Walmart’s retail model is widely celebrated for its efficiency and cost effectiveness. But does a retail model work when applied to healthcare? Even with its robust infrastructure and immense market presence, Walmart’s attempts to revolutionize health care delivery have not met its expectations of success. Instead, the company closed its health care division, which comprised 51 primary care centers in five states and telehealth services, citing the lack of a sustainable business model, the challenging reimbursement environment, and escalating operating costs as the key determinants of its decision.

In retail, success hinges on volume sales and cost savings, achieved through economies of scale. Walmart excels at achieving these goals by streamlining operations and negotiating low prices from suppliers. However, health care is inherently different. It requires personalized care, trust-building, and adherence to regulatory standards that do not align neatly with Walmart’s traditional retail strengths. The complexity of patient care, which entails nuanced medical needs and personalized treatment plans, clashes with the one-size-fits-all approach that works well in retail.

Walmart’s health care experiments, including Walmart Health centers that offered primary care, dental services, and mental health counseling, was ambitious. The model struggled to achieve scale effectively. A particularly significant challenge related to the effort to integrate comprehensive health care services into existing retail settings. Health care providers and patients alike often found the setting incongruous with their expectations of traditional medical service environments, creating problematic issues in terms of trust and perceived quality of care.

Moreover, Walmart’s approach to health care lacked a seamless integration with existing health care systems and electronic health records (EHRs), which are crucial for the coordinated care that today’s patients and consumers expect. This disconnect impeded the continuity of care, an essential component of effective health care delivery. In addition, the health care workforce is widely distinct from retail staffers, requiring specialized training and professional development. Walmart’s retail-centric human resource practices were not equipped to handle such employee demands efficiently or effectively.

Other retailers seeking to disrupt and benefit from health care offerings have faced similar hurdles. For example, both CVS Health and Walgreens have ventured into health care service provision, but they have struggled to scale their operations to match the personalized, nuanced demands of health care consumers. Furthermore, these companies have appeared unable to integrate retail and medical cultures, address the sophistication and complexity of health care regulations, and meet the needs of highly specialized medical staff. Their models, even if slightly more successful than Walmart’s, due to the resources available from their pharmaceutical experience, offer a further illustration of the challenges of translating retail efficiency into health care success. In turn, both these companies are scaling back their experimental health care operations.

The challenges faced by Walmart and other retail disruptors highlight a critical lesson: Health care complexities require more than just applying existing, cost-efficient, high-volume, retail approaches. Successful health care delivery demands a patient-centric model that emphasizes quality, continuity of care, and integration with broader health care systems. In these areas, traditional retail models fall short.

Discussion Questions:

1. How can retail companies better integrate health care services into their existing business models to address the unique challenges of the health care sector?
2. What lessons can be learned from the challenges faced by Walmart Health, in terms of scaling and integration with existing health care systems?

Sources: David Wainer, “Why the Walmart Model Doesn’t Work in Healthcare,” The Wall Street Journal, July 5, 2024; Katie Adams, “Healthcare Is a Frontier Not Even Walmart Could Conquer—And It’s Not Looking Great for Others Either,” Med City News, May 1, 2024; Giles Bruce, “Why Hospital Executives Think Walmart Health Failed,” Becker’s Health IT, May 1, 2024.