Steve Jobs did not develop amazing breakthroughs at Apple and Pixar by following conventional wisdom; he went against the grain. Suggesting that the customer doesn’t know what he or she wants is not only counterintuitive, it is also the antithesis of the traditional DME model. Those interested in blazing a new trail in HME retail would be wise to take a page from business legends’ playbooks. What can we learn from icons such as Jobs (Apple) and Howard Schultz (Starbucks)? What are the lessons from some of the world’s great retailers—Kohl’s, AutoZone and Lowe’s? What is the secret sauce that makes retail stars successful? For the past 30 years, HME providers have built businesses via equipment reimbursed by third-party payers, ostensibly sold through health care referral sources. This likely will always be the model for oxygen, CPAP, beds and wheelchairs. But epic changes in health care, in the DME industry in particular, are leading many HME providers to consider the broad category called retail. Retail includes any and all products and services sold to consumers, caregivers and institutions that are not reimbursed by a third party. Retail could be done inside a store, via the Internet, through external salespeople working with demo products at a health show, a county fair, a senior community or by calling on a specific target.
But does such a retail market exist? Wal-Mart does more than $50 billion a year in its health and wellness category. The nutritional supplement business in the U.S. is more than $40 billion and growing at a healthy seven percent. One hundred million Americans are suffering in chronic pain. One in four seniors has difficulty walking, including half the people ages 80 and older. America’s seniors, contrary to myth of the fixed income retiree, are the wealthiest segment of society. They have the disposable funds to transform HME retail into an enormous industry. But if we always do what we’ve always done, we’ll always get what we always have—and the dream that is HME retail will never be realized. Steve Jobs knew that he couldn’t just give customers what they said they wanted. He had to show them what they needed, too. As HME providers, you know about thousands of products that will help seniors and the disabled overcome limitations and improve the quality of their lives. You must figure out what customers need, show it to them and communicate how it will help. If you do this successfully, sales will follow. The home-improvement business used to be small and fractured. Hardware stores, lumber yards, catalogs, department stores and contractors each had a segment of a vastly under- developed market. Granite countertops, designer tile, great lighting choices and a plethora of cabinet options all existed, but the customer had to work very hard to shop these options. Exceptional merchandising unleashed the home-improvement industry by showing customers possibilities they otherwise could not imagine. Lowe’s doesn’t simply stock shelves with products—they merchandise in a way that helps people identify needs, plan improvements and imagine the impact on their homes and lives. A range of good-better-best options, coupled with making it easy to buy through home delivery and installation, drives business. Lowe’s also leveraged a secret that was hidden in plain sight. It was the first to recognize that women, not men, make most of the home-improvement decisions and, as a result, it built its stores to meet the needs of that demographic. Everything— signage, store layout, displays, checkout—is designed to appeal to female customers. Lowe’s teaches us important lessons to apply to HME retailing. We must show customers how to improve their quality of life, be safer and feel better. Let’s also learn how to focus on our real customer: mature women. These women make nearly all health care decisions. Everything you do must be done with your female buyer firmly in mind. The Buckle is a highly successful chain of 450 mall-based stores. It excels in selling hip apparel to fashion-conscious young people. When you enter a Buckle store, you’re immediately greeted by a smiling, helpful employee. Their help carries through your entire shopping experience, offering size and fashion alternatives and rounding out your outfit in ways that make purchasing additional items seem like a no-brainer. An exceptional workforce is the key. Buckle populates its stores with high-energy, passionate, enthusiastic, open-minded teammates. Coupled with excellent training and well-designed incentive compensation programs at all levels, its teammates ignite sales and profits. When you're thinking retail, you have to get the right people in the right places on your team. Employees’ success in serving customers, building relationships, finding solutions and adding revenue is not accidental. You have to hire right, train and incentivize to optimize your retail effort. You know the real estate adage: location, location, location. It’s true in retail, too. AutoZone is a dominant 5,000-store auto parts retailer. A destination store, AutoZone must create its own traffic. Their stores are easy-to-find. Strong signage, a recognizable logo and a name that fits their concept are all important elements of their success. Another compelling element is a hub-and-spoke approach. They use one larger store in a major market to serve as a mini-warehouse, supporting several smaller stores in that market. This extends their product offering without an investment in additional inventory and ensures customer needs can be met quickly and economically. Traditional HME providers aren’t located to succeed in retail. Many lack clarity of purpose in a company name and signage to properly communicate to consumers. All of these things are necessities as you move into store-based retailing. Kohl’s has built a retail juggernaut by making it easy to shop. “She finds what she wants on a single trip to the store,” is the centerpiece of Kohl’s value proposition. Always in stock through narrow and deep product assortments, convenient out-of-the-mall locations, great signage, central checkouts, ample fitting rooms, Kohl’s makes it easy, all the way down to doors that open effortlessly. Kohl’s also does an incredible job of communicating economic value to its customer. She shops Kohl’s with ease, leaves with what she wanted and always feels like she got a good deal and a reason to return again. We can learn much from Kohl’s. It’s hard to do business with all health care organizations. Making it easy for the customer to find and buy from an HME is imperative. People value expertise in HME provider locations. People gravitate toward passion, compassion, empathy, support and expertise. You must establish yourself as a center of excellence in your category. Extend your brand and expertise beyond the walls of the store, including through your website, not as a shopping cart, but as a driver of calls and traffic to the store. It’Sugar is the fastest growing candy store in the world and truly unlike any other. Oddly perhaps, a focus on the 19-year-old female target customer is easily evident as you peruse this edgy, often risqué store. They sell an experience. Their strategy is to focus on the 19-year-old, knowing that girls younger than that want to be older and those older want to be younger, and the guys will follow the girls into the store. The lesson for HME in It’Sugar is the relentless targeting of the desired customer. Our target customer is likely a female above the age of 55. Everything we do has to be with that woman in mind. Imagine the challenges of selling something for premium price that most people can get free at their office. Coffee may be the ultimate commodity. As Starbucks’ fortunes waned during the recession, conventional wisdom said cut costs, lower prices. Howard Schultz, the visionary founder of Starbucks, chose to go in a different path. Schultz sells an experience. He has built a powerhouse brand, great coffee, yes, but wrapped in a unique and compelling experience. It’s not always about price. If you want to make it about more than price, you’re going to have to work hard to do it. Consumers will “showroom” you—shop your store to check out products and ask questions, and then look for a lower price online. Like Starbucks, you must be more than a price and an item. The customer experience matters. So does your brand. To succeed at retail, think about how the customer experiences your store, how you present yourself and what your brand means in the marketplace. Commoditization can be overcome, but it’s not easy. Just ask Howard Schultz. Opportunistic is not a word that comes to mind when you think HME retail. But opportunism in retail requires seeking opportunities to play offense. TJMaxx is a great retailer that uses extreme flexibility to leverage an opportunistic value proposition. Reading and responding to customer preferences and changing habits, moving quickly into and out of inventory categories and demand drive this retail giant. Retail requires newness and freshness. Your inventory doesn’t age gracefully. You must be nimble. You must be acutely aware of what customers need and buy. You must also act boldly when you see opportunity, and cut your losses (i.e. mark down product) when you make a mistake. Incremental revenue is always your most profitable revenue. A large portion of your expenses are fixed in nature and as you add incremental dollars to the top line, you leverage the fixed cost infrastructure over a larger base, and more profit falls to the bottom line. Build-a-Bear is a retailer with incremental revenue as its secret weapon. Its entry item, an unstuffed bear or other animal, sells for around $15. But accessories and add-ons are merchandised with abandon, and the average ticket for customers is well north of $50. It is all the incremental purchases, typically several small items, that drive the economic engine of Build-a-Bear. HME retailers must embrace the search for incremental dollars. That next dollar presents one of the most compelling opportunities in HME. The key metric is average revenue per customer. Increasing average revenue per customer fuels your P&L and is a key to your retail strategy. Retail professionals continually shop their competition. They look for ideas, best practices and now to get an edge. As you explore retail, whether store-based or categories and programs not reimbursed by third parties, look around. Observe the practices of leading retailers and use it to maximize your success and help your customers.
