story and photo by Kim Souza
Health and wellness is big business for Wal-Mart’s Stores Inc. garnering roughly $30 billion in sales, which was 11% of the retailer’s total U.S. sales in fiscal 2013. Sales grew 3.8% from the prior year but the retailer is barely scratching the surface of opportunities as there are major shifts underway in this segment. (Update: The City Wire previously under-reported the health and wellness sales in an earlier version of this story.)
Dr. John Agwunobi, president of health and wellness for Walmart U.S., said there are ample opportunities to grow market share. He outlined a few areas where Wal-Mart was focusing on health and wellness growth: healthcare services such as immunizations provided by pharmacists in-store; product innovation, branded and private label, and key focus on the boomer demographic.
“We have 100,000 pharmacists scattered about this country and a vast supply chain network that we must fully leverage. Right now in 1,400 of our stores, we have pharmacists giving immunizations and other inoculations, but we will make these services available in all of our stores with pharmacies sometime this year,” he said.
Agwunobi spoke to roughly 800 business professionals in Rogers on Tuesday morning (Jan. 21), as the keynote speaker for the WalStreet Breakfast, a program offered by the Bentonville Chamber of Commerce.
He admitted that Wal-Mart has taken a back seat to other drug store chains when it comes to in-store clinics.
“We have 140 or so in-store clinics at this time and hope to add more in the future. We continue to test and study this option, but we haven’t found the answer yet,” Agwunobi said.
He added that while a couple of drug store chains — Walgreen and CVS Caremark — have actively opened in-store clinics in the past two years, he isn’t sure the ventures are profitable.
According to the Convenient Care Association, there are more than 1,400 health clinics inside retail chain stores – twice the number that there were in 2007. CVS Caremark leads the pack with 650 MinuteClinics in 25 states and Washington, D.C. Although Walgreen is second to CVS in clinic numbers, with Take Care clinics in 372 stores, it anticipates major growth in the next two years with a growth strategy that includes forming accountable care organizations (ACOs) and providing diagnosis and treatment services.
Walgreen partnered in 2013 with Florida-based Diagnostic Clinic, New Jersey-based Advocare, and Texas-based Scott & White Healthcare to form ACOs in which the retailer will benefit from gain sharing when the ACOs succeed in keeping patient healthy at a low cost.
Agwunobi said there continues to be massive consolidation in the drug store channel as the larger players seek to expand their footprints, aligning with insurers and other partners.
“This is a fundamental vertical shift in this channel. The worst thing we can do is sit by and watch. No one knows exactly how this end up but it’s important that we are part of the dialog as we keep our eye on the beacon — for Wal-Mart, that is the customer,” Agwunobi said.
While the Affordable Care Act intent was good, Agwunobi fears it will end up costing suppliers and consumers more money once the mandates kick in. He said those are two areas that squeeze the retailer from both ends.
“As consumers have higher costs associated with health care, that is less money they can spend on other things,” he added.
One area Agwunobi said there is enormous potential is in over-the-counter (OTC) wellness and nutrition innovation.
“Boomers are here. Their consumption is dramatically impacting our business in the areas of eye ware, gastric meds and Medicare Part B participation,” he said.
At one end of the boomer spectrum, Agwunobi described millions of older consumers living active lifestyles, engaged in fitness, yoga, consuming vitamins and other healthy nutrition products. One area where the retailer has seen big gains is in the private label eye wear, such as the Equate contact lenses. Agwunobi said it comes down to price and quality, the two areas that Wal-Mart won’t compromise.
“There is room for product innovation across multiple categories in both private label and branded, from fitness apparel and gear to food supplements,” he said.
On the spectrum’s other end he said the retailer is seeing older seniors and demand growth in diabetes and incontinence products as well as durable equipment sales. He said Wal-Mart seeks keep the cost of living down for seniors requiring more health care services and will rely heavily on its suppliers to bring ideas and solutions to the table.