In an effort to create new markets, several national retailers are stepping into the service arena.
Costco and Sam’s Club began offering health insurance to small business owners and the self-employed at the beginning of the year.
The Sam’s Club program is the only national insurance program of its kind in the country. Costco offers health insurance for small businesses in California, Hawaii, Nevada, Oregon and Washington.
Sam’s Club spokesman Olan James declined to say how many small business owners had signed up for the health insurance benefit, offered by Extend Benefit. Each plan can be tailored for the business owner and employees.
“We know a single size does not fit everyone, like with large plans,” he said. “This way, the owner can pick and choose which plan best suits his needs. … (And) the plan is portable. When employees leave, they can take the plan with them if they choose.”
Sam’s started offering health coverage in 2002, and started the new plan for businesses in January.
Despite repeated attempts, officials at Costco did not return phone calls to discuss the company’s insurance plan. Costco will enter the Colorado Springs market in 2007, with a 150,000 square foot retail center near Interstate 25 and Nevada Ave.
While Sam’s officials say they are addressing needs of their consumers – the wholesale club operates as a principal supplier for business needs – marketing analysts say the company is attempting to increase its bottom line.
“It’s all about the opportunity,” said Lex Higgins, professor of marketing at the University of Colorado at Colorado Springs. “There’s a missing spot in the marketplace, with health care in a very chaotic state.”
Competition among national big box retailers forces companies to try new arenas to increase profit margins, Higgins said.
“Wal-Mart and Sam’s Club are the largest retailers in the world,” he said. “And so, if they try this for a while and it fails, then it’s really just background noise. It won’t affect their bottom line. But developing new products is expensive, and if they don’t catch on, it can really eat into profits. This way, they don’t really lose anything.”
Wal-Mart and Target provide eye care services in their super centers, and Higgins said that health care could be next.
“You have to look at their target market,” he said. “And their market is the people who could be squeezed out of traditional health plans. For example, illegal immigrants could take advantage of the eye clinics at Wal-Mart, so could offering health care be that far away? And the major health care industries are going to be very cautious about approaching that – they don’t want to deal with small markets. But Wal-Mart can take that risk”
Other retailers will be joining the big box stores in offering more services, Higgins said. He cites McDonald’s as an example.
“They spent millions of dollars on those play centers around the restaurants,” he said. “So, if they were going to get really aggressive, they could hire someone at minimum wage to watch the kids. There’s a liability issue, but McDonald’s is large enough to handle it. It could happen sooner than people think. Retail competition is very heated these days, and the big stores want to stay on top, increase their profit margins.”
Filling niches in the marketplace is a natural progression of the economy, Higgins said. And larger retailers are uniquely positioned to take advantage of those unfilled needs.
“They can go out and try new things. If they are successful, they can keep offering services,” he said. “If not, they can stop offering that service and move on to other ideas.”