The next frontier in retail may be healthcare. Just weeks after Amazon (AMZN -0.15%) announced its acquisition of 1Life Healthcare, known as One Medical, Walmart (WMT -1.18%) is making a new move to penetrate the $4.1 trillion industry. The retail giant, which has long held ambitions of building a significant healthcare business, is partnering with UnitedHealth (UNH -0.95%) to offer a preventative program for seniors and virtual care for all ages over the next 10 years.
The program will start as a pilot at 15 Walmart stores in Georgia and Florida and will focus on patients with Medicare Advantage, a private form of health insurance. AUnitedHealth executive said that the partnership could potentially serve hundreds of thousands of seniors.
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Key Data Points
A win-win
Walmart has long been angling for a bigger piece of the massive healthcare market. While the company operates its own pharmacies and has 24 health clinics, its potential in healthcare seems much larger, especially since the company has more than 4,000 stores across the country that Americans visit frequently to do their grocery shopping, pick up a prescription, or buy something else they need. Many of those are located in rural parts of the country that are underserved by traditional healthcare outlets. Additionally, 90% of Americans live within 10 miles of a Walmart. Considering the significant foot traffic those stores get, adding healthcare services is a good way to expand Walmart's business.
Preventative care seems like an especially good fit for Walmart as well. A patient is more likely to get a cancer screening, physical exam, or blood test if it's convenient. Making these tests available at Walmart does just that.
A showdown with Amazon
Walmart isn't the only retail giant making moves in healthcare. Amazon (AMZN -0.15%), its chief e-commerce rival, announced in July that it would acquire One Medical, an operator of nearly 200 primary care clinics. Shortly after that news broke, Amazon said that at the end of the year it would pull the plug on its own Amazon Care program, which offers in-person and virtual care, thereby signaling that the company intends to buy, rather than build, its way into healthcare. Ultimately, Amazon decided that Amazon Care wasn't the "right solution for our enterprise-level customers." Other observers said the company struggled to gain clients, and it seems likely the company didn't see a path to profitability with the three-year-old service.
Previously, Amazon had partnered with JPMorgan Chase and Berkshire Hathaway on a joint venture known as Haven, which sought to disrupt the health insurance industry. But that project was disbanded in 2021, three years after its launch, without much to show for itself. Amazon also acquired online pharmacy PillPack for $753 million in 2019, and was reportedly one of the bidders interested in home healthcare provider Signify Health, though CVS Health won that deal.
Walmart's physical footprint gives it a distinct advantage over Amazon in building out a chain of clinics, but Amazon's reputation for customer service and its Prime membership base could give the e-commerce giant an edge in some ways.
Will the UnitedHealth deal move the needle?
With a goal of providing care to hundreds of thousands of seniors, it's clear that Walmart and UnitedHealth are thinking big. However, the program is starting with just a handful of locations, meaning it will likely take some time to reach scale.
Amazon's own experience with Amazon Care and Haven also offers a cautionary tale for Walmart. Healthcare is a particularly difficult field to disrupt. It's bureaucratic and byzantine. You need to form relationships with multiple stakeholders, including insurance companies, providers, employers, and patients.
Walmart is such a big company that it would take a multibillion-dollar business to have an impact on its financials. But healthcare certainly offers that opportunity, especially if Walmart can branch out beyond the UnitedHealth partnership.
Keep an eye on the new clinics when they launch next January. If things go smoothly, this could open a huge new market for Walmart. Still, it won't be easy, especially with Amazon hungry for a piece of the same pie.
