How CVS & Aetna Could Change Healthcare

Business Insider: “CVS Pharmacy’s $69 billion deal to acquire the health insurer Aetna — the second-biggest deal of the year — is different. It could actually make treatment simpler and easier for Americans, and it catches a bunch of trends in the market that push costs down. There are two big streamlining ideas at work here. First … Pharmacy Benefit Managers (PBMs) are the gatekeepers between insurers and a patient’s medical treatment, and CVS already has one. Ideally it ensures that the PBM is incentivized to keep costs for the insurer as low as possible.”

“For the most part, though, this doesn’t fundamentally change Americans’ experience when they get sick. PBMs are faceless entities, and insurance is a foreign language to a lot of people. This is where the second streamlining idea in this CVS acquisition comes into play … the company will be ‘promoting lower-cost sites of care’ after this acquisition. That means turning brick-and-mortar stores into treatment centers and hiring medical staff. That’s expensive, but it will keep sick people out of more expensive hospitals, which keeps costs down for insurers and ultimately customers.”

“And unlike a lot of new urgent-care facilities hitting the market to do this very thing (keep people out of hospitals), CVS comes with a ton of brand familiarity. Plus, quarter after quarter CVS has seen that its other businesses are outperforming sales in its retail channel. Turning brick-and-mortar stores into healthcare facilities is one way to make good use of them.”

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Real-Time Retail: Fanatics Seizes Micro-Moments

The New York Times: Micro-moments “happen all the time in sports: A player reaches a milestone, has a breakout performance or is traded to a new team. Apparel companies have traditionally been poorly positioned to meet the accompanying fan demand as it surges. Fanatics … a sports merchandise company … is changing that and, in the process, carving out a lucrative niche in a fiercely competitive online-retail industry largely dominated by Amazon.”

“The company is similar to fast-fashion retailers like H&M, Uniqlo and Zara, integrating design and manufacturing with distribution to fulfill orders within hours. After the Chicago Cubs won the World Series last year, Fanatics used Uber to deliver championship gear to some fans within minutes … As a result, Fanatics has more than doubled its revenue in just a few years.”

“Among the micro-moments that highlighted the new need for speed was Jeremy Lin’s emergence as a sudden star for the New York Knicks in 2012 amid the so-called Linsanity phenomenon.” Fanatics chairman Michael Rubin comments: “When Linsanity happened, within 12 hours to 24 hours, there were no jerseys to get. So you had this huge demand, and there’s no jerseys available. Then you order them like crazy, and by the time they get in, the moment’s over.”

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Retail Medicine: Is Aetna The Next Apple?

Axios: “Aetna’s Mark Bertolini has been talking with retail giants and the architect behind the Apple and Tesla retail stores about ways to make visiting the doctor more like going to the mall … Bertolini says health care should take a lot of cues from Apple, noting people are already willing to make appointments at the Genius Bar. Not only that, but they willingly pay money.” Bertolini comments: “They don’t sell anything at the Apple Store. People buy stuff at the Apple Store.”

He also says: “It has to be a place that’s not linoleum floors and formica counters. It needs to be a place where people want to go and it doesn’t need to be as expensive as the marble on the Apple floors and the glass staircase, but it can be a better experience.”

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Threesome Tollbooth: Seclusion as Luxury

The New York Times: Threesome Tollbooth, in Brooklyn, caters “to patrons who prefer to take their cocktails in extreme seclusion. About as wide as the average human arm span, it sits inside the supply closet of a shuttered Italian restaurant. Capacity is limited to three: the bartender, you and your date.”

“’You own the space,’ said the artist N.D. Austin who opened the tiny tavern … After making a reservation, guests are asked by email to meet him — or his partner, Jesse Sheidlower, a lexicographer — outside a graffitied metal door in Bushwick. A brief walk through that door and down an alley leads inside to the supply closet. The closet, one discovers, has been transformed into a small, wood-paneled chamber — the sort of place to which a professor emeritus of English might retire to sip his Scotch and page through Keats.”

“The evening isn’t cheap: The going rate is $100 to $120 a head for about an hour of service. For that you get a menu of five or six 3-ounce mini-cocktails, bearing names like Johann Goes to Mexico; you also get the close-quarter company of your partner and your host. Mr. Sheidlower said the tightness of the Tollbooth has had interesting effects on the clientele … His favorite customers, however, are those who walk in and spontaneously burst into laughter.”

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Richie’s Guitar Shop: (212-253-7643)

The New York Times: “Got a gig downtown in two hours and there’s no sound coming from your ’68 Stratocaster? Action need adjustment? Are you afraid your bass is possibly haunted? ‘Call Richie’ is the mantra — if you’re connected enough in the music world to have the business card with the phone number for Richie’s Guitar Shop, which has been promoted solely through word of mouth since Mr. Baxt started teaching himself to fix guitars in 1978. Upon calling (212-253-7643), Richard Baxt will tell you where to go — to a modest one-bedroom apartment on East 11th Street.”

“If you are a new customer, you will be handed a single-spaced, double-sided sheet of paper titled ‘The Richie’s Guitar Shop Philosophy.’ These are the rules of engagement, which include both the practical and unexpected — from the importance of appointments, to the $15 surcharge if Mr. Baxt has to clean ‘blood or other bodily fluids’ off the instrument.”

Mr. Baxt says big retailers “‘charge you $100 just to change the strings and make a few adjustments. To me, that’s unconscionable. I try to charge as little as possible’ … Customers’ needs vary. Mr. Baxt recalled a job he performed for a man convinced that there were demons inside his guitar. The man asked Mr. Baxt to carve the outline of a swastika into his pick guard, which he hoped would scare them out. ‘I did it,’ said Mr. Baxt, who is Jewish, with a laugh … The man called several weeks later, swearing that the demons had been exorcised. As it says on the guitar shop business card, ‘Psychotherapy extra’.”

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Apple’s Insanely Great Idea? Stores.

Scott Galloway: “Apple made this crazy irrational decision 20 years ago to forward integrate into the medium that was supposedly going away. Stores. And they have somewhere between five and six billion dollars in store leases now on their balance sheet and have reallocated capital out of traditional broadcast media, which is declining every day in effectiveness, into the store where people still make physical contact if you will. They still consummate the relationship with the brand at the point of purchase.”

“So you have this temple to the brand which is this unbelievable experience called an Apple Store, and then you have this very mediocre experience called an AT&T or Verizon connect your phone experience for Samsung and the other Android players. The biggest value-creating decision in the history of modern decision: Apple’s crazy decision to forward integrate into stores.”

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Danny Meyer & Enlightened Culture

Fast Company: “How do you persuade your waiters to forgo a 20% tip on each table they serve? Danny Meyer says they never wanted to hire people who would only have been nice to you if they assessed it out of the four tables in their section, you were the richest or you were the most generous.”

“By that he means building a culture where employees focus first on pleasing one another, creating a warm energy that in turn fuels the staff as it tends to patrons, the community, and suppliers. His restaurants offer employees a variety of rewards, from bonuses to birthday cakes. And employees in turn have discretion to give customers free extras, all creating a virtuous cycle of hospitality.”

“Meyer regularly tests his approach to see if it’s is working by asking members of the team to share their understanding and experience of the culture … He says these discussions happen at pre-service meetings and in employee town halls, and through multiple internal channels that employees can use to offer their honest feedback.”

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Wingtip Club: Like Costco For Millionaires

Business Insider: “Wingtip Club charges monthly dues and a one-time admission fee between $1,000 and $3,000, depending on the number of visits a member wants to make annually. It’s a pioneer among the handful of brands that pamper and offer places to socialize inside brick-and-mortar shops — a tactic to help them compete with popular online retail companies like Bonobos, Everlane, and Amazon.”

“Wingtip Club opened its first San Francisco store in 2008 and piloted the clubhouse at a barbershop nearby in 2010. The two concepts combined at the current address in 2012 … currently has about 900 members, with an average age of 45. Women make up about 11% of membership … A ‘visiting’ membership includes five visits per year and costs $25 in monthly dues and a one-time membership fee of $1,200. The more frequent ‘social’ membership allows six visits per quarter (24 times a year) and costs $125 in monthly dues and a one-time fee of $2,000.”

“All membership levels come with a 10% store discount.”

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Bodega: The Future of Convenience?

Fast Company: “Paul McDonald, who spent 13 years as a product manager at Google, wants to make this corner store a thing of the past … launching a new concept called Bodega with his cofounder Ashwath Rajan, another Google veteran. Bodega sets up five-foot-wide pantry boxes filled with non-perishable items you might pick up at a convenience store. An app will allow you to unlock the box and cameras powered with computer vision will register what you’ve picked up, automatically charging your credit card. The entire process happens without a person actually manning the ‘store’.”

“The idea is to preempt what people might need, then use machine learning to constantly reassess the 100 most-needed items in that community. In a sorority house, for instance, young women might regularly purchase pretzels, makeup remover, and tampons. Meanwhile, in an apartment block, residents might regularly buy toilet paper, pasta, and sugar. When an item is bought, Bodega gets a note to replace it, and regularly sends people out to restock the boxes.”

“In most cases, Bodega doesn’t pay for the retail space, but pitches itself as an amenity or a convenience to property managers. At gyms for instance, McDonald makes the case that having a Bodega stocked with power bars and protein powder might make the facility more attractive to members … The major downside to this concept–should it take off–is that it would put a lot of mom-and-pop stores out of business.”

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