Is Retail Always Profitable?

HME providers often call and ask an interesting question: Has a retail HME ever failed, and if so, why?

There are several factors that affect the success of a retail HME business. On average, most new retail HMEs break even by the 10th or 12th month, averaging between $40,000 and $60,000 per month at that time, with their full-time employees generating $150,000 in gross sales annually. When a new store does not meet those benchmarks, there is probably a problem or forgotten issue.

• Insurance vs. Retail: When customers walk into a retail store, they are usually greeted and then asked if they need help. Retail HME businesses are no different. Unfortunately, when HME staff must also process insurance, they are often bogged down with paperwork or on the phone for verification and unable to help customers who walk in. If a customer is ignored or abandoned when the salesperson runs to answer the phone, he or she may walk out. Not only have you lost a sale but you have probably lost a lifetime customer who will now be shopping at your competitors. In a retail HME, the staff needs to be dedicated to retail sales, 100 percent focused upon customers in the store to greet, help, educate, demonstrate, sell and service them. If insurance is accepted at a retail store, then several other options exist: A biller from corporate can be relocated to the store to continue billing functions but also to help with customer intake and verification. Customers can sit down and speak on the phone with a biller at corporate who will then process their insurance. Or if both locations are within a 30-minute drive of one another, customers can be asked to drive over to corporate where all insurance is processed.
• Advertise Beyond the Grand Opening: Most retail businesses need ongoing advertising to generate new customers, who can then be converted via superior customer service into loyal, repeat customers. There is no right or wrong medium for advertising, as every community has its own respective mix of newspaper, TV and radio with media stars and popular programs, personalities, columns and writers. For a retail business to establish its brand and generate sales from new customers, advertising must be frequent enough to saturate a given market. This generally means utilizing print ads two or three times per month, radio ads alternating weeks or months and TV ads two to three weeks per month. The average retail HME’s advertising budget ranges between $800 and $1,500 per month, depending upon monthly sales and the size of sales territories.
• Retail-Savvy Salespeople: We used to employ nurses, Pts and other professionals to staff retail HMEs, but over the years we have learned that selling retail is a personality trait, and HME knowledge is simply acquired information. Whenever the majority of customer transactions only involve one product each, it is obvious that a clinical person is focused on what insurance the patient has. In contrast, retail salespeople, who are people-oriented, are focused on qualifying customers and learning how they can improve that person’s daily quality of life. They easily learn most of what they need to know about HME within a month or two from being in-serviced by vendor and distributor sales reps.
• Location and Hours: Too many existing HME businesses attempt to expand into retail without reconsidering their locations, which are usually industrial or commercial. Unfortunately, whenever a retail business is located off the beaten path, the out-of-pocket costs for advertising to attract people to this single destination outweigh sales and profits. Retail HME businesses are most often profitable from the start when they are located in busy strip malls, near chain drug stores or adjacent to hospital campuses.

Retail stores are usually open hours that allow working people to shop. This is even more important for a retail HME, as many family caregivers are working baby boomers and can only shop after regular hours during the week or on Saturdays. Retail HMEs are finding that from 5 to 6 p.m. Monday through Friday they are very busy, as customers stop in to buy products and supplies on their way home. And Saturdays are the highest cash days as the majority of customers are primarily these same caregivers.

Read more Retail 101 columns.

Jack Evans is president of Malibu, Calif.-based Global Media Marketing, an HME consulting firm specializing in retail sales, layout and operations. You can reach him at [email protected] or 310/457-7333.