The Future of Healthcare May Be...Sears?

I can't stop thinking about Sears, which, in case you missed it (or don't care), has declared bankruptcy.

Like many of my generation, Sears was a staple of my childhood.  It was one of my father's favorite shopping destinations.  It was at the local malls.  You could buy practically anything there.  And, also like many of my generation, I haven't shopped there in years.

Sears wasn't in the healthcare business -- how did they miss that? --  but its decline may have warnings for it.

Photo: Lori Van Burenn

To be fair, Sears is hardly the only department store to be going through hard times, and, like Toys-R-Us, its current financial straits reflect more of its leveraged buyout than to any underlying changes in consumer purchasing preferences.  But Sears was different; Sears was iconic.

Sears was once the nation's largest retailer and employer.  Moreover, as CNN put it: "In its heyday, it was both the Walmart and Amazon of its time."  Pretty heady praise, but it was not only big, it was extremely innovative.

Its catalog was the internet of its day, allowing customers in the furthest reaches of the country to see, price, and buy products that they never otherwise would have even been aware of.  Its appliances (Kenmore) and tools (Craftsman) were top-of-the-line.  You could literally buy a kit for a house from them.  Sears quickly followed its customers to the suburbs after World War II, establishing anchor presences in most major malls and expanding hours.  

Sears even jumped big into financial services, founding Allstate, launching Discover, and buying Dean Witter (although it subsequently shed all three).

Somewhere along the way it lost that verve.  Big box stores like Home Depot and Walmart undercut it on prices, it missed badly on the internet, and it lost its ability to gauge what products consumers wanted.  It has closed over 1,700 stores in the past decade and it took its name off the Sears Tower in 2009, so the actual bankruptcy didn't come as much of a surprise.

Jason Downey, founder of the Center for Generational Kinetics, put it this way to USA Today: "Sears basically invented the catalog, and yet we have millennials who don't even check the mail."

Credit: Washington Post

Hmm, now, where have I seen something similar to that?  Oh, yes: For millennials, a regular visit to the doctor’s office is not a primary concern.  That Washington Post article explained that: "Their preferences — for convenience, fast service, connectivity and price transparency — are upending the time-honored model of office-based primary care."

Ateev Mehrotra, a professor at Harvard Medical School, told the Post: 

These trends are more evident among millennials, but not unique to them. I think people’s expectations have changed. Convenience [is prized] in almost every aspect of our lives,” from shopping to online banking.

See why I keep thinking about Sears?  

Walmart is trying to avoid a similar fate.  They've desperately tried to beef up their online capabilities, including purchasing such online-only merchants such as Jet,  Bonobos and Modcloth.  Walmart is trying to counter Amazon's purchase of Whole Foods by increasing its curb-side pickup and home delivery capabilities for groceries, seeing groceries as the biggest traffic driver to its stores.  It has historically done best with lower-income customers, but is trying to increase its appeal to more upscale shoppers.  

Sears would recognize that struggle.

The truth is that, while online shopping gets most of the publicity, the retail industry is still 90% offline.  Success still requires both physical and online presences. 

Analysis by Green Street Advisors

 Amazon is opening physical locations, and it is not the only online merchant to do so.  Jared Blank, of retail consulting firm Bluecore, told Bloomberg: "What some brands are starting to figure out is, ‘Oh wait, perhaps these retailers who have been around for 100 years were onto something."

Some of them, anyway.

Healthcare has the physical location part down.  You can't drive more than a couple miles in most communities without seeing a drugstore, an urgent care center, a medical office building, or even a hospital location.  Healthcare organizations are on a building craze that rivals anything mall developers have done (and many are moving into some of those malls).

Healthcare is also trying to beef up its online capabilities.  Telehealth is a boom industry, although actual use remains modest.  Patient portals have become the norm, but most patients still do not use them.   It's easy to buy many OTC health products online, but when it comes to healthcare services, it may be easy to find marketing information, but rare to actually be able to comparison shop or price them. 

If you want to DIY it, like those Sears kit houses used to let you do, the traditional healthcare industry isn't likely to be very happy about it. 

Healthcare now is sort of like shopping at Sears in the 1990's.  You could certainly find a store, and most likely could (eventually) find the product you wanted, but you might not be too sure it was a good buy.  If you wanted to shop online, well, Sears couldn't really help you but, hey, you could buy books on Amazon.   

It is not surprising that Walmart and Amazon both have designs on healthcare.  It is too big a market to ignore, and there is too much low-hanging fruit.  Marcus Osborn, Walmart's VP of health and wellness transformation, explicitly said their efforts in healthcare are because "none of us wants to be Sears." 

That should terrify healthcare executives, just as Sears executives should have been terrified when Walmart started expanding their physical presence or when Amazon started expanding from selling books.

What was that the Washington Post pointed out was lacking in healthcare?  Convenience, fast service, connectivity and price transparency.  Healthcare pays lip service to the need for more of these, but few parts of it are actually delivering on them.  Healthcare thinks it has time to figure out how to change, and prides itself that "health care is different."

It doesn't and it isn't. 

Life without Sears would have been unimaginable in the 1950's or 1960's.  As late as the 1980's it still seemed to be placing big bets for a continued future.  Yet within a few years it was struggling badly, and in 2018 it is bankrupt.  Omnipresence, name recognition, and even prior innovation do not guarantee continued success. 

Healthcare organizations: let Sears be a lesson for you.