The Next Big Trend In Retail: Healthcare. See How Best Buy and Others Are Cashing In
Healthcare is a $3.5 trillion industry in the US and retailers are lining up to get a piece of it. From Best Buy to Walmart to Amazon retailers do not want to miss out on this lucrative segment of the economy. Best Buy who you may have always associated with as place to buy the latest TV model or gaming console recently hired its first Chief Health Officer. Surprised? Well Best Buy is getting into health in a big way. It is focusing not just on fitness devices but on health services with a keen interest in serving senior citizens. There are more than 50 million people over the age of 65 in the United States and that number is expected to increase by 50% over the next 20 years. With those numbers it is now easy to see why Best Buy is leaning into the healthcare trend.
Best Buy is not the only one, other big name retailers including Amazon and Walmart as well as mall operators are trying to capitalize on healthcare spending. From healthcare services, to fitness devices see how these retailers and mall operators are trying to get a share of the growing healthcare industry.
1. Best Buy is making a big bet on healthcare. Over the past year it has spent over $1 billion on healthcare related acquisitions. This includes its acquisition of GreatCall in 2018 for $758 million. GreatCall sells mobile phones with large buttons that are senior citizen friendly. GreatCall also services senior citizens by providing an emergency response service that seniors can use if they, for example, have an accident and need help. Hubert Joly, Best Buy’s Executive Chairman and former CEO has labelled the seniors market as “white space waiting to be captured.” It looks like Best Buy isn’t waiting around. Its commitment to health care can also be seen in a recent move in which it hired its first Chief Health Officer, Daniel Grossman, a physician and former employee of Medtronic Plc., a medical device maker. Grossman also practices at the Mayo Clinic and is expected to start working at Best Buy today.
Best Buy is also tackling the healthcare sector by selling connected fitness equipment. The retailer plans to have connected-home gym equipment in 100 stores by the end of this year. Best Buy says its connected home collection is: “part of the company's commitment to helping customers use technology to live better, healthier lives." As sales of smartphones dampen, focusing on health could be an effective way for Best Buy to diversify outside of its core business.
2. Walmart continues to make moves in the health care space as well. In September of this year Walmart opened its first Walmart Health a “prototype” health centre in Dallas Georgia. The clinic provides a number of services including primary care, dental services, counselling sessions, laboratory work, X-rays and audiology. The centre is not located inside of a Walmart store but in a space adjacent to the store. Past attempts at healthcare clinics have not worked out for Walmart but the retailer hopes that it has gotten it right this time. Speaking about the centre a spokesperson for Walmart said: “Walmart is committed to making healthcare more affordable and accessible for customers in the communities we serve.” “The new Walmart Health centre in our Dallas, Georgia, store will provide low, transparent pricing for key health services for local customers.” This clinic is a test and if it proves to be a success Walmart may open more locations. Walmart plans to extend its low-price strategy to Walmart Health with a primary care appointment costing only $40 and a dental appointment costing only $25.
3. Never to be left out, like other retailers Amazon is also focusing on the healthcare market. Amazon purchased PillPack for $753 million in 2018. PillPack is an online pharmacy. That deal allowed Amazon to get a major foothold in the pharmacy business. Prescriptions are largely bought in bricks and mortar locations but this deal could change that if Amazon is able to disrupt the sector. Speaking about the purchase, John Sculley, Former CEO of Apple and CMO of RxAdvance, a pharmacy benefit manager said: “this one plays right into everything they know how to do.” “It’s in their wheelhouse.”
Earlier this month Amazon launched Amazon Care. Amazon Care is an initiative that came out of the Amazon, J.P. Morgan and Berkshire Hathaway health care venture that was announced last year. It is a healthcare service that provides a combination of in person and virtual healthcare to Amazon employees (for now). The service is currently being piloted in Seattle and to get started with the service Amazon employees use the Amazon Care app where they can have “an in-app video visit with a doctor, nurse practitioner, or registered nurse (“clinicians”) for advice, answers, diagnoses, treatment, or referrals”. Users can also use the app to text with a clinician to receive answers to questions or arrange a visit with a Mobile Care nurse if required. “The Mobile Care nurse may collect lab samples, perform some onsite testing (such as strep tests), administer common vaccines, or perform physical examinations.” Employees can also have prescriptions delivered to their home or they can pick them up at their preferred pharmacy.
Amazon often tests concepts first with its employees first like it did with Amazon Go before rolling them out to the public. With over 100 million members of Amazon prime it would not be surprising to see this as one of the many benefits of prime membership in the future. Either as part of the basic membership or as an add on.
4. In February of this year drugstore chain CVS started a pilot of three CVS HealthHUB locations in Houston. HealthHUBs are CVS locations that have a greater emphasis on health services and related products. HealthHUBs have expanded clinics with nurses, blood testing labs, nutritionists and nurses on site as well as health and wellness classes. One of the primary goals of the HealthHUBs is to help patients better manage chronic illnesses like diabetes and reduce the number of trips to the emergency room. To make room for the HealthHUBs, underperforming areas of the store such as cards were replaced with 20% more space dedicated to health related products such as ones that help with asthma and sleep apnea as well as health and wellness apps. CVS is planning on turning 1,500 stores into HealthHubs.
CVS also made a $70 billion acquisition of health insurance company Aetna last year. After the purchase of Aetna, CVS now provides health coverage for 22 million people. Since the healthcare industry has traditionally been structured around doctors, hospitals and other providers of care, Dr. Alan Lotvin, CVS’ Executive Vice President for Transformation believes that: “there's an opportunity to organize around the consumer.” CVS’ CEO Larry Merlo has also said: "imagine a world where [a] patient can walk into a CVS pharmac[y], they can engage with a nutritionist about their diet. They can talk to a nurse practitioner, perhaps have their blood glucose level checked, talk to their pharmacist about medication." CVS’ goal is to have 1,500 HealthHUBs in place by the end of 2021
5. Always looking for ways to repurpose space a small number of mall operators are leasing space to health clinics. Operators hope that when consumers make a trip to the mall to access health related services they will stay a while and shop at retailers. For example, In July of this year the largest mall in the US, Mall of America, announced that it will be opening a 2,300 sq. ft. walk in clinic in November of this year. The clinic will have a broader range of services than the typical walk in clinic including a radiology room and a lab in addition to medical exam rooms and a pharmacy dispensary service. It is likely that malls will move further into providing space for primary care. For example, the Dana-Farber Cancer Institute is planning to open a 34,000 sq.ft oncology and hematology outpatient facility in Patriot Place shopping center in Foxborough, Massachusetts.
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