Target-CVS Partnership is Blossoming
Posted: June 14, 2016
Since CVS has taken over the pharmacies in Target’s stores, Target is increasing its focus on its Connected Health section, which provides customers access to products designed to allow them to digitally monitor their health anywhere, 24/7.
Over the next six months, all 1,660 of Target’s pharmacy locations will become CVS-branded units. Additionally, the No. 2 discount retailer’s 80 in-store health clinics will rebrand as CVS MinuteClinic locations.
So far, about a third of Target’s 1,800 stores are merchandising Connected Health devices, anchored by healthcare technology company Qardio. The dedicated Connected care sections include medical-grade products like blood-pressure monitors and pain-management tools.
The mutually beneficial teaming of CVS and Target has also increased Target’s credibility for its health services offerings. On the CVS side, the retailer has expanded its reach by about 20%, without building additional stores. It also helps solidify CVS Health’s move to become a health-care provider as well as a more traditional retailer of health and beauty products, and, as with most drugstore chains in the U.S., mini-grocery stores.
Building on its wellness efforts, Target has been focusing on eating healthier with its food reinvention campaign, which emphasizes healthy snacks and has expanded its selection of natural, organic and locally grown food.
Target has identified wellness as one of four core “signature” categories that include style, baby, and kids. It also has been testing other connected display concepts and home automation sections in select stores.
According to Target spokesperson Erin Conroy, the partnership with CVS Health allows the retailer to continue to revamp stores and focus on its core business while also giving customers the pharmacy and health-care services and products they say they want.
Before CVS’s acquisition of Target’s pharmacies, Target had the choice of expanding its health-care business on its own, but in order to compete, it would have had to boost its competitive edge, as CVS has done.
With its acquisition of prescription-drug fulfillment company Omnicare Inc., which fills many rare and expensive medications that are shipped directly to patients and provides drug services to nursing homes and other health care providers, CVS gained enhanced negotiating power for more favorable drug prices.
Nick A. Egelanian, a retail expert at retail real estate services firm SiteWorks, thinks that with pharmacy and drug distribution not being part of Target’s core business, the retailer was probably better off in league with CVS, given the nature of the “inside game” of that business, “where they compete heavily in scrips.”
Target’s woes from the past few years made the sale of the pharmacy business a way to generate more money, plus Egelanian notes, it was probably a weak spot for them, since other drugstore retailers have CVS’s similar ambitions. So, while the pharmacy business may have been a missed opportunity for Target, it seems more important that Target grow its reputation and customer loyalty as a general merchandiser.
This presents an interesting situation for other discount retailers, as they may feel the pressure to follow in Target’s and CVS’s footsteps and focus on wellness also. CVS already took unprecedented steps to move in this direction when it decided to discontinue tobacco sales two years ago. The partnership with Target emphasizes this as it puts each retailer ahead of its competitors by sticking to this strategy.TAGS: retail, retail trends, retailers,