Wal-Mart Can Fail Too

Retail behemoth Wal-Mart (NYSE: WMT  ) has succeeded in many, many endeavors. Plus, these days, the fact that it’s grabbing additional market share -- as consumers trade down to save money -- underlines its strengths. However, it turns out that Wal-Mart has thus far failed in one of its promising growth initiatives.

According to BusinessWeek, Wal-Mart’s plans to use in-store health clinics as a growth area have not gone as swimmingly as one would think for a retailer as powerful and ubiquitous as Wal-Mart.

Not as healthy as planned
You’d think Wal-Mart’s entry into this area would be a no-brainer. In-store health clinics make sense; consumers can get ready access to care for run-of-the-mill health concerns quickly, without an appointment, and during off hours, since most doctors’ offices are open while consumers are working. If you need treatment for a simple sinus infection or a pesky rash, for example, a stop at your local Wal-Mart would make sense. These clinics market themselves as both convenient and cheaper than a doctor’s appointment or hospital visit.

Wal-Mart had originally planned to have these quickie medical clinics in 400 stores by 2010, and had high hopes to have 2,000 all told. In February 2008, it had 78 clinics; in a shocking turn of events, it now has only 31. And this is despite the fact that the Convenient Care Association said consumer visits to such clinics doubled to 14% of the population from 2007 through April 2009, so it appears to be a growth area. Clearly, the initiative just hasn’t been a success for Wal-Mart, even if this is a concept that’s resonating with some consumers. (Wal-Mart remains undaunted, saying it plans to have 400 clinics in stores within the next several years.)

Even more fascinating, the article pointed out that CVS Caremark (NYSE: CVS  ) and Rite-Aid (NYSE: RAD  ) have taken most of the market, although you’d think Wal-Mart would give any rival a run for its money. Of course, CVS and Rite-Aid are both well known as “drug stores,” which is seen as one of the reasons for their relative success. One problem that’s pointed out is that Wal-Mart doesn’t have an actual subsidiary relationship with its health clinics, and CVS and Rite-Aid do. The rough economic climate has made it hard on Wal-Mart’s health clinic “tenants.”

Success is no guarantee
The big picture, of course, is that we’re talking about a retailer that reported more than $400 billion in revenue last year. When you’re already talking about monstrous sales figures, drumming up new growth is a massive undertaking. What else can it do to drive additional sales?

And as much as Wal-Mart’s known for being successful and formidable -- take its cutthroat attitudes toward suppliers, a historical example being Rubbermaid’s having been forced into merging to form Newell-Rubbermaid after it got the Wal-Mart squeeze -- Wal-Mart hasn’t been successful in all of its competitive endeavors. For example, remember when it tried to take on Apple (Nasdaq: AAPL  ) and Netflix (Nasdaq: NFLX  ) in music downloads and DVD rentals? There’s a reason you probably don’t think of Wal-Mart first when you think about digital tunes or a DVD rental.

Of course, despite the setback in the health clinic area, or any other setbacks, Wal-Mart has recently vowed it can keep the customers it’s been gaining during our country’s economic tsunami. However, there’s no guarantee that will work, if many surviving retailers evolve and are also able to offer far cheaper prices. I’m not sure Wal-Mart or its shareholders should simply count on the newly frugal American consumer or what is being widely called “the new normal” to bring in additional growth.

Lately I’ve had to admit that Wal-Mart has been a solid stock idea, given its reputation for rock-bottom prices. Then again, several years ago it was clear that competition from rivals like Target (NYSE: TGT  ) and Costco (Nasdaq: COST  ) was nothing to laugh at, and growth was a challenge.

What now, Wal-Mart?
It should be interesting to see how Wal-Mart does if the economy improves quickly, if consumer sentiment shifts, or if many retailers start competing more aggressively on price. Although Wal-Mart’s new focus on sustainability and environmental initiatives are nice, shareholders certainly should be on the lookout for plenty of Plan Bs. Unless Wal-Mart can figure out the appropriate business model, convenient in-store health clinics may not be one of them.