The "Survey Fast Facts" from HomeCare magazine's 2009 Retail Survey (published in April) pinpoint:
- why home care businesses are not profitable in retail; and
- how these same HMEs can improve their cash sales and profitability.
A quick recap of the facts shows how you can improve your retail sales by maximizing sales-per-customer, diversifying your revenue mix and increasing your cash profits.
Days and Hours of Operation
In retail, the busy times of the week vary by industry and market. In general, Saturday is the busiest day, followed by Mondays and Fridays. Retail drugstores report that, between 5 and 6 p.m. daily, they are inundated by boomers and family caregivers on their way home from work.
Are HMEs open on Saturdays or after 5 p.m.? I would have to say that 95 percent are not open during these prime retail shopping times. Approximately 30 percent reported in the Retail Survey that Mondays and Fridays are their busiest times during the week. Therefore, one simple way to increase retail sales and profits would be to open your doors for the busiest retail hours on Saturday and at least until 6 p.m. during the work week.
Dedicated Retail Salesperson
According to the survey results, “a majority of respondents (55 percent) report that they do not employ dedicated showroom salespeople.”
Hello, HME providers: If you want to sell retail, you need a retail salesperson. Look at retail drugstores as an example. Home medical equipment is not the same as OTC (over-the-counter) products that sell themselves. Whenever a drugstore adds a dedicated home health care salesperson, they double their HME sales.
Those HME businesses that still focus on Medicare and Medicaid rely on insurance intake staff to act as both customer service representatives and retail salespeople. However, insurance personnel have an exclusive approach as they only are concerned with “providing” reimbursable products and ignore everything else.
Retail salespeople, in contrast, have an inclusive approach as they demonstrate and then sell all of the products that meet an end-user's home health care needs, regardless of whether a product is reimbursable or sold for cash.
Retail HMEs focus on Medicare customers as their “sales opportunities” for retail sales. With every rental item such as a walker, wheelchair or bed, the salesperson demonstrates all of the related accessories that the end-user would need to facilitate his/her mobility, independence and quality of life.
These same stores average $100 in cash upgrades for every walker (i.e., using an ABN to upgrade to rollators); $200 in cash accessories for every wheelchair (i.e., a cushion and ramp); and over $300 for bed accessories (i.e., sheets, pillows and a memory foam mattress pad).
Remodeled Showrooms
According to HomeCare's survey, nearly one-third of respondents (31 percent) have expanded or remodeled an existing showroom within the past three years. Good news, yes? Well, that depends …
The goal in remodeling an HME showroom is actually multifold:
- Create departments for your major categories.
- Display your most profitable products in those respective categories.
- Create retail adjacencies to increase add-on retail sales.
- Increase sales-per-customer and sales per sq. ft.
However, none of these goals can be achieved if your salespeople are not educated as to why you have made these changes in the first place!
Showroom redesign is just the first step. Train your salespeople in both core and related products — and in retail selling. Then they will understand why products have been relocated and how to offer solution selling instead of simply providing reimbursable products.
Volume vs. Profit Margin
“Respondents are likely to track different retail products using total sales volume (46 percent), profit margin (35 percent) and inventory turnover rate (32 percent),” the survey results show. “Four in 10 respondents (40 percent) allot showroom space based on product profitability, 30 percent do not and 30 percent are unsure or did not answer the question.”
If you look at any other retail business, profit margin is the No. 1 indicator of sales and profits for inclusion and placement of every product and respective category in any stores.
The front third of a retail showroom accounts for 80 percent of its sales. Remember the 20/80 rule of retail? Twenty percent of your products will generate 80 percent of your sales.
First you must identify your most profitable category. Then you should display this category in the largest depth and breadth in the front center of your showroom. The more product you display in any respective retail HME category, the more of that product you will sell. Why spin your wheels on a product category that is selling volume but not profitable?
Front Window Display
Only half of the respondents in the Retail Survey said they have a front window display. In retail, your showroom windows are your silent salespeople.
The minute you remove fake plants, rows of rental manual wheelchairs and stacks of rental hospital beds — and replace them with displays of retail products such as lift chairs, scooters, rollators and mannequins — people start stopping in saying that they never knew you carried these items.
Not only do retail businesses maintain window displays, but they change their displays regularly. Consumers who drive by businesses notice what has changed; if something stays the same, then they stop looking. The easiest way to change your windows is to move products one space over every week (or month). People usually look at the same window, and if they see something new, they will remember what they are looking at.
The best retail sellers are rollators, transport chairs, lift chairs, travel/transport scooters, bath safety and designer canes. Display one of each in your windows and constantly move them up or down your windows to make your displays look fresh and new.
Location, Location, Location
Although over half of the providers who participated in the survey are located in a freestanding building, the issue remains where these buildings are located (i.e., only 16 percent are located in a strip mall).
Creating a retail showroom is worthless if you are located in an industrial or commercial neighborhood that is off the beaten path and a destination in itself. People will not simply stop by but will have to be driven to your store via ongoing advertising.
Most home medical equipment stores are traditionally located in low-rent districts, which means they are situated off of the major retail thoroughfares and not very easy to find. In retail, a business must be visible and accessible in order to be successful.
Look at any freestanding retail chain drugstore. In fact, the most profitable retail HMEs have been located adjacent to these same chain stores.
View HomeCare's entire 2009 Retail Survey.
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.
