Photo: CVS Health
Can retailers be healthcare disruptors?
Dan Stanek
Through a special arrangement, what follows is an excerpt of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.
For minor health conditions and “everyday” healthcare, retailers are turning the tables. In-store clinics are rewriting the rules on how to deliver consumer-centered healthcare that is:
- Cheaper to build and operate;
- More accessible and convenient.
Yet, by fully integrating these services into their holistic physical and digital shopping experiences, retailers have an opportunity to become an even greater force.
For retailers, becoming a “primary care” option of choice creates an entirely different dynamic in the consumer/shopper relationship with the store and the retailer’s brand, creating completely new visit patterns, trip drivers and need states. Taking advantage of a huge and growing health opportunity, the relationship with retailers and brands has the potential to:
- Create destination or “statement” offerings in health-related categories;
- Activate categories adjacent to health services, especially conditions being actively managed (allergies, digestion problems, diabetes, etc.) in concert with clinic visits;
- Add new health services and other categories (e.g., Costco’s expansion and space dedicated to hearing aids);
- Strengthen wellness (not just treatment) offerings in store to take advantage of the massive attitudinal movement to illness prevention and toward active lifestyles;
- Tap emerging technologies to support new personalization models. Diagnostic information from apps and wearables, personal health data and even remote telehealth services (where specialists offer consultation from a remote location) offer new ways of thinking about the overall consumer experience.
Regardless, the medical industry will not sit idly by while retailers invade their turf. They’re rapidly opening facilities in smaller, more convenient locations or moving into retail spaces in strip centers and malls (some, ironically, left vacant by retail closures). They’re even creating “chain” medical brands such as One Medical and Great Expressions (dental care). An epic battle of massive industry players is on the horizon.
To me, however, this feels like a tipping point for retailers — an opportunity to provide better customer experiences in the health and wellness space at a time when our population is aging, Millennials are establishing families and all ages are expecting more. It’s a battle for a new generation of patients. Time to gear up.
Discussion Questions
DISCUSSION QUESTIONS: Is retail well positioned to offer solutions for many of healthcare’s challenges in the years ahead? What factors will work for and against retailers when it comes to gaining greater traction in providing healthcare?
Poll
BrainTrust
Manish Chowdhary
CEO and Founder, Cahoot
Lesley Everett
CEO and President, Walking TALL Training & Consulting, Inc.
What we once thought about the delivery of and access to healthcare in America is thankfully in our rear view mirrors. For years it has been purported that “consumers were in charge of their own health.” Finally, thanks to retail clinics, wearables, a glut of information, a reshaped ecosystem and better self-care choices, this has become reality.
Retailers wishing to gain traction must recognize all aspects of health, wellness and prevention sought by consumers and provide holistically-integrated solutions. Furthermore, because every individual’s health journey is unique, their point of entry into seeking healthcare must be seamless and accessible.
Some retail businesses are good candidates for integrating healthcare into their strategy. For years there have been pharmacies in retail stores. Expanding the services seems reasonable. How far they can expand? That’s yet to be seen. Too far and the retailer could lose their identity.
Access to medical care is changing, with Americans being offered more locations for access to medical professionals. Some retailers may have the space, and may be willing to undertake the effort, to host a medical clinic. For others, this doesn’t make sense. Retailers need to take a hard look at the numbers and the liability before jumping into hosting a clinic.
Retail is definitely positioned well to offer solutions for *some* of healthcare’s challenges.
A key driver is the change in doctor patient relationships. The concept of a lifetime primary care physician or family doctor is on the decline. With workers changing jobs and insurance plans every two to three years, they often have to switch doctors to stay in-network.
Suddenly the concept of the no-wait drop-in at “CityMD,” for example, is much more appealing than finding a new doctor.
Retailers can incorporate basic healthcare services into their model and gain traction. The key question will be, how does the service fit into the broader business model of the merchant? The more transactional and brand-relevant services will likely thrive. Offering flu shots and diabetes tests at a pharmacy is relevant for the brand. Offering eye exams with the intent to sell glasses (i.e. retail) fits Costco’s business model.
That said, broader healthcare is unlikely to thrive in a retail environment. Retailers and healthcare professionals struggle to meet customer service expectations. Could a Nordstrom make a difference? Yes. Would their customers seek any healthcare in the store? Unlikely. Would there be synergies with Nordstrom’s brand or core expertise. Unlikely.
With brick-and-mortar retail struggling, there are many opportunities to move into consumer services with greater brand relevance and operational synergy.
I see the retail healthcare industry growing because those who have no insurance or insurance plans with high deductibles will always look to save money. The FDA is continuing to allow more OTC drugs and devices, most recently they approved OTC hearing aids. So it’s smart for retailers to invest in building up this area. Moreover, we will see more local clinics with facilities competing which will help the customer further by keeping costs down. My only concern is that we do not sacrifice quality which will be very difficult because usually with price competition quality begins to suffer.
Let us hope that they can. Healthcare is mired in bureaucracy, old-fashioned thinking, red-tape and a model that puts the patient last in so many considerations. Retailers, for all their faults, are extremely customer-centric. Their entry into this market could be just the shot in the arm that healthcare needs!
I see it as less a competitive battle between established medicine and retail and more as the continuation of opening new opportunities to provide accessible care to patients, be the providers retailers or hospitals/clinics/medical groups.
Retail has been in the lead; there are now over 1,120 minute clinics in CVS stores and somewhere around 400 to 500 in Walgreens outlets. Supermarkets too are participating (Kroger, for example, operates well over 200 Little Clinics), and they certainly do have the resources to provide clinics, prescriptions and nutrition management. Urgent care facilities and operations like Great Expressions open up even more accessibility, they provide different services from retail-based healthcare offerings. I believe that there is plenty of room to grow for everybody.
It makes perfect sense for retailers to expand into a level of healthcare. For years, pharmacists in stores have often been the trusted go-to experts for minor ailments and medications, and now blood testing units are being set up very effectively in grocery stores for convenience. There may be a sensible limit to the healthcare available in this way, however a good move for retailers I would say.
The Minute Clinic is the perfect case study in why retailers can solve for what traditional healthcare hasn’t (or won’t). They recognized the “job to be done” for consumers who need quick diagnoses for minor health issues. Avoiding the pain of going to a doctor’s office and waiting hours for a flu shot is time well spent.
Forbes recently published a study of the shifting trends among the 50 largest sectors in American business. In 1917, medical wasn’t even on the list, since it constituted less than 2 percent of American industry at that time. Fifty years later, in 1967 medical was the ninth largest industry, while in 2017 it is the third largest.
This trend is far from over. And for retailers it is mostly a strange bird that does not fit into their inventory management, unpaid stock-picker shopper business model, because of the necessary professional medical component behind it. So the retail front for medical services is mostly ceded to contract providers, like CVS in Target stores.
Since 90+ percent of drug store profits come from fulfillment of prescriptions, with the entire front of the store largely being a traffic builder, adding inoculations and other medical services is at the cutting edge of this discussion.
Interestingly, this use of low margin front of store business to drive back of store, or drive-thru, prescriptions, is similar to Walmart using the low margin, frequent sales of grocery to drive sales in the rest of the store, ultimately sending Walmart to the head of the pack of global retailers.
Don’t be surprised if a related model, using the main body of the retail store as a traffic driver for medical services, has an even larger impact than the injection of online shopping into the brick-and-mortar space. NOTE: medical services will continue to be largely a brick-and-mortar phenomena, as long as medical professionals, doctors, pharmacists and their attendant assistants have the clout to keep non-“professionals” out of the service space here. The future will be more fascinating than the past!
This is not just about existing retailers jumping into this space but also clinics popping up that look like retailers. I won’t bore you with my ailments but needless to say, I have to have my blood panels done every month. Currently I have to make an appointment with my doctor, go in and wait and then have my blood work done and sent out for a ridiculous amount. And you ask what’s wrong with our healthcare? Its not so much about how many payers there are as it is about the way things work and all at the expense of the patient. Wouldn’t it be nice to hop into a local, convenient “store” to get this done? And to be able to pick up items that you might need related to your condition(s)? This is a great place for retailers to start looking at new services and opportunities. For my 2 cents.
The massive food and healthcare industries touch every individual, yet are largely disconnected. The opportunity to bring together nutrition and health at a deeper level yields major benefits for the entirety of the value chain. Customers are generally ready and open for this kind of service — it’s just a matter of retailers being more willing to step into the space as well as technology service providers that enable them to unlock that value.
I see a terrific opportunity for food retailers to position themselves as the “health & wellness” providers. Unfortunately, they allowed the chain drug stores to own this positioning. With renewed interest in convenient healthcare, food retailers may now have the opportunity as well as they have permission to become major players in this space. How? By delivering on the healthful aspects of food and diet to one’s health & lifestyle.
Offering dietary advice, wellness screenings, healthy cooking classes, incentives for exercise, etc. would allow them to make inroads here without a lot of CAPEX spending.
Retail pharmacy brands were the first to recognize broader healthcare services as a competitive differentiator, as evidenced by the success of CVS Minute Clinics. We see grocery retail as well positioned to capture much more healthcare-related market share, though most don’t yet recognize the opportunity at hand.
One super-regional grocery chain with a clear focus on healthcare services is Des Moines, IA-based Hy-Vee. The employee-owned company offers a comprehensive slate of wellness services for customers, families and businesses to tap into, including dietitians, on-site flu clinics, diabetes education programs, pharmacist-led smoking cessation, and several other services.
Hy-Vee recently announced plans to operate orange theory fitness centers as part of their healthy living/healthy communities initiatives. These types of creative moves make them distinct in customers’ minds. In order for retailers to gain more traction around healthcare services, they need to be thinking holistically, with a commitment to customer convenience.
YES THEY CAN. Three areas of impact:
1. They know consumer behavior better than healthcare in general. Traditional Healthcare still talks in terms of the Patient Journey. But some are moving upstream to realize there is still a decision path to making decisions on what providers/payers to work with. Retail already gets that perspective.
2. Retailers can be more nimble and flexible in their delivery of basic healthcare services that large-scale healthcare organizations will struggle to provide. And really, should a large organization be straddled with flu shots and colds? If we can tie the patient records together so that they travel more cohesively with the customer/patients, then we will have this seamless system that allows retail to disrupt the traditional delivery methods.
3. The proximity of the physical store in your neighborhood for retail for simple health care needs, coupled with pharmacy and OTC products, in one place.
Location pervasiveness, alone is a great driver for retailers to dive into these services. This is also another way for retailers to be thought of more by consumers as services providers, rather than simply “product sellers.” Another great way to differentiate.
Grocery retailers are definitely the best positioned to increase the customer experience by extending the current customer shopping journey offering additional services within their in-store clinics and pharmacies. However, the solutions they could provide need to be designed in terms of how the customer would value such enhanced experience and not result in adding complexity to the customer experience. Other retailers like active apparel might consider adding some healthcare services that could complement the healthcare journey.