Retailers Boost in-Store Clinics to Draw Traffic

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Retailers Boost in-Store Clinics to Draw Traffic

By Debby Garbato - 03/20/2013

Shoppers can kill time many ways while waiting for their number at the deli counter or hot food bar: They can cruise the cleaning aisle, scope out deals on boneless chicken breasts or, in increasing numbers of stores, visit an in-store clinic for a quick cholesterol check.

Over the past decade, the number of food, drug and mass retailers offering health services has steadily grown. As of December 2012, in-store clinics alone numbered 1,420, up from 1,350 in 2011, says Shoreview, Minn.-based Merchant Medicine. The number and range of other services, usually tied to pharmacy, is escalating, too. Services include nutrition and diabetes counseling, inoculations, medication management, and screenings for cholesterol, blood pressure, bone density and other conditions.

Fees for blood pressure screenings at in-store clinics generally are a fraction of what physicians' offices or hospitals charge.

Retailers are not looking to replace traditional medical care, but a primary care physician shortage, aging baby boomers and the uninsured have created demand for affordable, accessible health care services. Health care services also can help retailers stand out, attract shoppers and increase loyalty.

"It's an opportunity to differentiate and be a destination," says Kristy Jozwiak, spokesperson for Chandler, Ariz.-based Bashas' Family of Stores, which offers in-store clinics, nutrition counseling and health screenings. "These are cost-efficient ways to address health and wellness. Certainly, programs bring additional traffic."

Declining pharmacy margins resulting from third-party prescriptions are another reason for expanding health services. Some tests and services are free. Others, like Hy-Vee's full cholesterol screening for $45 and dietitian consultations priced at $409 for six visits, generate revenue, says Ruth Comer, assistant vice president of media relations for the West Des Moines, Iowa-based retailer.

While services at walk-in clinics are bargains for consumers, they also generate incremental revenue and traffic for retailers. Kantar Retail analyst Jessica Campbell says the average cost to consumers is $60–compared with $283 at a physician's office and $485 for an emergency room visit. Health publisher Kalorama Information reports 2012 retail clinic sales totaled $885 million; they are expected to exceed $1 billion this year and rise to $2.5 billion by 2017.

Retail clinics generated $885 million in 2012, and about 45 percent of patients paid in cash.

As many as 45 percent of patients pay cash because they are uninsured or have high deductibles, says Tine Hansen-Turton, executive director of the Convenient Care Association, a Philadelphia-based trade group for retail clinics. "We're the lowest [cost] care option. Clinics also keep people out of emergency rooms."

The Diabetic Demographic

More than many others, diabetics understand the convenience and affordability of in-store clinics.

"Diabetics are extremely important for obvious reasons," says Mike LeBlanc, director of pharmacy sales and marketing at Bi-Lo and Winn-Dixie. "They require much care and visit the pharmacy frequently."

As a result, many retail health-care programs are focusing on services for diabetics. Here are a few more "obvious reasons:"

Diabetics represented 6 percent of the population in 2010, according to the U.S. Centers for Disease Control and Prevention. The numbers are higher in certain areas and among blacks and Hispanics.

The disease accounts for $1 of every $10 spent on health care, the American Diabetes Association says.

Diabetics spend about $2,500 annually at the pharmacy, but up to $6,500 if they have related conditions and complications. Non-diabetics spend about $300, the Hamacher Resource Group says.

Clinics also attract families and time-pressed young adults, says Alex Evans, vice president at Boston-based L.E.K. Consulting. "They may have forgotten to get their kid's baseball physical," he says, adding that broader usage skews a little younger and lower income. Clinics are also popular in rural areas with limited health care.

The aging of the baby boomer generation also is driving the increased popularity of retail health care. Boomers are health-conscious and often spend freely. "The aging population wants to put care into their own hands, but wants guidance," says Dave Wendland, vice president of Milwaukee-based Hamacher Resource Group. "The more retailers attract customers to health and wellness, the more they'll spend."

DIETITIANS VS. CLINICS

CVS leads with 609 MinuteClinics, followed by Walgreens' 370 Take Care Clinics. Rite Aid operates NowClinics on a smaller scale.

Some mass-merchandisers also are experimenting with clinics. Target's 44 clinics are in six states, while Walmart offers 138 The Clinic at Walmart locations, which are run by an outside company. ShopKo, a regional discounter, operates six FastCare clinics in Wisconsin.

"It's a zigzag with Walmart," says Kalorama publisher Bruce Carlson. "They've closed some, announced they were getting out of the business. Then, in 2011, they said they wanted to expand. Now, they're about where they started."

The ROI on Health Care

Retail health care programs are not cheap: Space must be allocated, equipment purchased and trained professionals recruited. But retailers say they are seeing a return on their investments for paid services in clinics and the free screenings and consultations many offer.

Building a 150- to 500-square-foot retail clinic costs between $70,000 and $80,000. The clinic can require up to $300,000 in operating capital to finance the first two years, reports Kalorama. While some retailers take the plunge and develop their own clinics, others, like Walmart and H-E-B, use outside providers or partner with local hospitals.

Some retailers are struggling to generate clinic traffic and profits. Walgreens had hoped to operate 400 clinics by 2008, according a 2012 report from the Griffin Consulting Group, but it has about 370 today. CVS' in-store clinics achieved profitability for the first time in 2011, according to its annual report. CVS is planning 2,016 locations by 2016. Additional clinic services and the tying in of its prescription benefits management business could help profits.

As for no-cost dietitian services, Ruth Comer, assistant vice president of media relations at Hy-Vee, says the ROI comes from incremental food sales. "Services are a big investment. But when a store adds a dietitian, there's an immediate increase in food sales by having a professional help select products. And dietitians may give out samples of a nutrition bar and discuss benefits. Sales go from a dozen bars a week to a dozen cases."

At Bi-Lo and Winn Dixie, LifeScan provides glucose testing equipment. This offsets some of the costs associated with the free testing, says Mike LeBlanc, director of pharmacy sales and marketing.

Loyalty programs can help retailers better track ROI. Navarro's Diabetes Club, for example, gives discounts on supplies. Members also receive 25-percent-off coupons for the general merchandise item of their choice, says Cristy Leon-Rivero, chief marketing officer. Navarro's Rx Savings Club provides 90-day supplies of 100 different generic drugs for $9.99.

Historically exempt, pharmacy services are now part of many storewide loyalty programs. This allows retailers to track pharmacy against nonpharmacy purchases. Bi-Lo's and Winn-Dixie's bonus cards also tie in fuel. Shoppers receive 5 cents off per gallon for every $50 spent storewide (including pharmacy). "We can look globally at customers and [determine] what we should focus on in promotions," says LeBlanc.

Some services are completely funded by vendors. SoloHealth's free testing kiosk, for example, screens for vision, blood pressure, weight and body mass along with an overall health assessment, says Bart Foster, SoloHealth's founder and CEO. It is supported by ads from companies like Novartis and Kellogg.

While consumers wait for test results, they are a captive audience, and Foster says they frequently buy advertised products. The kiosk voluntarily captures email addresses and directs customers to in-store health services.

The kiosk, which generally is located on a pharmacy end cap, has been installed in select locations in Walmart, Sam's Club, Safeway and Schnucks stores. By the end of 2013, Foster expects it to be in 3,500 locations.

Like mass retailers, many grocers have scaled back, exited or not expanded the concept–although Kroger reportedly does well with its 88 Little Clinics, which it acquired in 2010. Operated by an outside provider, H-E-B's 30 RediClinics reportedly also are successful.

Unlike in drug chains, health care is not central to most supermarkets' business models–it is just another department. This can create challenges, particularly when it comes to management's priorities. "Drug chains naturally do it best," says Evans. "They have the heritage, credibility and connections. The drug channel grew out of pharmacy. Elsewhere, pharmacy was an add-on."

Instead of clinics, many supermarkets are focusing on dietitian services along with health screenings, inoculations and other services. Often, dietitians take shoppers on store "tours" where they point out foods for different diets. This differentiates grocers from drug chains. "It's an advantage that the dietitian can pick up a few loaves of bread and tell somebody they'll work with a low-sodium diet," says Mike Penn, Marsh Supermarkets' director of pharmacy. "People also have nutrition questions while shopping."

Loyalty to dietitians–along with pharmacists with diabetes training–runs high. If providers switch stores, customers often follow, says Comer. Most also purchase nonpharmacy items.

In addition to dietitians, Hy-Vee has installed certified chefs in half of its stores. Chefs work with the dietitians on special diet recipes, cooking classes and demos, says Comer. Many doctors refer patients to Hy-Vee.

Hy-Vee also participates in health fairs, attracting consumers with celebrities, samples, coupons and other perks, says Ray Stone, president of Health Smart Rx based in Elmhurst, Ill. Usually, fairs are held in hotels. Events help promote Hy-Vee's services. "Running a weekly ad doesn't do it. These things pay back."

Bi-Lo and Winn-Dixie–along with Navarro Discount Pharmacy–differentiate with pharmacists specially trained in HIV medications. "A few stores are focused on this," says B.J. Cobb, pharmacy professional services manager at Bi-Lo and Winn-Dixie. "They're educated on HIV and what's new, which constantly changes."

The two supermarkets also administer monthly injections to schizophrenics to help control their condition. "It's more convenient than going to a doctor every few weeks," says Cobb. "They're also more likely to take their medication."

While many supermarkets offer services for diabetics, Marsh further distinguishes itself by also providing seven free medications and lancets. Penn called the freebies the "cornerstone" of Marsh's two-year-old diabetes program. "Diabetics are typically good pharmacy customers, so it's a way to attract new business. As we work with them on nutrition, they also tend to become good grocery customers."

HEALTH CARE CHALLENGES

Retailers can face hurdles when it comes to their acceptance as health providers. The traditional medical community is sometimes put off by retail clinics, or what some call "doc-in-the-boxes" or the "McDonaldization" of health care. Critics contend services are not comprehensive and discourage the uninsured from finding a primary care physician. "There's a place for it," says Carlson. "The [American Medical Association] is concerned about continued care when somebody goes to the doctor then [to] a retail clinic. It breaks the continuity."

Convenient Care Association members must adhere to certain quality standards, Hansen-Turton says. This includes generating electronic health records that can be sent easily (and accurately) to consumers' primary care physicians. Clinics also connect people to local physicians and community health care centers so they have a "medical home," she adds.

Marsh says its immunization program has been financially successful. But some insurers only reimburse patients when their doctor provides this service. "This doesn't make sense because they must pay for both the visit and immunization," says Penn.

Marsh wants pharmacies to be viewed as more than pill dispensers. "There isn't complete acceptance as to what pharmacies can do," says Steve Cummings, director of pharmacy services. "There's still a mindset that you just get your medicine and head home. But that's gotten better and should continue improving."

With the Affordable Care Act and associated 2014 health care changes, many experts are expecting an increase in demand for health care services, and some say the need will spur critics of in-store clinics to retreat. With insurance more widely available, doctors may be inundated. "There will be huge demand on primary care," says Carlson. "You'll probably see a lot of health care partnerships so people get the right care at the right cost."

The former chief editor of several publications, Debby Garbato is an independent business journalist and research report analyst who has covered retail for 25 years. She can be reached at [email protected].