After several months of operating a new HME retail store, the owners, who had expanded from a traditional HME business, are very disappointed. Sales are minimal, averaging one product per transaction, 90 percent of which are reimbursable items. Margins remain slim, there is minimal growth each month and still no profit.
Why didn't retail work?
- Salespeople Sell!
The first mistake is that this HME attempted to run its new retail business with staff from its traditional reimbursement-driven business. These people are excellent with insurance intake, verification, claims submission and claims management. However, to work in a retail environment, the staff needs an entirely different skill set; employees in a retail setting must be people-oriented, have retail sales experience, be highly motivated and comfortable as team players.
Yes, the new retail operation could have trained existing staff on how to sell each category. But from working with and visiting HME companies for over 20 years, I have found that a new retail HME business will have a higher probability of success — and profitability — if owners simply hire retail salespeople and train them on HME. Rarely do HME insurance veterans enjoy or succeed at retail sales. Many are not people-oriented to begin with and prefer to stay in the back office.
A profitable HME retail showroom starts with a coherent retail design. Product mix includes all of the core categories, while product selection within each category features good-better-best product options.
Retail HMEs that are merchandised in this way are basically home health department stores that are very successful at closing sales on the floor. They enable customers to be educated on the various products that are available to meet any specific medical or home care needs. Customers are also able to comparison shop within the store — the key to enabling your sales staff to close the majority of sales (converting the majority of customers into buyers).
The next component of a properly merchandised retail HME is accessorizing core products with all related and add-on products. This helps the salesperson explain how core and related products meet similar home care needs, enabling them to cross-sell and upsell. The goal here is not simply to increase sales per customer but to provide the end-user with all of the possible products that can maximize his or her independence and daily quality of life.
Finally, a successful retail HME trains staff on how to utilize retail adjacencies. Why is the showroom arranged the way it is? Don't assume that employees will know. Usually, senior categories (patient room, bath safety, incontinence, etc.) are presented together to help meet the majority of a patient's home care needs. Baby boomer categories like diagnostics, compression, orthopedic supports and hot/cold therapy are also presented together to meet the majority of their respective health care needs.
Too often, only one CSR is working the retail showroom. That person must answer the phones, wait on customers and process insurance when necessary. The average retail sale takes 20 minutes of uninterrupted time. This translates into the salesperson greeting the customer, helping that customer find the product(s) he or she needs, demonstrating those products and educating the customer about related products that could also help them or their loved ones with a specific medical issue.
However, the average insurance intake and documentation takes one hour to process. This means that the sole CSR is losing two other retail sales every hour that he or she processes an insurance patient. Given that the average HME retail sale is approximately $200, you can easily do the math.
Create a back-up system for answering the phones when a customer is in the store. Assign billing staff to process the intake, whether in the showroom or over the phone. Don't lose customers: Not only will you sacrifice a sale, but you will also lose a patient for life because he or she will not come back to shop in your store again.
Superior customer service means that the customer comes first.
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 jevans@retailhomecare.com or 310/457-7333.
