Over the next two years CVS Health will spend more than $2 billion on new technology, mainly on digital healthcare, and Walgreens is spending about $1 billion.
Amazon is quietly figuring out how to integrate its $753 million acquisition of digital pharmacy PillPack.com and its network of 475 Whole Food stores into a broader digital healthcare and ecommerce strategy.
Rite Aid is another retail chain looking to get a leg up on healthcare ecommerce. Rite Aid recently hired a new chief marketing officer with extensive ecommerce experience and this year is spending $250 million overall on store upgrades including $60 million on better digital technology, the retailer says. “Our fiscal 2020 capital expenditure plan is to spend $250 million, which includes $60 million for script file buys and investments in technology design to accelerate our digital and omnichannel offering,” says Rite Aid chief financial officer Matthew Schroeder.
The biggest retail pharmacy chains and Amazon are racing to build online shopping malls for healthcare and to turn their physical stores into one-stop shops for all things healthcare and strategically enhanced by digital and ecommerce technology.
The race maybe on, but the question is: What’s at stake—and what does the winner get?
The answer, according to a new analysis of consumer healthcare trends by KPMG LLC, is the winner gets the spoils of securing more healthcare business in different ways from consumers in different age groups.
Consider these fast-changing aspects of healthcare and the type and level of care that differentiates Millennials from Baby Boomers, says KPMG.
- In the next 12 years the healthcare industry will face major demographic changes that will impact which services are needed and where they will be delivered.
- By 2030 the older population is expected to grow from 35 million consumers to 74 million consumers. People age 65 and older will account for 25% of the U.S. population by 2060.
- The number of people with three of more chronic conditions will rise from 30.8 million to 83.4 million by 2030.
- Consumers with five or more chronic conditions make up 12% of adult population but account for 41% of total healthcare spending.
- 30% of Millennials have a used a walk-in clinic in the past year compared with 14% of Baby Boomers.
- For Millennials consumer healthcare going forward will focus on staying, healthy, improving outcomes using predictive analytics, meeting their preference for retail and virtual healthcare and more convenient access through wearables and telehealth.
- For Baby Boomers consumer healthcare going forward will focus on managing chronic disease, improving outcomes with care management solutions, meeting a preference for traditional care settings and fostering convenience through symptom monitoring tools.
“As demand for convenience gains traction, there must be a radical change in how healthcare is delivered as well as to widespread adoption and reimbursement of digital health tools. The question is: ‘Who will lead the charge,” says a new report from KPMG. “Both payers and providers may have difficulty keeping up with technology innovation but given the barriers to entry and complexity of the regulatory landscape, many technology innovators have yet to be convinced that it is worth their while to make a full commitment to healthcare.”
CVS, Walgreens, Amazon, Rite Aid and others are putting resources into expanding digital healthcare, updating pharmacies with more digital technology and adding more services because “timely and convenient access to healthcare is rising in importance in consumers’ decision-making process,” KPMG says.
Online healthcare shopping malls like the type CVS and Walgreens are building relies on a deep understanding of patient and customer behavior to target each patient with personalized programs.
Recent moves include:
- Rite Aid Rite Aid is deploying new ecommerce and digital marketing technology from Adobe Inc. On June 19, Rite Aid, based in Camp Hill, Pennsylvania, announced a new multiyear relationship with Adobe that centers on Rite Aid deploying Adobe Experience Cloud, an integrated suite of ecommerce, online marketing and web analytics products. Rite Aid has yet to release details on deploying the new Adobe technology, including the cost of installing and running Adobe Experience and a technology deployment timeline. By deploying new and better ecommerce technology and working more closely with Adobe, Rite Aid plans on gathering and synthesizing more customer data to build more personalized shopper and patient profiles. “Developing deeper relationships with our customers is a key focus for Rite Aid,” says CEO Joseph Standley.
- CVS is currently piloting HealthHubs at five locations in Houston, with plans to open additional HealthHubs in Houston, Atlanta, Philadelphia and Tampa, Florida, this year. CVS also plans to have 1,500 total HealthHubs operating by the end of 2021. The goal of opening a wide array of HealthHubs is giving consumers more online and omnichannel options to shop for healthcare services, insurance, and medical equipment and supplies at locations that aren’t doctor’s offices and hospitals, CVS says. “These stores bring to market a new retail engagement model that offers healthcare services in a more convenient, more accessible and more customer-focused manner,” says CVS Health CEO Larry Merlo.
- In January, Walgreens announced it would begin working with Microsoft to design new “digital health corners” for its stores, beginning with a 12-store pilot project this year. As part of the deal, Walgreens will begin using Microsoft’s Azure cloud-computing software, moving applications and data to retailers’ data centers, the companies said. That partnership in particular will accelerate Walgreens’s focus on digital healthcare, the company says. “The partnership with Microsoft is a clear acceleration of the digitalization of our company along with recruiting internally a lot of (people), particularly a chief digital officer,” Walgreens president and co-chief operating officer Alex Gourlay told analysts. “And there’s more people coming in to really drive the modernization of our platform and processes to become a new retail and healthcare company.”
The retail chain that uses artificial intelligence and data analytics the best to understand segmented customer behavior and deliver a unique and personalized offline and online healthcare services experience stands to gain the most business, says Ashraf Shehata, a partner in the Global Healthcare Center of Excellence at KPMG US. “Each of the retail chains will do that differently based on the healthcare segments they know and serve,” says. “It is clear that technology disruptors—with established data architectures and deep understanding of consumer behavior—will play a crucial role in the consumerization of healthcare.”
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