April 26, 2006
Convenience is king for U.S. consumers. So it's understandable that retailers and restaurants are evolving to provide customers with one-stop shopping experiences. The examples of this trend abound: McDonald's (NYSE: MCD ) is experimenting with DVD kiosks, Starbucks (NYSE: SBUX ) hawks CDs, and Target (NYSE: TGT ) houses Starbucks coffee shops in its stores. Now, Walgreen (NYSE: WAG ) is considering a plan to join this trend. The idea may be a boon for consumers, but it's less clear if it'll be a good plan for Walgreen.
This summer, Walgreen will launch more than 20 health clinics in stores in the St. Louis and Kansas City areas, expanding the experiment to other locations later in the year. There's no doubt that the clinics offer convenience. Patients can come in any day of the week without an appointment and be seen by nurse practitioners who can check for routine ailments, provide vaccinations, and screen for diabetes and high blood pressure. Furthermore, the program doesn't cost Walgreen anything. The services will be provided by another company, Take Care Health Systems, which will rent in-store space from Walgreen at market rates.
The thought is that an in-store clinic will increase store traffic. It's certainly possible that more people could come into Walgreen stores as a result of the program, but it's not evident that the clinics will increase customer satisfaction. The no-appointment system may be great in the near term, but as more people turn to the quick fix of Walgreen clinics in lieu of waiting months for a doctor's appointment, it's a reasonable possibility that in the long term the clinics will be overloaded. This, in turn, could lead to frustration and dissatisfaction on the part of the very customers that were attracted to the clinics' convenience in the first place.
It makes sense for Walgreen to look for ways to improve customers' shopping experiences. And to some extent, the clinic initiative is understandable as a response to competition, since Target, Wal-Mart (NYSE: WMT ) , and CVS (NYSE: CVS ) have already been testing the idea. But Walgreen should consider that acting as an alternative provider of health care services might be more trouble than it is worth.
Starbucks is a Motley Fool Stock Advisor recommendation. To find out what other companies David and Tom Gardner have recommended to subscribers since April 2002, clickherefor a 30-day free trial.
Fool contributorBrian Gormanis a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.