Creating a Retail State of Mind
A retail provider explains how HMEs need to rethink their cash businesses.
- By Wayne Slavitt
- May 01, 2017
When competitive bidding first went into effect
in 2013, many HME retailers believed the draconian changes forced upon
them would be reversed or at least substantially modified. After all, how could
they sustain an average of a 46 percent reduction in reimbursement rates? The
industry has pushed for competitive bidding relief, and yet, most of the initial
changes implemented with competitive bidding remain in effect today.
In the meantime, competitive bidding fostered the growth of HME retail
sales. Specifically, the bid program created two types of retailers. The first type
won contracts under competitive bidding. However, as the new reality of much
lower margins took shape, “We’ll make it up in volume” became the goal for
these retailers — which was rarely achieved. The second type of retailer lost
contracts with Medicare and saw large swaths of their revenue dissipate overnight.
A new reality that required them to adapt or die. And yet, why have so
few retailers made the changes necessary to survive in a non-Medicare world?
A Non-Retail Environment
Up until 2013, HME retailers who accepted insurance (which was mostly all
of them) never felt a real need to offer a retail friendly environment to their
customers. After all, their real customer was not the senior who received
a wheelchair, but instead the payer, such as Medicare. Product choice was
decided by the payer, relieving the retailer from having to worry much about
merchandising. In fact, most Medicare-dependent HME retailers never had to
worry about much related to running a true retail business.
Let’s take a look at the average HME retailer that I have observed. Let’s
explore the following aspects of their businesses:
With Medicare as your true customer, most HME retailers
never saw a need to locate their stores in actual retail centers. After all, why
would you pay for retail space when your end-users (i.e., “customers” in a retail
business) rarely come into your store? That’s why most Medicare-dependent
retailers rent commercial space with a tiny showroom and a lot of warehouse
space. Once a retailer decides to focus on cash sales, converting a Medicare-dependent
location one that focuses more on retail is difficult.
Due to their showrooms’ space limitations, most
Medicare-dependent retailers display a small array of products, often
presented to maximize revenue per square foot rather than a positive retail
experience. Not only is merchandise often displayed in a non-retail friendly
manner, it is often dirty and dusty, and not very appealing to the customer.
Retailers focused on an insurance model tend to concentrate on products
that are reimbursable. Unfortunately, products provided by Medicare,
such as wheelchairs, walkers, commodes, and rollators are not feature-rich,
best-in-class products. What Medicare-dependent retailers offer are just
the basics and rarely feature merchandise that provide real solutions to
Personnel hired to work in an insurance-focused store are
trained in such tasks as order pulling, warehousing, order processing, and
billing. While these skills are essential for an insurance model, they are
for a cash retail store.
• Customer service
To provide great customer service, you first need to
know who the customer is. For insurance-dependent providers, the customer
is the insurance entity. The end user has little or no monetary responsibility
and doesn’t have to be sold to. And since the delivery of merchandise to the
end user is not dependent on the quality of the service provided to the end
user, the bar for customer service is set very low.
A Retail State of Mind
I have consulted with many companies interested in converting their existing
business, or in creating a new business based on a 100-percent-cash model.
Let’s say you are finally ready to convert your HME business to an all-cash
model. You’re tired of lower margins and realize you can no longer sustain
running your company as you have in the past. Where do you begin?
If you currently have a location that is not in a retail center,
the best thing to do is to relocate. But, what if that is not possible, for any
number of reasons, including time remaining on an existing lease or the cost
of moving? What can be done to convert this store to a retail destination?
First, you will need to create an adequate amount of retail space. For Mobül,
that ideal amount of retail showroom space is approximately 3,500 square feet.
The store frontage should be all glass, if possible. If the ceiling can be raised to
at least 10 feet, do it. This will open up your space and create a better visual for
your customers. Also, consider outdoor signage, not only on your building, but
also on the street that will attract drive-by traffic.
Now that you are transforming your business into a true retail
enterprise, you need to think like a retailer. You must constantly ask yourself,
“How can I attract people to come to my store?” Each market is different, but
consider a number of advertising channels, including print, cable and local
television, radio, and direct marketing. Under the broader marketing umbrella,
explore the possibility of building a referral network with local doctors, hospitals,
clinics, senior centers, and pharmacies. And, while this may be a novel
concept for many, don’t overlook the possibility of digital marketing.
More and more HME manufacturers are catching
onto the retail friendly movement, by offering retail-focused packaging and
point-of-sale displays. These retailers, such as Golden, Nova and Stander, can
provide merchandising suggestions, including plan-o-grams, banners, and
other attractive ways to draw in customers. Aside from vendor help, you will
need to invest in great-looking fixtures and displays.
The bigger merchandising challenge is product selection. Moving from a
Medicare model to an all-cash model requires a broad expansion of inventory.
Carrying just one or two rollators will no longer work. Adding more featurerich
products at higher price points broadens your appeal to more customers.
And yet, it is expensive and risky. What if they don’t show up?
You can teach skills to most people, but you can’t alter someone’s
attitude. If you have kind and caring employees, retain them and start to teach
them how to sell at retail. Bring in trainers, if necessary.
• Customer service
Make the necessary pivot to providing top-flight
customer service to each and every person who walks into your store. Treat
people with care and kindness.
The Next Step
If converting to an all-cash model seems overwhelming, you are starting to
understand it. The process takes detailed analysis, careful planning, and a
commitment to making it successful. It won’t happen in a couple of weeks or
months. Consider working with someone who is already successful in this
space. And know that a lot of it is attitude and having a retail state of mind!
This article originally appeared in the May 2017 issue of HME Business.
Wayne Slavitt is the founder and CEO of Mobül: The Mobility Store, which is an all-retail mobility provider business based in Long Beach, Calif. He also sits on the HME Business Editorial Advisory board.