Walmart and Humana, a prescription for success?

Last week, news broke that Walmart is considering an acquisition of Humana, the big health insurer. This is just one move among many of late where retailers are trying to creep into the healthcare space.

CVS is in the process of acquiring Aetna, Albertson’s is acquiring a number of Rite Aid locations, and Amazon is partnering with Berkshire Hathaway and Chase to shake up healthcare in some unspecified manner. 

There are two factors driving this: First, retailers believe that there are costs to be wrung out of the US healthcare system by offering commodity health care services in stores rather than in doctors’ offices. Consumers hope so too, as healthcare spending as a percent of GDP is expected to grow from 17.9 to 19.7 between 2016 and 2026. I’d much rather spend money on the latest in flat panel TV than insurance co-pays and deductibles.

Second, and probably more importantly, retailers desperately need new sources of store traffic growth, which has been steadily declining.

CVS' acquisition of Aetna makes all the sense in the world, as the natural culmination of its brand positioning as a health care company which really began when it eschewed sales of tobacco products in its stores in 2014, despite the $2 billion in annual revenue that it was giving up.

CVS sells a heckuva lot of over-the-counter health care products, and needs to create opportunities to bring people into the store, especially with a growing share of customers taking advantage of the drive-through window. The best thing about sick people, from CVS’ perspective, is that they are sick, and are in need of what CVS has to offer.

The question is whether this logic extends to Walmart as well. Walmart could certainly benefit from increased store traffic and has lots of OTC product to sell, as well as nearly everything else that a shopper could want while they’re getting a flu shot and picking up antacid.

As a believer in the importance of strategic focus, though, I worry that the costs of absorbing Humana might get in the way of Walmart’s desire to catch up with Amazon in e-commerce.  Distraction might be a bigger cost than the $38 billion that Humana is currently worth. With Amazon, Walmart is competing against a company that has a virtually unlimited appetite for the number of competitive battlefronts it is willing to fight on.

A Walmart/Humana partnership, rather than acquisition, though, could be a brilliant maneuver. Humana can sidestep the costs of building out physical points of patient engagement [and let’s be honest, Walmart can give up some square footage] and find opportunities for consumers to stay healthy on a more cost-effective basis. 

With more store traffic, Walmart drives more trips. But, Walmart doesn’t have to get as mixed up in the regulation and instability of insurance markets that are going to be inevitable until Congress can pass bipartisan health care legislation that won’t be mucked around with by each new election wave. And on the e-commerce front, Walmart’s online business, which is already nearly half click & carry, only benefits as more people are making more trips to Walmart stores.

Or, maybe strategic focus is a thing of the past and my 24-year-old MBA has outlived its shelf life. Amazon sure thinks so.

e-commerce: Can Nike do it justly?

To a greater extent than most other traditional brands, Nike has moved aggressively to ensure that it emerges stronger from the digital revolution than its competitors. From the beginning of the e-commerce era, Nike vigorously pursued a direct-to-consumer first strategy, principally rooted in its desire to control its brand.  

Just last week we saw Nike invest in its direct business, acquiring data analytics firm, Zodiac, in an effort to get better at managing its direct-to-consumer relationships. This is the first instance that I can think of where a brand or retailer acquired an analytics shop, presumably as an acqui-hire.

Despite its growing dominance over online retail, Nike resisted the urge to develop a wholesale relationship with Amazon. Control, though, proved elusive because marketplaces, such as eBay and then Amazon, allowed third-party sellers to sell Nike’s products at prices that Nike could not control, with inconsistent, poor quality product content not approved by Nike.  

By July of 2017 it had become apparent to Nike that it couldn’t continue to pretend that Amazon’s marketplace didn’t exist any longer, and decided to develop a wholesale relationship with its northwestern neighbor. Nine months later, it’s not obvious that Nike has achieved what it had hoped. Nike search results are far more likely to lead to products sold by third-parties, not by Amazon. Even Amazon Choice labels point to items sold by third-party merchants on generic Nike keyword searches. 

Most importantly, when we looked sales of Nike shoes on Amazon since the deal, our data found that Nike’s share of sneaker sales has dropped slightly. The Nike brand accounted for 20.7 percent of sneaker sales dollars on Amazon between July and December 2016, but had dropped to 19.2 percent in the same period in 2017. Adidas seemed to be the biggest beneficiary of Nike’s share loss, with its Amazon share increasing from 13.2 to 16.3 percent.

About Ken

Ken Cassar is vice president, principal analyst at Slice Intelligence, where he looks at trends in the e-commerce industry armed with Slice’s robust set of online sales data.

Ken brings a rich online retail background to Slice Intelligence. Most recently, Ken was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative digital commerce measurement and advertising effectiveness solutions. Prior to Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought leader, trusted adviser, and media source on e-commerce. His prescient outlook on fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a digital media zeitgeist at the dawn of the Internet.

Ken has an MBA and Bachelors Degree in Political Science from the University of Connecticut. Ken aspires to stay technologically ahead of his teenage children, as evidenced by his ‘Gadget Geek’ Slice profile. He also has the appropriate jacket for every occasion.