Fast Five Shorts | Pro Or Con: Clinics Inside Of Retail Stores?

Summary

Omni Talk Retail Podcast Summary

Episode Title: Fast Five Shorts | Pro Or Con: Clinics Inside Of Retail Stores?
Release Date: February 6, 2025
Hosts: Omni Talk Retail featuring Chris Walton, Anne Mezzenga, Alex, and Ben

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1. Introduction: The Closure of Walgreens' In-Store Clinics

The episode kicks off with Alex addressing a significant development in the retail healthcare landscape:

Alex [00:00]: "Walgreens is shuttering its health clinics at 47 Illinois locations... The question here is, what does Walgreens closing 47 Illinois clinics say about the potential of in-store clinics within retail settings?"

This announcement sets the stage for an in-depth discussion on the viability of integrating healthcare services within retail environments.

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2. Evaluating the Viability of In-Store Clinics

Chris Walton expresses skepticism about the sustainability of in-store clinics, drawing parallels with similar closures:

Chris [00:48]: "It doesn't seem like this concept of putting clinics in a retail setting is working. Walgreens is not making it work... Walmart shut theirs down."

Chris questions the fundamental customer value of having clinics inside grocery stores, pondering why consumers would prefer such setups:

Chris [00:48]: "I just don't get the customer, fundamental customer value of putting clinics inside of spaces run and operated by grocers... But maybe I'm missing something."

In contrast, Alex challenges this viewpoint, highlighting the strategic importance of clinics for retailers like Walgreens:

Alex [02:02]: "I think that's the option value here. I think this is really bad news for Walgreens... What’s the reason for Walgreens to exist anymore?"

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3. Analyzing Business Strategies and Market Dynamics

Ben aligns more closely with Chris, providing context about Walgreens' broader strategic moves:

Ben [04:19]: "Walgreens... were closing 1200 stores, kind of pulling out of 47 clinics feels small... They clearly want to get out that primary care model as part of streamlining their business."

He references Walmart's similar stance, emphasizing the financial unsustainability of primary care models within retail:

Ben [04:19]: "Walmart... couldn't sustain the financial costs and did not see a sustainable business model for primary care."

Ben also points out that only a few players, like CVS with Minute Clinic, seem to be successfully navigating this space, suggesting high barriers to entry for new entrants.

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4. Diverse Outcomes Among Retailers

The conversation acknowledges that not all retailers are experiencing the same challenges. Alex notes:

Alex [06:17]: "Hyvee is making it work, so why is Hy Vee making it work? And Walmart's not making work and Walgreens isn't making it work, but CVS is making it work."

This highlights that success in integrating clinics may depend on specific business models, target demographics, and operational strategies tailored to each retailer's unique context.

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5. The Community Aspect and Customer Experience

Chris adds a personal perspective on the customer experience within local grocery settings:

Chris [06:17]: "I'm always bumping into people at my local grocery store. The last place I want to see them sit, have them see me being sick is in my grocery store."

He underscores the potential discomfort customers might feel when blending retail and healthcare spaces, questioning the seamless integration of such services.

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6. Future Outlook: Challenges and Considerations

The hosts deliberate on what constitutes "making it work" for in-store clinics, acknowledging the uncertainties surrounding the long-term success of this model:

Chris [07:25]: "What does making it work really mean right now? Like, it just means they're successful or they just haven't closed them yet? We don't know."

They emphasize the need for a nuanced approach, considering factors like target demographics, cost per square foot, and the specific healthcare services offered.

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7. Conclusion: The Path Forward for Retail Clinics

The episode concludes with an understanding that the future of in-store clinics is still unfolding. While some retailers struggle to maintain these services, others continue to find value in them. The discussion leaves listeners contemplating the intricate balance between retail convenience and effective healthcare delivery.

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Key Takeaways:

• Sustainability Concerns: Major retailers like Walgreens and Walmart are retracting their in-store clinic offerings, raising questions about the model's viability.

• Diverse Success Rates: While some retailers like CVS continue to thrive with integrated clinics, others face significant challenges, indicating that success may hinge on specific operational strategies.

• Customer Experience: Integrating healthcare services within retail spaces may impact the traditional grocery shopping experience, potentially creating discomfort among customers.

• Future Prospects: The sustainability of in-store clinics remains uncertain, with ongoing debates about their value proposition and operational feasibility.

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This episode provides a comprehensive analysis of the current state of in-store clinics within the retail sector, offering valuable insights for industry stakeholders and listeners interested in the intersection of retail and healthcare services.

Transcript

[Alex]

Walgreens is shuttering its health clinics at 47 Illinois locations. According to Progressive Grocer. The company, which previously announced that it is closing up to 1200 underperforming stores by 2027, will no longer offer in store clinics run by Advocate Healthcare in 47 Illinois locations. The clinics combine patient care from in store health professionals with video counsel from Advocate clinicians. The question here is, what does Walgreens closing 47 Illinois clinics say about the potential of in store clinics within retail settings? Chris, I want to go to you first because we heard a lot of chatter about this over the course of the last couple days at fmi. What, what are your thoughts on the closure here of these 47 locations?

[Chris]

Yeah, I don't know how to compute this given the information that we received at smi. Fmi, smi, fmi. I think, you know, I think this story potentially says a lot. You know, following the industry like we do, it doesn't seem like this concept of putting clinics in a retail setting is working. Walgreens is not making it work. Based on this headline, Walmart shut theirs down. Now, the issues could be unique to the Illinois market. I'll take that. You know, take that with a grain of salt. But again, Walgreens operates out of Illinois, so if they should be able to make it work anyway, they should be able to make it work in Illinois. So that's curious. But what you're alluding to with FMI is it this also flies in the face of what Oliver Wyman's Bobby Gibbs told us at FMI this past week, that he thinks we're going to start seeing more clinics pop up inside of grocery stores. And for me, I just ask, why do I want my clinic where I'm doing my grocery shopping? Like, I can see it in the same strip mall, maybe, like, you know, it's the same idea of like sprouts drafting off another grocery store for their own traffic. But I just don't get the customer, fundamental customer value of putting clinics inside of spaces run and operated by grocers, particularly so. But maybe I'm missing something. I don't know. And, but I, I'm not buying what, what we were told at fmi. I'm sorry.

[Alex]

Oh, man, I totally disagree.

[Chris]

The clinic side of it, the, the health care benefits side that he was talking about too, in terms of like, like health insurance companies partnering with grocers, that makes sense. But the clinic side, I don't see that being the primary outlet for people in the long run.

[Alex]

I just don't oh man, I, I disagree. I think that that's, I think that's the option value here. I mean, I think this is really bad news for Walgreens actually. Like, I'll start there. I think this is terrible news for Walgreens because if they lose the clinic business, and especially we're going to talk about another headline later on about other mass merchants getting into 30 minute prescription delivery, I. What's the reason for Walgreens to exist anymore? Like, that's my bigger question. If there's no clinics and there's no like, you know, if there's better deals or, or better availability for getting prescriptions delivered to my house, what you're going in there for overpriced product, I mean that's really what it is. At the end of the day, you're paying more for over the counter medications there in most cases than you can at a mass retailer. You're paying more for beauty products. Like, I don't know why I'm going to a Walgreens anymore. So I think that's the bigger question here. But Ben, I don't see my pharmacies.

[Chris]

At my clinic actually. I mean if I flip this on its head, like that seems like the better user experience to me.

[Alex]

Yeah. I don't know though. I think like the mass retailers, like there's, you're already going there. The grocery store, you're already going there. I think it falls in the trip type. So I, I don't think seeing Walmart pull some of these clinics out of there like we're talking about. Sorry, just to clarify, Walgreens is pulling them up, but I'm talking about your point about Walmart pulling out their clinics. I think it's just, I think it's just a reconfiguration of what the best move is. Not that they're completely drawing away from this because I think it's, it's one trip type, it's a one stop shop. And those clinics, especially for the minute clinic type needs are still very valuable. It's just getting them in the right format and being able to allocate the right amount of space. But Ben, I want you to be the tiebreaker here. Where, where do you fall on, on Walmart? Sorry. Now Walgreens pulling out hard one to do 40, 47 of their clinic locations.

[Ben]

Yeah, I'm probably more on Chris's side, I'm afraid. Ann. I'm sorry.

[Alex]

I think, explain, explain why though. Tell us more.

[Ben]

I think there's two things. There's one which is the model, so clinics within a broader retail setting and you know, as in primary care clinics as opposed to Rx. And I think that's. Yeah, it's really important because it is very specific. Your use cases of when you need to access primary care versus on a regular trip that you can, you can factor in. And then the second beer is about Walgreens. So in the context of their announcement back end of last year, they were closing 1200 stores, kind of pulling out of 47 clinics feels small. The big picture is they're stripping back. They're desperately trying to sell Village md, which is losing money for them, was a big spend for them was their primary care move. So they clearly want to get out that primary care model as part of streamlining their business. So kind of disclosure in that context feels understandable, I think for primary care clinics. I went back and looked at the Walmart release when they closed, when they pulled out their business in June and they said it was damning from a position of having been really positive about this as a business model. They said that they couldn't sustain the financial costs and they did not see a sustainable business model for primary care. And I know we're going to, I think we're going to go on to talk about Walmart. If Walmart can't see a sustainable model, I'm kind of, I guess I'm struggling and I notice it's basically just leave CVS and Minute Clinic as the only, as the only player and that's fine. And they obviously made it, they're making it work, but it feels like the barriers of entry are too high for anybody else to be able to utilize this space. And I guess ultimately I'd probably fall a little bit more on Chris's side. It reminds me of some of the conversations you were having about community space. I love retailers when they run retail stores and I think that's where I'd love to see the focus.

[Alex]

Okay.

[Chris]

Yeah. The last point I, the last point I would make on this too, and which I think is like the local grocery store is where you see your friends in the local community. Like I'm always bumping into people at my local grocery store. The last place I want to see them sit, see, see that, have them see me being sick is in my grocery store. I just don't, I just don't see how that works. And so if Walgreens can't make this work, Walmart can't make this work. I hope there aren't that many grocers jumping feet first into this, but I don't know.

[Alex]

I mean, yeah, I think you have to look at the. I really think you have to look at this on a case by case basis too. I mean, Hyvee is making it work, so why is Hy Vee making it work? And Walmart's not making work and Walgreens isn't making it work, but CVS is making it work. So I think there's more to it than that. And I think that primary care is defined differently too. In some cases, like primary care versus minute clinic care, like I do. There's, there's nuance in it. And so I really think it's about, really thinking about who your target demographic is, all of the costs that go into how much you're paying per square foot for these types of things too. And not just, you know, it's not just one, one solution to serve all people, but points taken. Points, right?

[Chris]

And what does, and honestly, like we do on the show, what does making it work really mean right now? Like, it just mean they're successful or they just haven't closed them yet? We don't know. We have no idea. So.