business

More retail clinics opening at Target

Though the chain store has favorable customer demographics, analysts don't see the move as an attempt to become a major player in the market.

By Pamela Lewis Dolan — Posted Sept. 27, 2010

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In opening eight new Target Clinics in Illinois and Florida, the Minneapolis-based retail chain is sticking to its business strategy of limited expansion of in-store clinics.

Of the big-box retailers and grocery chains in the retail clinic market, Target is the one whose customer demographics generally mirror the sweet spot sought by retail clinic operators. The openings in the Chicago and Palm Beach, Fla., areas, the second-largest expansion in the chain's history, will make for a total of 36 stores nationwide.

Analysts, however, don't see this as the start of an aggressive move by Target to become a major player in the retail clinic space.

"Target has taken a very cautious approach," unlike other retailers that announced grand plans for expansion, said Tom Charland, president and CEO of Merchant Medicine, a retail clinic consultancy firm in Shoreview, Minn. He said Target has the ideal customer demographics for retail clinic success -- higher-income, two working-parent households -- but that he knows from experience that the company will continue to expand at a slow rate.

Before leaving to start Merchant Medicine, Charland was senior vice president of strategy and business development for MinuteClinic, the retail clinic pioneer that was one of the early partners with Target in the chain's outlets.

The two companies parted ways in 2006. When they split, Target rebranded its clinics with the Target Clinic name through a partnership with Medcor, a company that provides management services to retail clinics. Later that year, CVS purchased MinuteClinic.

There has been speculation in the retail clinic industry that the two companies parted ways because MinuteClinic's expansion plans were more grandiose than Target's. But Charland said he believes it had more to do with Target's philosophy toward third-party vendors interacting with its customers. All of those working at Target, whether it's in a Target Clinic or a Starbucks in the store, are Target employees.

Target spokeswoman Erin Madsen said the company's desire to "provide our guests with a fully branded experience" led to its decision to take over all management responsibilities of the clinics from Medcor in 2008.

After Target and MinuteClinic split, the retail clinic market saw its most significant period of growth -- 800 stores opened from October 2006 to October 2008 alone. Meanwhile, Target quietly opened a few clinics here and there at a total of 28 stores. The industry reached a plateau of about 1,200 clinics in early 2009. Since then, operators have struggled to find a sustainable business model, and the number of clinics opening is closely matched by the number of clinics closing.

Madsen said Target's expansion plans are "smart, strategic and methodical."

"Target continues to believe there is great potential to grow this format more broadly," but it has no immediate plans to expand beyond its 36 clinics, she said.

Charland said he gives the retailer a lot of credit for not making the types of predictions that other chains have made, only to backpedal months later when their expansion plans turned into downsizing plans.

Based on the announcements made by several clinic operators a few years ago, experts were predicting several thousand clinics by 2009. Wal-Mart alone said it could possibly have 2,000 clinics by 2012. There are 1,190 clinics in operation, including 88 at Wal-Marts, according to Merchant Medicine's September market report. Expansion plans have been scaled back in many cases because patient traffic has not met expectations.

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