside many chain drug store locations.

Rite Aid may be a follower, but it got much of the rest of its house in order first, while keeping an eye on the performance of CVS and Walgreens. Now it has acquired the knowhow of an established, but relatively small operator that it can adapt.

I'll be glad to see a brisk competition develop between the big three over these services. It should serve patients well in terms of price, service standards and availability.

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James Tenser, Principal, VSN Strategies

This is about time in coming. Rite Aid has to be a player in this business or they can plan to be losing a share of the business.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

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