Today, the home health care product segment is one of the fastest-growing and highest margin areas in independent drugstores. Why? Drugstores are already in the retail business and simply have expanded upon health and wellness to include home health care merchandise.
Traditional HME providers might want to consider incorporating key retail components from drugstores. Instead of depending on “back-door” referrals for the majority of insurance-driven revenue, providers need to include “front-door” retail sales as well to remain viable and profitable.
Many successful (ie, profitable) HME businesses are in the retail business, and their cash sales account for anywhere between 40% and 65% of their gross sales. Most HME products in a retail setting are sold in exchange for money, whether cash, check, or credit card. Without any 60- to 90-day payment delay from insurance, cash is deposited daily to help fund ongoing operating and marketing expenses.
The following are some key retailing strategies:
Location, Location, Location
In any retail business, first and foremost is location. When drugstores query customers as to why they patronize their particular store, “convenient location” is usually cited as the primary reason.
Retail HME companies are located in highly visible and easily accessible areas where customers are already shopping for health care products or pursuing health care-related activities. This means adjacent to a chain drugstore, hospital, or medical office building.
Today, chain druggists are the number-one referral source for HME businesses. They fill between 500 and 700 prescriptions per day and do not want to bother with medical equipment. Given that 10% to 20% of their customers have home health care equipment and supply needs, these referrals provide an easy way to build a profitable HME business. Yet, very few traditional HME stores call on chain drugstores.
Note that store fronts on busy retail streets take advantage of the several thousand people who drive by daily and—if you rotate your displays monthly—look to see what is new in your windows. This is free “guerrilla marketing” that often generates as much business as expensive print or media advertising.
| How to Beat—Not Compete With—the Chains The chain pharmacy that is sending those HME referrals can also be capturing a large percentage of your retail business. Many home health care products that drug and mass market chains still consider over-the-counter items are being sold daily at retail prices that are often less than HME providers pay wholesale. These products include: • Orthopedic supports
• Compression stockings
• Blood pressure monitors
• Incontinence products How can HME businesses compete when selling these products? There is one simple solution: Do not carry the brands that your local chain sells. HME providers can never win by selling the same brand that is carried by a Wal-Mart, Kmart, Target, or chain drugstore. These mass marketers buy in tremendous volume, stock only the highest-selling SKUs (stock-keeping units), and focus on price rather than quality. Successful HME stores buy and stock medical-grade brands that cannot be compared unit-to-unit for pricing. Then, to avoid competing, successful providers get customers to switch from the chain’s brand to the private label or generic that is available only at your store. Convincing customers to change brands is not easy since most people are creatures of habit. They need to perceive (even if they never actually receive) a strong personal benefit before changing, such as financial savings, physical comfort, reduced stress, or superior performance. One of the best proven methods for changing a customer’s purchasing habits is to give them free samples of the product in question. Vendors of disposable products, such as incontinence items, will usually provide free samples for customers to try for themselves. Other product vendors will provide showroom samples to facilitate demonstrating their product benefits for customers. These HME providers also employ trained salespeople who demonstrate the products and educate customers as to why they are the best available to meet their health care needs. When you combine a professional product selection with knowledgeable salespeople, your customers are willing to pay more. —Jack Evans |
Clean Up Your Showroom
Clear out the gondolas. Get rid of the broken linoleum and frayed carpet. Your goal is to provide an attractive retail showroom in which HME products are displayed openly for customers to touch, try, and buy.
Are your walkers hanging folded from your beautiful slat wall? Take them down, open them up, and place them handles-out to the aisles. Display fully loaded models of rollators with seats, baskets, and trays. Then watch your sales double or triple.
Are your scooters and lift chairs displayed prominently on risers? Put them down on the showroom floor. Charge the scooter batteries. Place a sign in the scooter basket that says, “Take me for a test drive.” Plug in the lift chair and place a sign on the back that says, “Sit down and see how easy you stand up!” Then watch your sales take off.
Give Your Customers Choice
Did you know:
1. Eighty percent of Baby Boomers decide what to buy after they are in a retail store?
2. The most successful way to close a retail sale is to offer choices to consumers and then let them make the purchasing decision as to which model they will buy?
Display one lift chair, and a customer will look, leave, and then go to your competitor to compare. Chances are they will buy there after seeing several options. However, if you display a complete product selection within your own showroom, you enable customers to choose between options that meet their own needs (ie, medical and financial).
Usually, HME shops will display a basic model (that equates to the Medicare-reimbursable basic entitlement) and an upscale model. The most profitable dealers always display “fully loaded” models just like automobile showrooms and always start selling from the top down.
Merchandise to Cross-Sell
Is a 60-year-old woman coming into your store monthly for incontinence products but never buying bathroom safety items? Is a 50-year-old man buying diabetes supplies but never adding on compression stockings or skin care products? If so, you are simply not meeting as close to 100% of your customers’ home health care needs as possible—and you are failing to maximize your sales and profits per customer.
Most customers do not know that they need these related products. Retail HME providers can educate customers through showroom displays merchandising related products adjacent to the demand categories. For example, if diabetes is a core category, surround this section with related products, such as compression stockings, orthopedic supports, and skin care.
Train your salespeople to ask customers if they are also in need of a specific related product. Step through each related product category to explain why it meets a similar medical need or value.
Train to Sell
Just because some home health care products are small and packaged does not mean they are over-the-counter items that sell themselves. A salesperson needs to qualify customers to find out the end-users’ home health care concerns and needs. Then they must demonstrate how specific HME products will help the customers maintain or improve their daily quality of life.
Dedicate a few retail clerks as your HME salespeople to work the showroom during specific retail hours. Provide product training by having HME vendors or independent sales representatives do in-services for these salespeople on a regular basis before your business opens. Provide them with name tags that specify they are “HME Specialists” or “Home Health Care Professionals.” Let your customers know your salespeople are proud to be experts in HME.
And remember that HME salespeople are like anyone else in sales in that they work in response to incentives. Every salesperson needs motivation via higher potential earnings. The average HME commission paid today is 10% on monthly gross HME sales. Good salespeople earn 50% of their base salary in commissions; excellent salespeople will double their salary.
Open Saturdays?
Remember that the days and hours of business directly affect your bottom line. Staying open 7 days a week is not always cost-efficient, but Saturday is usually the busiest retail shopping day. Also, staying open until 7 pm one or two weekday evenings will enable caregivers to shop after work. The more convenient you make shopping in your home health care showroom, the higher your sales and number of repeat customers.
Your goal is to become the local home health care resource and help your customers to better care for themselves and their loved ones at home. When you combine a retail showroom, complete product selection, trained salespeople, and superior customer service, then your business can become the local Starbucks of HME.
Jack Evans, president of Global Media Marketing, Malibu, Calif, is an educator and marketing specialist in home health care. He works with HME providers and drugstores to develop retail layout, merchandising, sales training, marketing, and advertising programs. He can be reached at www.retailhomecare.com or (310) 457-7333.
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