Chain Retailers Look at Health and Wellness to Drive Customers

manicure

Who would have thought just a few years ago that shoppers could walk into a DSW store and not only buy a new pair of sandals or heels, but also get pedicure or manicure?

Or that consumers could drop in at their local CVS drugstore for a weekly yoga class?

But big, national retailers are piggy-backing on the red-hot health and wellness sector to draw foot traffic into their stores at a time when more and more consumers are shopping online. Retailers are looking to create a customer experience that can’t be duplicated online and give people reasons to continue to come back into their stores.

And health and wellness happens to be an enormous business. Globally, the “self-care sector” is a $4.7 trillion industry, reports the Global Wellness Institute.

However, the question becomes whether chain retailers’ ventures into the sector will work.

“Retailers do well with what they’re good at: a good product, great service, stellar marketing, etc. It will be interesting to see how this will work for these concepts,” says Jen Helm, a managing director specializing in retail real estate in the Twin Cities, Minn. office of real estate services firm Newmark Knight Frank.

“I think it’s going to be challenging to get their customer base to think in a different direction from who they already are,” Helm says. “I wouldn’t think to go take a yoga class at a CVS or get a pedicure at a DSW and maybe buy a new pair of shoes on my way out.”

DSW experiments with alternative uses

Columbus, Ohio-based DSW Inc., which operates more than 500 locations, is expanding its in-store nail salons with the goal of beefing up footwear sales.

The giant off-price footwear retailer has been testing nail salons in two of its Columbus stores since 2017, after partnering with Columbus-based W Nail Bar, and is now expanding with five new stores in Austin, Texas; Dublin, Ohio; and Washington, D.C. Customers can get manicure and pedicure services, waxing services and even beer and wine at some locations.

“The nail bar services engage customers and create loyalty by inspiring self-expression,” said Bill Jordan, president of DSW, in a statement. “They also create repeat visits to the DSW brand.”

In another effort to drive consumers to its stores, DSW is selling CBD-infused personal care products. CBD is short for cannabidiol, a chemical produced by the cannabis plant, but without the THC. CBD has been touted as helping to treat pain, sleeplessness and anxiety.

DSW has been testing selling Green Growth Brands’ Seventh Sense CBD-infused muscle balms, body lotions, body washes and foot creams in 10 stores. The company said during the first 10 weeks of the test period, 74 percent of Seventh Sense’s products on its shelves were sold, significantly exceeding expectations.

Now DSW plans to sell roughly 55,000 units of Seventh Sense’s CBD products across 96 of its U.S. stores.

The chain is also making moves to build exclusive brands and products. Last October, DSW partnered with brand management company Authentic Brands Group to acquire shoe manufacturer Camuto Group, for about $375 million. Camuto owns licensing rights for the Jessica Simpson footwear business, as well as the footwear and handbag licenses for Lucky Brand.

With DSW continuing to expand its offerings, it announced a corporate name change to Design Brands Inc. and will change its ticker symbol to DBI on April 2.

All of these moves come at a time when Amazon has been boosting its market share in the footwear business. Also, DSW’s main competitor Payless ShoeSource filed for bankruptcy and is closing all of its 2,500 stores in North America, which could be a big boon for DSW if it can capture those customers.

CVS launches new HealthHUBs

Following CVS Health’s $70 billion acquisition of Aetna  last year, CVS announced it would transform the consumer healthcare experience. CVS has now unveiled three new health-focused concept stores, called HealthHUBs, in the Houston area, that are designed to make drugstores more than simply a place to pick up prescriptions or run in for milk.

The new store design boasts wellness rooms for yoga, space to consult with dieticians and services to help people with chronic conditions, like diabetes and asthma. (CVS already runs a network of MinuteClinic locations inside its stores).

HealthHUBs offer digital tools and on-demand health kiosks to measure and track blood pressure, weight and BMI. The newly created spaces can also host group events like health classes and nutritional seminars.

With the new format, more than 20 percent of the CVS store is dedicated to health services.

“We believe that transforming the consumer health care experience begins with creating a new front door to health care,” said Alan Lotvin, chief transformation officer for CVS Health, in a statement. “Our new HealthHUB locations are just that—helping to elevate the store into a convenient neighborhood health care destination that brings easier access to better care at a lower cost.”

As more people are shopping online, drugstores are seeking to become “healthcare destinations” that can attract consumers. Amazon made its foray into the prescription drug delivery business after acquiring online pharmacy PillPack in 2018, which put even more pressure on existing drugstore chains.

Simple strategy

“It’s super simple. Retailers need to start generating traffic one way or another,” says Ricardo Rubi, retail marketing specialist and partner at New York consulting firm Simon-Kucher & Partners. One way is through the health-and-wellness category.

But, Rubi adds, retailers have been dabbling in this with different forms in the past. He points to when the now-defunct Borders bookstore started to see its traffic slow and pursued its café concept more aggressively.

“People think that they put in the café so people go and get their book and then they get coffee,” Rubi says. “No. It’s the other way around. People go and get coffee and then they buy books.”

CVS and DSW are “two retailers that are in peril from disruptive entities in the marketplace,” according to Rubi.

CVS’s traffic driver is drugs. “We see that falling more and more as more people are getting their drugs online, so they need to do something that will drive people to the store that cannot be replaced by something online,” he notes.

And as for footwear, Amazon is becoming a bigger player with $3.7 billion in shoe sales in 2017.

“I can imagine [DSW and CVS] have a team in a little room thinking about what are different potential ideas that we can use in order to bring more people into the stores,” Rubi says. “If people come in, they will buy other stuff as well.”

Retailers are also targeting the millennial generation, according to Rubi, because “they’re the ones that have the money.”

By 2020, global management consulting and professional services firm Accenture predicts that millennials will account for nearly $1.4 trillion in spending power. Millennials tend to use their disposable income to pay for experiences, including health and wellness, self-care, travel and technology, rather than tangible goods.   

Could retailers face challenges as they move into the health-and-wellness sector?

Helm says adding health and wellness into these stores may be challenging, but she suggests that retailers could team up with health and wellness companies or events and market together to associate the brand with a healthy lifestyle.

Examples can could include a “DSW-sponsored popular marathon or shoppers can receive a coupon from CVS for certain healthy items from the yoga studio that they frequent,” Helm says.

“It will also be interesting to see how they navigate the use with the landlords,” Helm says, pointing out issues like exclusive use clauses in leases.

“Many of these shopping centers have nail salons, fitness and yoga studios or the health-and-wellness mix of tenants, and giving a large tenant such a broad exclusive could be challenging for a landlord to fill other vacancies in a shopping center,” Helm says.

Health and wellness uses are great tenants for small-shop spaces and it would limit the landlord’s ability to lease spaces in their centers, she adds.

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