The latest slew of new announcements and developments by big box retailers, pharmacy chains, and tech giants makes it clear. The consumerization of health care is here, and it’s much bigger than free flu shots at the drug store. In fact, it’s a game-changing shift on several dimensions. In our view, these are the ones with the most impact to your business:
- Business Models – retailers are going beyond brick-and-mortar stores to become full-service, easily accessible health care providers. The focus is building customer relationships and loyalty; sales and repeat business will grow as products increasingly link to diagnosis and treatment. The opportunity for auto-replenishment, membership, advisory services, and other recurring revenue goes hand in hand with these models. Walmart, CVS, and Best Buy are notable examples of companies going in this direction.
- Ecosystems – networks and partnerships are not only necessary to deliver comprehensive services and seamless experiences,they are crucial in an environment where insurance and regulatory agencies call the shots. To succeed long term, retailers and CPG companies need to cooperate with insurers, hospitals, government, doctors and other third parties such as testing labs. Another factor is the proliferation of FHIR (Fast Healthcare Interoperability Resources) technology, which looks to increase interoperability among hospitals, physicians, and other relevant parties. FHIR creates standards for different data elements so that developers can build application programming interfaces (APIs) that can be used to access datasets from different systems. Apple is part of the group pushing this standard forward as it seeks to build a developer platform and ecosystem.
- Product/Service Innovation – opportunities are greatly expanded when the context is consumer-driven versus strictly medical. Health care is not limited to pharmaceuticals, medical devices, or delivery by doctors and hospitals. Wearables can be remote monitoring devices, foods can be medicine, support systems can be online, and so on. Gut health, brain health, skin health, sleep science, and other self-treatable ailments have opened the door for boundless innovation without as much regulatory scrutiny.
- Markets – the market for health care/wellness offerings is enormous and can be segmented a number of ways. Healthcare technology, for example, is estimated to be a $50 billion market. Both Apple and Best Buy are aiming at the aging market (see below): 10,000 people turn 65 every single day and two-third of seniors over 65 live with one or more chronic conditions. There will be 54 million seniors by 2023 and 90% want to live at home. The medicinal/functional foods market is yet another market; 37% of consumers use functional food to address metabolic disorders, depression, gut health and more, according to Tastewise. Overall, the total consumer wellness market for products and services is estimated at $630 billion.
- Channels – a good part of the demand for retail health care is driven by the cost and complexity of traditional health care systems. People want simple, effective, affordable, and easily accessible solutions. This means different pricing for self-paying customers and omni-channel delivery. As more and more retailers and big box stores jump on the health care bandwagon, companies need to decide with whom they will align. Direct to Consumer (DTC) websites, education, customer support, and social media will be key differentiators.
What the leaders are doing
Best Buy said at its recent investor meeting that 1 million customers have signed up for its remote health monitoring services. The company hopes to have 5 million customers within the next five years. It’s acquired two companies — Great Call, which sells wearables and medical alert devices, and Critical Signal Technologies, which provides a mix of telehealth and in-home care services to expand its offerings for seniors to include services “geared around health and safety, think urgent response, fault detection, concierge help…” By providing what seniors need and want to stay in their homes, they believe their addressable market more than doubles.
Apple is increasingly becoming a sales channel for consumer health care as it builds its platform for third party developers to create apps. The company continues to enhance its Apple Watch as a health product and add more medical and prevention services to the device including blood pressure management, diabetes management, sleep monitoring and heart health. Further, Apple offers health record management through the iPhone. Democratizing health care is an important mission for CEO Tim Cook. “We are taking what has been with the institution and empowering the individual to manage their health. And we’re just at the front end of this.”
Walmart is piloting a new standalone health care clinic in Georgia. Walmart Health services include: Primary care, dental care, mental health counseling, labs & X-rays, screening, optometry, hearing, fitness & nutrition, and health insurance education & enrollment. While Walmart already has a foothold in health care through its pharmacy business, the addition of full-service clinics is anentirely new model. Walmart is also an important player in the overall health care ecosystemthrough its huge influence on everyday food and exercise habits. Its growing emphasis on health and wellness offerings will surely have a ripple effect.
CVS is not only remodeling many stores to allocate more room for health care products and in-store clinics, it’s building a tech-enabled healthcare experience in partnership with Aetna that combines artificial intelligence, virtual care services and connected devices with brick-and-mortar clinics. CVS wants ‘to connect the physical and digital experience to expand consumers’ access to care. Those experiences could be a virtual doctor visit, using an AI-powered chatbot or sending health data to a physician through a connected device.
Sam’s Club just announced that it’s piloting a discount health program to make health care more affordable. In exchange for an annual fee, customers will get deals on some generic medications, dental, optical and other services.
And, of course, there’s Amazon. The ecommerce giant has launched Amazon Care, a virtual clinic for its own employees. Amazon is known for testing concepts like Amazon Go with its own employees first, so this could be a sign that Amazon is looking to get more into the primary care business.
The consumer appetite for accessible, affordable health care alternatives is huge. This not only creates new opportunities for retailers, but for all players on the value chain.
For CPG firms, adding the right health & wellness benefits to your offerings will help ‘premiumize’ them and potentially raise profit margins.
The key is execution and focusing on your company’s core strengths and market. The cost of implementation can be high – make sure your profit potential is there.
Consider the five game-changing dimensions in terms of your business and decide where you can make the biggest impact:
- Business Models: Make sure you think beyond products, think of the way you can add value to the customer’s full experience.
- Ecosystems: Choose partners that will strengthen your position
- Product/Service Innovation: Differentiate your offerings, as the market heats up, so will the competition. Don’t just add a feature and slap a new ‘health care’ label on products. Go deeper – what do your customers need? It may be support, maybe ‘house calls’ or trustable advice rather than technology. Ask, prototype, and test.
- Markets: Focus.Start with a market you already know to pilot new ideas. The more tailored and personalized, the higher value your offering will have.
- Channels: Align with the retailers that fit your brand and that deliver reliably to the customers you want to reach. Access to customer data and insight is essential as you build your health care platform. Consider creating your own DTC website.
Remember, gaining – and maintaining – customer trust is imperative. Product safety and quality is a given, but you must also respect your consumers as patients. Show genuine empathy; often that is the underlying need not being met by traditional providers. Most of all, strive to contribute to better health outcomes.