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Walmart Shakes Up Retail Healthcare with Closure of its 51 Health Clinics and Virtual Care Practice

Walmart’s Stunning Reversal 

Earlier this week the retail giant caught the industry by surprise with its decision to close all Walmart Health clinics and its virtual care service.  It’s worth noting that Walmart announced plans to open 22 new Walmart Health locations only a month earlier. Since then, the company has pointed to a challenging reimbursement environment and escalating, unsustainable operating costs.

The U.S. Market for Primary Medical and Dental Care Services

The market for primary dental and medical care services combines to over $460B dollars and is growing – with the primary dental care market estimated to grow at a 3.3% CAGR until 2030, and the primary medical care services at a 3.4% CAGR until 2030. Walmart began investing aggressively in this market starting in 2019 to capture a sizable growth opportunity and bring recurring traffic to the store through its evolving omnichannel healthcare offering.

Walmart’s Decision to Withdraw from the Retail Healthcare Market

The advent of retail health clinics about 25 years ago was driven by rising health care costs and consumer demand for more convenient care options. In the past 5 years, leading retailers such as Walmart, Amazon, Target, Walgreens, and CVS have expanded their offerings in this highly fragmented market at a time when they benefited from pandemic-driven trips and sales growth. Between 2017 to 2022, retail clinic claims volume was up 200%, urgent care claims rose 70%, while ER claims and primary care physician claims dropped 1% and 13%, respectively. Despite measurable gains in claims, retailers have not necessarily become profitable in this business alone.

An Uncertain Future for the Dynamic Retail Healthcare Market

In addition to Walmart’s struggles, we have seen other big retailers falter, including Walgreens with its cutback of VillageMD clinics as part of a $1B cost-cutting initiative that was brought about in 2023 (alongside a $1.73B operating loss in its healthcare division). Others like Target entered this market more cautiously through a partnership model. Target has opted for Kaiser Permanente and CVS to operate clinics out of its stores, allowing the retailer to benefit from increased foot traffic without investing the resources required to sustainably manage a health care business. Best Buy is another retailer getting involved in healthcare via installing and servicing home-based technology. Still others like Instacart are delivering prescription meals for people with hypertension, diabetes, or kidney dysfunction through their partnership with care providers such as Boston Children’s Hospital and Mount Sinai Health System. On the other side of the spectrum, is behemoth Amazon – having massively expanded its healthcare business with 3 distinct offerings: Amazon Pharmacy, Amazon Clinic, and Amazon One Medical.

A growing and diverse set of retailers are looking to get a piece of the healthcare pie – or at least attract recurrent customer visits to their stores through a health-driven offering. It remains to be seen whether any of these approaches will be viable in the long run.

Nico Fernandez

Nico is an analyst at McMillanDoolittle supporting the firm's LATAM practice, including strategic growth planning, digital transformation, consumer insights, and operational optimization initiatives.

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