Retail giant Walmart's (WMT 1.02%) exploration of expanding further into the healthcare market turned into action last month when the company opened its first Walmart Health center in Dallas, Georgia. Walmart has been working with healthcare professionals for the last year to design a one-stop-shop for affordable healthcare.
Health and wellness are already a large part of Walmart's business model, with $35.79 billion in U.S. net sales in the fiscal year ending January 2019. That's about 10.8% of the total. Included in that figure are prescription drug sales, vision services, medical product sales, over-the-counter drug sales, and services offered in its 19 Care Clinics, including immunizations, lab tests, physicals, and referring to specialists. Walmart is looking to build on that by adding additional services to this existing list, all available under one roof.
Let's take a look at a few key points to consider when analyzing this move by Walmart.
Image Source: Getty Images.
Not the same as other store clinics
You might be quick to dismiss this as nothing new. You can already go to a CVS or Walgreens clinic, or even a Walmart Care Clinic, and get healthcare. Walmart says its Walmart Health center in Dallas, Georgia, goes further and is the first of its kind to put all of the following services under one roof, outside of a hospital or dedicated medical facility:
- Primary care
- Urgent care
- Lab testing
- X-rays and X-ray diagnostics
- EKG tests
- Counseling
- Dental care
- Optical care
- Hearing services
The ability to take care of all these health needs under one convenient blue roof and pick up supplies you might need while feeling poorly -- like tissues, over-the-counter medicine, and bandages -- sounds appealing. And current in-store quick care facilities don't have the capability to do blood tests or labs in-house. The redesigned store in Dallas, Georgia, also offers a pet-care clinic.
Additionally, the company boasts in its press release that pricing will be "low" and "transparent," regardless of whether you have insurance. If it can deliver on that promise, as an investor, I'm interested. A quick look at current posted average prices shows it's beating CVS and Walgreens in price with several popular services.
| Service | Cost | ||
|---|---|---|---|
| Walmart Health | CVS | Walgreens | |
| Office visit | $40 | $99-$139 | $89 |
| Flu test | $20 | $70-$100 | $66 |
| Strep test | $20 | $35-$45 | $25 |
| Lipid panel | $10 | $37 | $35 |
While Walmart hasn't announced specific plans to offer specialized medical services, changes to its employee health network could find their way to the consumer side if they prove effective. The company is testing out programs that utilize "data and proven results" to connect patients with specialists. Additionally, it is testing a "personal healthcare assistant," which works as a concierge that simplifies healthcare logistics including scheduling and billing and also helps patients with things like understanding a diagnosis. Walmart is also testing out expansion of video doctor visits (known as telehealth) through partnerships with Doctor On Demand, Grand Rounds, and HealthSCOPE benefits.
More effective use of space as consumers shift to purchasing online
With e-commerce sales growth of 37% in Q2 2019, Walmart's customers are shifting their business from brick-and-mortar to online. What this means is revenue per square foot in brick-and-mortar locations will become less profitable. Walmart may not be losing out on the sales as they shift online, but there may be more profitable ways now to utilize the space. The new Walmart Health center will take up 10,000 square feet inside the Dallas, Georgia store, a big step up from the 1,500-square-foot Care Clinics currently in 19 Walmart locations through Georgia, Texas, and South Carolina. Forbes reports that another Walmart Health center is in the works for Calhoun, Georgia, but that there's no word on a national rollout.
In a market where the percentage of uninsured Americans rose from 7.9% to 8.5% in 2018 and annual deductibles for employer-based health plans have quadrupled in the past 12 years to more than $1,300, customers are looking for an affordable and convenient solution to meet their healthcare needs. If Walmart can bring proof to concept in Dallas, Georgia, expansion could be a profitable growth lane.
