One of the critical themes that will determine offline retail success in the coming years will be the capacity to maximize physical locations. That will obviously place a huge emphasis on site selections, store formats, localized approaches to store stocking and more. But an important piece of this puzzle will center around the ability to take full advantage of each space with added services. Whether it be classes in a Lululemon or a meal at a Crate & Barrel, the change is coming.
And no sector is experiencing this shift with greater force and focus than Health. In recent months, Walmart, CVS, and Walgreens have all made significant announcements regarding their intention to dive more deeply into Health services.
We dove into the data to analyze the potential impact.
The Opportunity
When CVS announced the expansion of their Health Hubs, the first place to look was the potential value of pilot sites in Texas. Unsurprisingly, the locations showed a unique ability to extend visit durations, and to bring visitors during beneficial off-peak time periods. The result is a unique combination of a new revenue source, an ability to expand classic shopping with added visits, and visits that can be scheduled for off-peak hours to maximize the full day.
So to measure success, the locations would be looking to show ‘greater than average’ visit durations and visits during off-peak hours. And this is just what the CVS pilot showed. Two of the pilot sites have shown average visit durations of 42 (red) and 41 (green) minutes respectively. This is is 22.1% higher than the nationwide average for CVS, for the period since the launch of the pilot in February 2019. Looking at the graph below shows how much more dependant the CVS nationwide average is on shorter visits.
Even more, these visit durations amounted to an increase of 7.7% and 10.8% respectively for those specific locations when comparing the period between January 2017 through January 2019, to the time since the pilot was launched.
Why The Wider Trend?
There is always the concern that this is perhaps a CVS-centric benefit that has a unique capacity to support that chain. But, in this case, it looks like Walgreens may have even more to gain. Walgreens (red) sees an even greater reliance on evening hour visits that CVS (blue). Analyzing the period from January 2017 through August 2019, Walgreens saw 27.6% of visits come between the hours of 6 pm and 12 am. While the absolute number of visits may remain stagnant, the ability to drive more morning visits could help increase earning potential.
Beware The Giant
While these moves may give a tremendous amount of hope to both brands, there is a significant threat looming on the horizon - Walmart. Walmart, the king of offline retail, is obviously involved in the trend as well with a specific focus on leveraging its massive retail footprint to get involved in health services. Analyzing the location of one of their first Walmart Health sites shows a location that is already a strong and consistent performer.
Yet, there are already indications that the plan may indeed be working. Analyzing average daily traffic for September 2018 compared with the first 17 days of September 2019 shows an increase of 7.6%. This is a dramatic difference for a brand that already boasts huge daily visitor numbers. However, all this should be taken with needed caution as Walmart spikes can be related to a variety of factors, and not just the launch of a new service. In fact, even a minimal percentage increase could provide tremendous revenue improvements because of the audience size.
Moving Into Health
The move into health services could provide a major boon for CVS, Walgreens and Walmart, adding new revenue streams and increasing core retail metrics like visit duration and repeat visits. Yet, the move must be seen within a wider context. Offline retailers have recognized that the full value of their physical footprint is not being met and are increasingly searching for new and innovative ways to fill this gap.
The experiential shopping perspective is spreading and more brands are going to ask how to better utilize the offline investment to maximize value.
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