The Rocky Road to Retail

For the past 20-plus years I have been presenting retail as a viable option for HME businesses. Now it appears that retail has come into its own and is no longer just a niche. Retail-only HHC businesses are opening monthly around the country and growing into profitable companies without any need for government or third-party insurance reimbursement. This increased interest in retail reflects the diversity of people who now contact me on a regular basis:

• Venture capitalists wanting to create a national chain in HHC
• HME veterans who want to create franchise systems based on their own successful business models
• Drug, food and mass retail chains that want to expand the HHC offering in their pharmacies
• Investors who want to “roll-up” a regional or national selection of independent HMEs into a national chain
• Vendors who want to create retail websites and go direct to consumers
• Vendors who are selling HHC products via infomercials

Retail HHC is no longer simply one or more planograms but now incorporates an entirely new comprehensive focus. The business model has changed, and HMEs need to understand this paradigm shift if they are going to be successful in retailing HHC. Following are a few of the core components in HME that have been dramatically redefined for retail HHC.

Location: Historically, reimbursement-driven HMEs have always been located in industrial or commercial zones as this is where warehouse-based businesses do well. But when this traditional HME suddenly creates a “retail” showroom at this same location, they are disappointed by the lack of retail customers frequenting their store. HME owners must understand that these locations are single-destination businesses, and most consumers are not willing to drive who-knows-where just to find them. Retailers know that location comes first: visibility, accessibility and convenience are the critical factors in determining the ultimate success of any given retail business. True retail HMEs are found in shopping centers, medical malls, busy retail strips—anywhere people shop or visit on a regular basis.

Interior Space: These traditional HMEs are also warehouses with offices. Rarely do they display any product “out front” as most patients are serviced via delivery and never come to their actual location. The few HMEs that do have product displayed basically extend their warehouse into the front of the building. In contrast, retail HMEs are almost entirely showrooms that highlight room displays and offer open floor space with products displayed out of the box as well as a complete product selection. This last point is important because warehouses just stock numerous units of the same model, while retail showrooms display good, better and best product options to facilitate their customer’s purchasing decisions.

Customer Base: Traditional HMEs service patients who have no choice in their product decision as Medicare or their insurance company has contracted with a specific HME provider. “Provider” is the key word here, because while traditional HMEs provide products and supplies to patients and then bill a third party, retail HMEs sell them for cash.

Customer Service Staff: Most reimbursement-driven HME businesses are staffed by billers, as even customer service is a function of processing claims. However, billers are not usually “people oriented” and prefer office jobs—retail is definitely not their forte! Retail businesses need dedicated retail staff. Bottom line: hire for attitude, then train for product specialists.

Marketing: Referral marketing for traditional HMEs has usually focused on hospital discharge planners and case managers as well as local physicians. In contrast, most retail HMEs have never called on a hospital or doctor, relying instead on chain pharmacists as well as independent and assisted living facilities.

Advertising: Traditional HMEs might place print ads when they run a sale, but retailers know they must advertise continuously, advertising on contract both with their local weekly throwaway newspaper and either a radio or TV station.

I’ll be writing the cover story for the next issue of HomeCare and providing a retail checklist that can be used to help guide this transition into the retail HME business.