Earlier this week, on the same day, Gap announced it was closing 175 or 25% of its retail stores, while CVS Health proclaimed it was purchasing Target’s pharmacy and clinic business for $1.9 billion as part of an aggressive expansion push. Oliver Wyman’s Howard Lapsley asks what these differing trajectories suggest for healthcare companies:
Healthcare has long been an industry unto itself, enjoying a fair bit of immunity from consumer market trends. But the near simultaneous news of Gap’s misfortunes and CVS’s confidence draws attention to larger market forces at work—forces that are cutting across sectors.
The Gap reportedly continues to lose to online and “fast fashion” brands. According to USA Today, “same-store sales fell 10% in the first quarter, compared with a 5% drop in the year-ago quarter.” And notes Business Insider: “American consumers are moving away from brand names in favor of value, a trend that is also hurting retailers like Macy’s, JCPenney, and Target.”
By now the tale of Gap may not be surprising—hum drum fashion, mediocre quality, vanilla stores, lines to the cashier—this amounts to a “why bother” for the consumer when it comes to meeting their needs on their terms—today. Especially when compared to online retailers like Zappos for infinite variety, best-in-class customer service, and free and easy returns; stores like Apple’s Genius bar with a dumb question “safe zone” and issue resolution; and Starbuck’s for consistent quality and personalization. The list goes on.
In the healthcare world, retailers are learning from these best-in-class examples to face generations of consumer dissatisfaction and hassles encountered from the healthcare delivery system. Contrast the Gap retreat with the march of CVS to grow its Minute Clinic business from 900 clinics today to more than 1,500 by 2017. Pharmacy clinics will text you when it’s your turn (if there is even a line) and have easy and convenient hours and locations. Quality service is a must, and expansion of clinical services that are connected and in coordination with primary care physicians and the rest of the care delivery ecosystem are in motion.
From a consumer’s standpoint, convenience, simplicity, and ease of interaction with the healthcare system are keys to success. For payers, providers, and retailers, those alliances that form a coordinated and complementary ecosystem of providing healthcare on consumer’s terms will create loyalty and trust on par with a Wegmans—versus the less consumer- and patient-centered models that have all too often defined healthcare experience in the US.