RETAILNETGROUP STRATEGY ALERT No.

14 Issue
November 2008
Retail Health Services Update
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Greetings! In This Issue

Winning Trips
Serving Un-met Needs
RNG has said before that a key challenge retail faces today in developed Retail Health Clinic Business
countries, even before the current economic challenges, is the decline in Model
shopper trips to specific outlets as total trips decline and total outlets The Role of Technology
continues to grow. This trip deficit creates the need for retailer marketing Role of EHRs and Statistical
to activate shoppers not just within the store, but also to their store Analysis
choice-which is really the retailer's First Moment of Truth (FMOT). We call Broader Vision of Healthcare
this Trip Marketing,as it is all about winning the trip. Services

Read on for our thoughts, and please share yours. Store Tours
Tim O'Connor, 10,000+ photos -
Vice President Views of the most important
RetailNetGroup.com new stores opened in North &
tim@retailnetgroup.com Latin America, Europe and
soon
the leading Asian markets

Winning Trips Filter by department -

Search/sort photos across
markets and
Retailer health services' primary strategic advantage is winning trips. A
retailers by department (for
retail health clinic wins the trip well before a pharmacy at the point a
brand managers looking for
shopper chooses a healthcare provider. great ideas)

"By establishing Target as our guests' one-stop shop for all their health "Best Ideas" galleries that
and wellness wants and needs, we will boost shopping frequency and guest highlight the very best ideas
loyalty." (Target Analyst Meeting 2008) from across all of our store
galleries
While the growth of retailer health services has not been as massive as On-Demand - Photos of any
forecasted as recently as a year ago, considerable insights have been store in most parts of the
gained by the market that RNG believes will support the continued world in 72 hours or less.
development of the concept.
Contact Mark Byrd to schedule
a demo or request more
• Retail clinics serve un-met needs for patients and shoppers -
information.
convenience, value, and third-party attention to often self-
diagnosed medical needs.
Updated
• The clinic business model needs larger-scale partners, and to Curriculum
be tailored to the primary consumer audience's expectations for
medical care.
Subscribers to RNG can now
• The role of technology in enhancing distributed healthcare access our newest Retail
services will grow. Webcams, email, online viewing of x-rays, Market Development case for
MRIs, and more will proliferate and the systemization of the Latin and Central America.
clinical process (checklists and notes) will expand on a level of
 discipline not typical of doctors offices.
• The role of Electronic Health Records (EHRs) and statistical
analysis is a key success factor.
Prior Strategy
• Employers are important stakeholders in healthcare and are Alerts
increaingly creating their own on-site clinics, reminiscent of a
return to the industrial medical offices of the 60's
Retail Pricing Update
• Pharmacy Retail Specialists (drug channel) are integrating a Sophisticated retail pricing has
broader vision of healthcare services. emerged as a key driver of
long-term growth and
profitability.

Wal-Mart's Marketside: A
Small(er) Supermarket
RNG's visit and perspecitve on
Wal-Mart's new small box
format

Wining in a Zero-Sum
Environment
RNG's forecast for total chain
sales, winning (and losing)
market segments, and
retailers' playbooks for Q4 and
beyond

The Legacy Store Challenge

Why retailers' #1 ROI challenge
is driving growth in their
existing stores, and how the
Keep in mind that with over 34,000 pharmacies in just the largest 15 US leaders win
retail pharmacy operators there is a great deal of room for growth of this
concept from the current levels of 1,112 clinics (as of 11/13/08 according Goldman Sachs Global
to www.MerchantMedicine.com) Traffic is growing for the leading operators Retailing Conference
and they continue to invest in additional clinics. Get a quick download of RNG's
thoughts after hearing and
meeting with leading retailers

Serving Un-met Needs Chain Retailing 3.0

Over the next two years,
Retail clinics serve un-met needs for patients and shoppers - convenience, branded manufacturers and
value, and third-party attention to often self-diagnosed medical needs. retailers will be challenged to
find new ways to prosper in
A RAND Health study examined the types of patients who use retail clinics the fastest changing food
retail environment in a
(September/October Health Affairs), analyzing more than 1.3 million
generation
visits to retail clinics from 2000 to 2007 from eight retail clinic operators
that accounted for three quarters of the clinics in operation as of July 2007.
Mature Store Activation
• Patients aged 18 to 44 accounted for 43 percent of retail clinic
visitors, compared to 23 percent for primary care physician The new new thing in retail
offices. growth is old stores, and how
to unlock their potential to
• Just 39 percent of retail clinic patients said they had a primary reach new shoppers and drive
care physician, while 80 percent of people surveyed nationally say wallet share with existing
they have a personal doctor. shoppers

• About 90 percent of the visits to retail clinics were for 10

simple acute conditions and preventive care: upper respiratory Social Networks
infections, sinusitis, bronchitis, sore throat, immunizations, inner Online social networking
ear infections, swimmers ear, conjunctivitis, urinary tract allows marketers to connect
infections, and either a screening test or a blood test. The same with new and existing
 customers and deepen the
conditions accounted for 18 percent of visits to primary care level of engagement
physician offices and 12 percent of emergency department visits.
On top of this data is the fact that 40% of emergency room visits are non- Pricing Optimization
emergencies, and surveys indicate that 65% of respondents were unable to
Retailers are developing
get a visit with a primary care physician within a day of calling in sick. 42%
pricing as a strategic
were unable to get it within a week of calling (Commonweath Health and capability, which also raises
Mass Medical Society). several opportunities for CPG
firms

Private Label
Strategic store brand programs
are a significant growth
strategy for retail leaders

Express Stores
Convenience food retailing is
changing globally as consumers
express their preference for
healthy, fresh, and ready to go
(or consume) foods

Meet Our
Analysts

Most of the new clinics are being added in top 50 markets in the fringes
around cities to attract both suburban and urban households. This plays
off of dual-income households without time for the current medical system
but with resources/insurance to get care.
Dan W. O'Connor is the
President & CEO of the
RetailNet Group. He also is
Retail Health Clinic Business Model the Founder of Management
Ventures, Inc. (MVI), a WPP
Group company. Dan is a
The clinic business model needs larger-scale partners, and to be tailored to widely known industry speaker
the primary consumer audience's expectations for medical care. and thought leader.
LinkedIn | Email
With the traffic they bring to the store and add-on purchases of goods and
RX Scripts (even at $4) being clinics' key strategic value to retailers, clinic
operators need strong affiliations either with the retailers or with a major
healthcare centers/hospital . The need for larger partners becomes a
requirement as most of the financial value of the clinics is gained
downstream of the clinic, the retailer who gains that value and constructs
the relationship with the clinic operator or by the Hospital who partners
both for referrals and staff leverage of its own operations as well as value
shared back from retailers.The recent drop outs from the industry in June
2008 lacked this extended business model and did not have the
relationship with the retailer hosts or longer view for value monetization in
terms of trip capture and add on sales. Closures included SmartCare with Aaron Chio is a Senior Analyst
leading RNG's development of
15 clinics (in Wal-Marts), Early Solutions Clinic with six clinics, InstaClinic
new research, insights and
with two clinics, ReadyCare with one clinic, and Mercy ExpressCare with
growth strategies in Latin
one clinic
America.
LinkedIn | MSN |
In addition, as Wal-Mart has learned, the appropriate staffing, branding
and marketing model needs to be reflective of the primary consumer in the
trading area. Older consumers tend to be more traditional in service
expectations (physician versus nurse care as well as more chronic or
interrelated/conflicting medical needs that resist a non-MD or hospital-
based clinic. As a result, over 73.6% of the 65 and over clinics users in the
Rand study were there just for immunizations. Wal-Mart's telemedicine
model of bringing the Doctor into the clinic vial webcam while still having
the lower staffing costs of the nurse practicioner as well as recent growth
in Hospital network clinics reflect this issue. Tim O'Connor is Vice President
at RNG, currently responsible
for RNG's Growth Strategies
Curriculum and European
market insights.
LinkedIn |

"I think that the business model that most companies that operate in that Keith Anderson is a Senior
Analyst and responsible for
space -- that business model they are using is one that has not proven yet
RNG's North American research
to work. Now the one that we have just recently started, which is slightly
practice and transformational
different because it leverages the brand equity of the local hospital, as well
capabilities
as the expertise of the local hospital to provide the nurse practitioners for curriculum.
the clinic, that is one that we feel that has a lot more potential. Because LinkedIn | Twitter | Windows
we both have the trust of the customer in terms of the brand of the Live Messenger
hospital, and at the same time you have the professional management of
the nurse practitioners, which some private equity firms that have entered
this space might not have." (Eduardo Castro-Wright - Wal-Mart Stores US
- President & CEO)

Growth in the Role of Technology

The role of technology in enhancing distributed healthcare services will
grow. Web cams, email, online viewing of x-rays, MRIs, and more will
proliferate and the systemization of the clinical process (checklists and
notes) will expand on a level of discipline not typical of doctors offices.

Clinics are getting due credit for discipline and thoroughness due to use of
technology-based information and process management systems as well as
use of tools like the webcams mentioned above. This helps both defend
the quality of care as well as provide a basis for continuous improvement.

Role of EHRs and Statistical Analysis

The role of electronic health records (EHRs) and statistical analysis is a key
success factor.

Electronic health records will not only save the total medical system an
estimated $500 million according to recent election campaign retoric, but
will also address one of the complaints and limits to service growth for
clinics. Clinics are primarily limited to simple medical issues that require
minimal extended care or followup. With EMR, clinics will be able to provide
the convenience and ensure continuity of care and ability to address more
complicated services or patients (such as the elderly on continuous
medication or treatment). This will also support the development of clinic-
based chronic care services like diabetes care, wound management, and
more.

Statistical analysis by clinic operators will be used not only to improve the
business model but also to improve healthcare delivery and feedback to
medical products manufacturers in a way not capable today from the low-
tech traditional medical services.

Broader Vision of Healthcare Services

Pharmacy Retail Specialists (Drug Channel) are integrating a broader vision
of healthcare services.

CVS and WAG have different strategies overall but both have visions and
are integrating retail clinics and the role of the retail store into a bigger
picture of healthcare services. (CVS, for example, just appointed a Chief
Medical Officer who will oversee MinuteClinic, Accordant Healthcare, and
CVS's clinical and medical affairs and healthcare strategy.)

This vision for healthcare services enables greater differentiation of each

business as well as supports more rapid rollout of clinics and marketing
scale, which is already enabling advertising them on TV to drive traffic.

More on these Topics

1. Cain Brothers Report on Clinic Business Models (on RNG)

2. Podcast with Tom Charland, chief executive officer of Merchant

Medicine myths and realities of retail clinics

3. Hospital based clinics increasing activity and addressing MD buy in

(AMN Healthcare News)
http://www.amnhealthcare.com/News/news-details.aspx?Id=6888

4. Video about the Mayo Express Care service

5. Community blog of retail clinicians for issues and on the floor

perspective

RetailNet Group is the leading insight and advisory firm focused on

retail growth strategies and consumer-facing transformational
capabilities. We are deeply experienced retail/consumer analysts
and strategists working exclusively to help brand-led businesses
and large-scale retailers grow.

Sincerely,

RetailNet Group
Note: Articles contained in this newsletter are collected from a variety of sources and
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