UPDATE: February 13, 2019: A CVS Health spokesperson told Retail Dive Wednesday that the drugstore is piloting three HealthHUB locations in Houston, with services that include, but go beyond, medical help like blood pressure checks. The concepts have in-store community spaces to host wellness education and activities, as well as virtual opportunities for guidance and self-care, according to a company blog post that underscores how health services are overshadowing its front-store retail.
As part of an effort to remake its customer experience in stores, CVS Health will launch a set of concept stores early next year, CEO Larry Merlo told analysts on Tuesday, according to a transcript from Seeking Alpha. Between Aetna and CVS Health, capital expenditures are "about $2.5 billion to $2.8 billion," and developing the new stores wouldn't require going beyond that, Eva Boratto, executive vice president and controller and chief accounting officer for CVS Health, told analysts.
The stores will be centered on health, offering "new services to better address the cost-quality-access challenges of consumers and identify the most effective and scalable solutions, so they can be rolled out more broadly across our footprint," he also said.
The stores, which Merlo described as "a hub-and-spoke concept" or "health hubs" will be among the efforts the company will explore now that it owns health insurer Aetna, although they won’t be limited to Aetna subscribers, he said. CVS didn't immediately return Retail Dive's request for more information.
The health hub concept briefly outlined by Merlo on Tuesday is squarely focused on the company's medical operations, which could be a boon to consumers beset by rising health care costs. Merlo outlined several examples of long term medical cost savings to come from the new programs, including better management of five common chronic conditions, an expansion of services available at MinuteClinic, a reduction of avoidable hospital readmissions by merging Aetna's clinical programs and CVS stores, and better management of chronic diseases like kidney disease.
CVS' health ambitions have grown since the company ditched tobacco sales four years ago. In a quest to remake its stores into health and wellness hubs, beauty has also become a priority. Earlier this year, CVS announced its BeautyIRL pilot, one of the first major changes to its stores and a nod to its front-of-store retail operations.
The retailer has made other efforts to transform its beauty offerings in the past, including adding more premium brands last year, and launching the "Beauty in Real Life" campaign this April, which focused on more natural marketing and unaltered imagery. But, despite finally moving retail sales into the black, the pharmacy retailer's most recent quarter revealed that its front-store sales continue to suffer, including in the beauty department.
Whether beauty is aligned with or incorporated into any new store concept, the category is the retailer's best chance to get customers through its doors. So far, the company isn't really acting like it realizes that, according to GlobalData Retail Managing Director Neil Saunders. In fact, stores in general are "dingy and uninspiring," he said.
"As consumers feel confident there has been a natural tendency to spend a bit more, including on personal care and beauty products," he noted in an email to Retail Dive this week. "As such, CVS has engineered its uplift at a time of robust consumer expenditure; and, it has grown at a much slower pace than the overall beauty and general merchandise markets. The real test will be whether CVS can both maintain its growth into next year and boost its market share at existing stores."