Retailnet Group Health Services At Retail - Applications

RETAILNETGROUP STRATEGY ALERT No. 14 Issue Retail Health Services Update

November 2008

To read this article in your browser, click here.

Greetings! RNG has said before that a key challenge retail faces today in developed countries, even before the current economic challenges, is the decline in shopper trips to specific outlets as total trips decline and total outlets continues to grow. This trip deficit creates the need for retailer marketing to activate shoppers not just within the store, but also to their store choice-which is really the retailer's First Moment of Truth (FMOT). We call this Trip Marketing,as it is all about winning the trip. Read on for our thoughts, and please share yours. Tim O'Connor, Vice President RetailNetGroup.com [email protected]

Winning Trips Retailer health services' primary strategic advantage is winning trips. A retail health clinic wins the trip well before a pharmacy at the point a shopper chooses a healthcare provider. "By establishing Target as our guests' one-stop shop for all their health and wellness wants and needs, we will boost shopping frequency and guest loyalty." (Target Analyst Meeting 2008) While the growth of retailer health services has not been as massive as forecasted as recently as a year ago, considerable insights have been gained by the market that RNG believes will support the continued development of the concept.

•

Retail clinics serve un-met needs for patients and shoppers convenience, value, and third-party attention to often selfdiagnosed medical needs.

•

The clinic business model needs larger-scale partners, and to be tailored to the primary consumer audience's expectations for medical care.

•

The role of technology in enhancing distributed healthcare services will grow. Webcams, email, online viewing of x-rays, MRIs, and more will proliferate and the systemization of the clinical process (checklists and notes) will expand on a level of

In This Issue Winning Trips Serving Un-met Needs Retail Health Clinic Business Model The Role of Technology Role of EHRs and Statistical Analysis Broader Vision of Healthcare Services

Store Tours 10,000+ photos Views of the most important new stores opened in North & Latin America, Europe and soon the leading Asian markets Filter by department Search/sort photos across markets and retailers by department (for brand managers looking for great ideas) "Best Ideas" galleries that highlight the very best ideas from across all of our store galleries On-Demand - Photos of any store in most parts of the world in 72 hours or less. Contact Mark Byrd to schedule a demo or request more information.

Updated Curriculum Subscribers to RNG can now access our newest Retail Market Development case for Latin and Central America.

discipline not typical of doctors offices. •

The role of Electronic Health Records (EHRs) and statistical analysis is a key success factor.

•

Employers are important stakeholders in healthcare and are increaingly creating their own on-site clinics, reminiscent of a return to the industrial medical offices of the 60's

•

Pharmacy Retail Specialists (drug channel) are integrating a broader vision of healthcare services.

Prior Strategy Alerts Retail Pricing Update Sophisticated retail pricing has emerged as a key driver of long-term growth and profitability. Wal-Mart's Marketside: A Small(er) Supermarket RNG's visit and perspecitve on Wal-Mart's new small box format Wining in a Zero-Sum Environment RNG's forecast for total chain sales, winning (and losing) market segments, and retailers' playbooks for Q4 and beyond

Keep in mind that with over 34,000 pharmacies in just the largest 15 US retail pharmacy operators there is a great deal of room for growth of this concept from the current levels of 1,112 clinics (as of 11/13/08 according to www.MerchantMedicine.com) Traffic is growing for the leading operators and they continue to invest in additional clinics.

Serving Un-met Needs Retail clinics serve un-met needs for patients and shoppers - convenience, value, and third-party attention to often self-diagnosed medical needs. A RAND Health study examined the types of patients who use retail clinics (September/October Health Affairs), analyzing more than 1.3 million visits to retail clinics from 2000 to 2007 from eight retail clinic operators that accounted for three quarters of the clinics in operation as of July 2007. •

Patients aged 18 to 44 accounted for 43 percent of retail clinic visitors, compared to 23 percent for primary care physician offices.

•

Just 39 percent of retail clinic patients said they had a primary care physician, while 80 percent of people surveyed nationally say they have a personal doctor.

•

About 90 percent of the visits to retail clinics were for 10 simple acute conditions and preventive care: upper respiratory infections, sinusitis, bronchitis, sore throat, immunizations, inner ear infections, swimmers ear, conjunctivitis, urinary tract infections, and either a screening test or a blood test. The same

The Legacy Store Challenge Why retailers' #1 ROI challenge is driving growth in their existing stores, and how the leaders win Goldman Sachs Global Retailing Conference Get a quick download of RNG's thoughts after hearing and meeting with leading retailers Chain Retailing 3.0 Over the next two years, branded manufacturers and retailers will be challenged to find new ways to prosper in the fastest changing food retail environment in a generation Mature Store Activation The new new thing in retail growth is old stores, and how to unlock their potential to reach new shoppers and drive wallet share with existing shoppers Social Networks Online social networking allows marketers to connect with new and existing

conditions accounted for 18 percent of visits to primary care physician offices and 12 percent of emergency department visits. On top of this data is the fact that 40% of emergency room visits are nonemergencies, and surveys indicate that 65% of respondents were unable to get a visit with a primary care physician within a day of calling in sick. 42% were unable to get it within a week of calling (Commonweath Health and Mass Medical Society).

customers and deepen the level of engagement Pricing Optimization Retailers are developing pricing as a strategic capability, which also raises several opportunities for CPG firms Private Label Strategic store brand programs are a significant growth strategy for retail leaders Express Stores Convenience food retailing is changing globally as consumers express their preference for healthy, fresh, and ready to go (or consume) foods

Meet Our Analysts

Most of the new clinics are being added in top 50 markets in the fringes around cities to attract both suburban and urban households. This plays off of dual-income households without time for the current medical system but with resources/insurance to get care.

Retail Health Clinic Business Model The clinic business model needs larger-scale partners, and to be tailored to the primary consumer audience's expectations for medical care. With the traffic they bring to the store and add-on purchases of goods and RX Scripts (even at $4) being clinics' key strategic value to retailers, clinic operators need strong affiliations either with the retailers or with a major healthcare centers/hospital . The need for larger partners becomes a requirement as most of the financial value of the clinics is gained downstream of the clinic, the retailer who gains that value and constructs the relationship with the clinic operator or by the Hospital who partners both for referrals and staff leverage of its own operations as well as value shared back from retailers.The recent drop outs from the industry in June 2008 lacked this extended business model and did not have the relationship with the retailer hosts or longer view for value monetization in terms of trip capture and add on sales. Closures included SmartCare with 15 clinics (in Wal-Marts), Early Solutions Clinic with six clinics, InstaClinic with two clinics, ReadyCare with one clinic, and Mercy ExpressCare with one clinic

Dan W. O'Connor is the President & CEO of the RetailNet Group. He also is the Founder of Management Ventures, Inc. (MVI), a WPP Group company. Dan is a widely known industry speaker and thought leader. LinkedIn | Email

Aaron Chio is a Senior Analyst leading RNG's development of new research, insights and growth strategies in Latin America. LinkedIn | MSN |

In addition, as Wal-Mart has learned, the appropriate staffing, branding and marketing model needs to be reflective of the primary consumer in the trading area. Older consumers tend to be more traditional in service expectations (physician versus nurse care as well as more chronic or interrelated/conflicting medical needs that resist a non-MD or hospitalbased clinic. As a result, over 73.6% of the 65 and over clinics users in the Rand study were there just for immunizations. Wal-Mart's telemedicine model of bringing the Doctor into the clinic vial webcam while still having the lower staffing costs of the nurse practicioner as well as recent growth in Hospital network clinics reflect this issue.

"I think that the business model that most companies that operate in that space -- that business model they are using is one that has not proven yet to work. Now the one that we have just recently started, which is slightly different because it leverages the brand equity of the local hospital, as well as the expertise of the local hospital to provide the nurse practitioners for the clinic, that is one that we feel that has a lot more potential. Because we both have the trust of the customer in terms of the brand of the hospital, and at the same time you have the professional management of the nurse practitioners, which some private equity firms that have entered this space might not have." (Eduardo Castro-Wright - Wal-Mart Stores US - President & CEO)

Growth in the Role of Technology The role of technology in enhancing distributed healthcare services will grow. Web cams, email, online viewing of x-rays, MRIs, and more will proliferate and the systemization of the clinical process (checklists and notes) will expand on a level of discipline not typical of doctors offices. Clinics are getting due credit for discipline and thoroughness due to use of technology-based information and process management systems as well as use of tools like the webcams mentioned above. This helps both defend the quality of care as well as provide a basis for continuous improvement.

Role of EHRs and Statistical Analysis The role of electronic health records (EHRs) and statistical analysis is a key success factor. Electronic health records will not only save the total medical system an estimated $500 million according to recent election campaign retoric, but

Tim O'Connor is Vice President at RNG, currently responsible for RNG's Growth Strategies Curriculum and European market insights. LinkedIn |

Keith Anderson is a Senior Analyst and responsible for RNG's North American research practice and transformational capabilities curriculum. LinkedIn | Twitter | Windows Live Messenger

will also address one of the complaints and limits to service growth for clinics. Clinics are primarily limited to simple medical issues that require minimal extended care or followup. With EMR, clinics will be able to provide the convenience and ensure continuity of care and ability to address more complicated services or patients (such as the elderly on continuous medication or treatment). This will also support the development of clinicbased chronic care services like diabetes care, wound management, and more. Statistical analysis by clinic operators will be used not only to improve the business model but also to improve healthcare delivery and feedback to medical products manufacturers in a way not capable today from the lowtech traditional medical services.

Broader Vision of Healthcare Services Pharmacy Retail Specialists (Drug Channel) are integrating a broader vision of healthcare services. CVS and WAG have different strategies overall but both have visions and are integrating retail clinics and the role of the retail store into a bigger picture of healthcare services. (CVS, for example, just appointed a Chief Medical Officer who will oversee MinuteClinic, Accordant Healthcare, and CVS's clinical and medical affairs and healthcare strategy.) This vision for healthcare services enables greater differentiation of each business as well as supports more rapid rollout of clinics and marketing scale, which is already enabling advertising them on TV to drive traffic.

More on these Topics 1.

Cain Brothers Report on Clinic Business Models (on RNG)

2.

Podcast with Tom Charland, chief executive officer of Merchant Medicine myths and realities of retail clinics

3.

Hospital based clinics increasing activity and addressing MD buy in (AMN Healthcare News) http://www.amnhealthcare.com/News/news-details.aspx?Id=6888

4.

Video about the Mayo Express Care service

5.

Community blog of retail clinicians for issues and on the floor perspective

RetailNet Group is the leading insight and advisory firm focused on retail growth strategies and consumer-facing transformational capabilities. We are deeply experienced retail/consumer analysts and strategists working exclusively to help brand-led businesses and large-scale retailers grow. Sincerely, RetailNet Group

Note: Articles contained in this newsletter are collected from a variety of sources and links can expire over time.

Email Marketing by