Retail by Definition

Due to the sluggish economy, we have decided to wait until next year to open our new retail showroom. But we want to know if you would instead help convert our current location into a retail HME.”

This is the second call I have received during the past month with this same request — and the second “No” I have been forced to give as an answer. I am not trying to be negative, but simply to help HME providers understand what really defines a retail business.

• A Retail Location: Traditional insurance-driven HME businesses are usually warehouse operations that are located in industrial or commercial areas. The bulk of their Medicare/Medicaid business is conducted over the phone or electronically; the patient rarely comes into the office because the reimbursable products are usually delivered directly to the patient's home.

  In contrast, a retail HME must be located in a highly visible area that has high daily traffic and is easily accessible. The prime locations are adjacent to or nearby a chain drugstore or grocery/pharmacy chains, because these chains have already researched traffic count, visibility and accessibility. And the majority of retail HME sales are impulse sales where the customer takes the product home with them.

  The issue in retail concerning these different locations is not to create a separate destination. When a retail HME is located adjacent to or in close proximity to other retail businesses, the HME benefits from consumers who also visit their store while out shopping. The largest “crossover” from a retail business to an HME is from retail chain pharmacy, because 10 to 15 percent of these 350 to 500 script customers per day often need home health care products. (Independent pharmacies often also sell HME, so that is why chains are better referral sources.)

  Due to the low cost of rent in commercial locations that are under $1/ft./mo. (or $12/ft./yr.), existing HME businesses are reluctant to move and increase their rental cost. However, when a retail HME is located by itself off in an industrial park, it must spend too much money on continuous advertising in order to draw customers to the inconvenient location. The cost of this advertising will often be higher than profit from the resulting sales.

• Storeroom vs. Showroom: The traditional HME in a warehouse setting uses every square foot to warehouse inventory. The front-end of the business rarely looks any different than the back-end: The entire location is one large storeroom.