Can Healthcare Services Revitalize Retail For CVS?

CVS retail business, separate from its pharmacy operations, has had a difficult few years. Same-store sales have been falling, particularly as some staples that were once common drugstore sales have departed solidly online.

Which has left CVS looking to reimagine its retail space to focus more on the healthcare side of its offering, and to provide an incentive to enter the physical store regardless of the digital shopping alternatives.

And so the CVS store is changing, reports noted, starting with three new concept locations in the greater Houston area, which have been recreated as miniature healthcare clinics. Officially titled HealthHUBs, they come as CVS moves to transition its corporate identity away from the pharmacy chain of the past and toward its emerging identity as an integrated healthcare company for the future. The news also comes as CVS has acquired Aetna for $70 billion and officially rebranded as CVS Health, denoting its new identity as a care company.

The new stores still offer some of the pharmacy staples of the past: Chocolate, greeting cards, cosmetics and “general and seasonal merchandise” still command some floor space, even in the newly redesigned stores making their debut in Texas this week. But those general retail items will be reduced and restricted to make more room for healthcare-related services. There will be specialized care areas for patients suffering from chronic conditions like diabetes, high blood pressure or asthma. In some cases, it will also mean wellness areas for diet seminars, yoga classes and sessions with specialists.

“We’re pleased and surprised pleasantly with the ecosystem of healthcare that we’ve created here and how approachable it is, how much people are interested in it, and there are certain things we can take to all stores,” CVS Pharmacy President Kevin Hourican told CNBC.

An “ecosystem of care” is in CVS’ interest, because to an insurer, healthy customers are much less expensive than those who are not. And, because it is a drugstore, it already has its ideal consumer base, both captive and in context. The customer is already thinking about their health – or their chronic condition, in some cases – while they are waiting to pick up medicine. As CVS’ retail space becomes less profitable in terms of foot traffic and revenue generation, resetting the space around services that customer/patients already need does have promise.

But, as is the case with many healthcare-related innovations, the challenge is in soliciting and getting consistent customer participation and follow-through. Customers in the pilot stores (and presumably in the stores CVS wants to build going forward) can check their blood pressure, talk to a dietician or even sign up for digital weight loss programs – all at the same in-store kiosk, if they choose. The challenge is to get them to that kiosk, and then get them to actually stick to the dietician’s advice or the new diet program. That part is harder to do, and no amount of service upgrades will force an unwilling customer to actively manage their health.

But what CVS can do – and what their CEO says they hope to do – is to remove the cost and other access barriers that can push people away from the healthcare they want, or from being better wellness managers.

The stores in Houston have been open since December, and so far, the early feedback has been positive. CVS has said that it does not intend to turn every store into a HealthHUB location, and that the HealthHUBs will be like laboratories where ideas and innovations in patient healthcare will be tested and perfected before being sent out across its store network. And almost every store will feature at least some of the offerings of the HealthHUBs.

“It’s one-stop shopping,” said Houston user Jacqueline Haynes, who noted that she has been using the store not just to fill prescriptions, but also to monitor her blood pressure and work on her diet.

The services offered through HealthHUB locations, according to CVS, are available to all customers, not just Aetna users. Aetna members are offered the chance to have an extra consultation at the pharmacy window about the available health services and how they are related to their treatment plan, though the company will also answer questions from anyone who asks.

And while not every store will be quite as refitted as the Houston pilot stores, CVS has allocated $2.6 billion for store remodeling over the next years – meaning changes are certainly coming, and by the looks of the budget, there will be more than a few of them.