GERMANTOWN, Wis. — ALC Inc., a Wisconsin-based lift chair manufacturer, has announced the formation of an HME delivery company that projects sales exceeding $167 million and EBITDA of $16 million by the end of 2013.
HomeCare DSD, LLC, is currently shopping for investors "and we are seeking to raise $1.65 million, upon which time, we will launch the first three routes in Florida with a centralized warehouse," said Lucien Campolo, CEO of the new company and CFO/director of sales for ALC. "After that, we will sell routes to owner-operators across the country."
The new company is specifically targeting small HME companies for its goods because they have suffered the most from manufacturers cutting back on their independent sales reps, as well as services, Campolo said, citing pharmacies with retail HME as an example.
"Smaller companies are an untapped market," said Campolo, who has had experience with direct store delivery via a successful sun care product company. "The big dealers are getting the big attention. But there are others that are not getting any attention at all. What's better than to show up and say, 'Do you need anything today? Because I have a bunch of things on my truck.'"
The company's plan is to purchase branded HME products from manufacturers at deep discounts, with only one manufacturer per category, and sell them at a low margin to route owners, who will pick them up at centralized warehouses and, in turn, sell them at a discount to HME retailers.
"The route owners will use the time-tested sales method of direct store delivery, each with a decorated box truck filled with inventory for immediate sale. Their inventory will be limited to the branded products offered by the company," the company said in a press summary last week.
HomeCare DSD will carry a mix of high-ticket, high-volume and niche items, including ALC's Action Lift Chair, Campolo said. A new ALC manufacturing facility in Jefferson, Wis., utilizes a workforce of furniture workers who were idled when the century-old Schweiger Furniture Company closed five years ago. With more than 30 years in the business, ALC has redesigned its Action Lift Chair and is producing it and other new and private-label products at the plant.
HomeCare DSD has already reached agreements with several other companies, including Active Care Medical, Life Station and Stander Inc., according to Campolo. And not everything will be on the truck. Some items will be drop shipped, he said.
The company plans to offer exclusive routes to entrepreneurs in 72 of the largest metropolitan areas in the U.S., Campolo said, and has enlisted Route Brokers, which brokers route distribution opportunities, to sign on route owners.
"We are constructing a network that is nationwide," Campolo said. He added that each route owner will have a handheld computer to use in running the route, writing invoices, printing them out and having them signed "on the spot."
Eventually HomeCare DSD, to be based in Boca Raton, Fla., will add repair services, he said.
Route owners can purchase routes for about $110,000. While they furnish the trucks, HomeCare DSD will provide training, the aid of a manager for two months or until the route operator has established the first 20 to 25 accounts, the first-round inventory and access to financing.
The company expects first-year sales of $4.1 million and a gross margin of 10 percent. Revenue projections are based on initial monthly sales of $1,200 per account. Campolo believes that's a conservative estimate since some products are priced between $800 and $1,200.
All in all, HomeCare DSD is a way of returning service to the industry, Campolo said. The challenges in the HME industry have resulted in cost-cutting measures that have "sabotaged" the service component, he said. Manufacturers have reduced service to providers as profit margins have waned, and the spike in fuel prices has resulted in fewer visits from sales reps and less frequent deliveries from freight carriers.
"My answer," he said, "is to climb above the fray and provide service that people really want and need … Service is the business."