E-Commerce: Where the Customers Are
The value of e-commerce is undeniable, but it's not surprising that some HME providers are unsure about the right approach. How can they get started?
- By David Kopf
- Mar 01, 2018
That cacaphony of mouse clicks you’re hearing? It’s legions of retail HME customers going online to learn about and purchase home medical products. They search, they scroll, they compare, and, if they find the right solution, they buy. Now ask yourself: how hard are you working to capture those clicks? Because you should be.
For HME businesses that have endured Medicare reimbursement cuts and audits, diversifying through retail sales has been a critical way to drive new revenues. And, as a provider ventures into the territory of retail sales, it’s hard not to notice e-commerce. Certainly e-commerce is a part of nearly everyone’s daily life, so why shouldn’t HME providers tap into that market?
The value of e-commerce is undeniable. According to a June 2017 Forbes article, online sales grew faster in 2016 than they had over the past three years and account for 11.7 percent of overall retail sales. More data: The Census Bureau’s tallied retail e-commerce sales in the United States for the first quarter of 2016, and it grew 3.7 percent over the previous quarter to a total of $92.8 billion. Lastly, market data company Statista.com reported that health-related spending constituted 5.6 percent of total e-commerce. That amounts to $5.19 billion in one quarter.
The net takeaway from all this? There is no stopping this sea change in how people get their product information and buy products — including HME.
More than anything, the market for retail HME is going online whether providers like it or not. In fact, more of the trepidation toward e-commerce might be from providers rather than patients. Seniors are only too happy to buy online, says Kamal Haddad, CPA, founder and CEO of Health Mobius LLC, a company specializing in e-commerce for the HME marketplace.
“Your existing customer is out there buying these cash sale items anyway,” he says, adding that most retail transactions are either happening entirely online or at least involving online research. “Only 20 percent of cash sales transactions are being conducted purely in a retail environment. So when you take a look at that 80 percent that’s either involving pure e-commerce or some combination of online research and in-sore sales, [providers] are missing out on 80 percent of the business. These customers are buying online.”
So what are some of the finer points that HME providers should consider when planning out their approach to e-commerce?
Three e-Commerce Approaches
At the outset, you must consider how you are going to approach e-commerce. That starts with defining the types of e-commerce business models. Christina Throndson, director of business development for VGM Forbin oversees all business development by VGM Forbin for websites, social media and online advertising. She outlines three basic models for e-commerce:
- Model 1, Awareness—an online presence meant to drive traffic to the physical location.
- Model 2, Convenience—a limited e-commerce presence designed to help patients purchase resupply items and other HME offerings online, but still in support of a physical location.
- Model, 3 Dedicated e-commerce—a business that is dedicated to e-commerce and is focused on engaging with and transacting with online customers on a regional, national or international level.
Throndson says that a loose estimate based on her experience with VGM Forbin customers, approximately 60 percent of HME providers with an e-commerce presence would fall into model 1, about 35 percent would be model 2, and only roughly 5 percent would qualify as model 3. That said, the overarching goal of each model is to grow sales. The difference lies in the digital strategy the HME provider implements.
Model 1 is a basic online presence that informs customers about what a provider offers and specializes in, and how clients can find or contact the business. It is more of a billboard than an interactive marketplace. The main goal of a model 1 website is to drive customers into the brick and mortar location in order to conduct business.
That said, truly succeeding at model 1 is much more involved than it sounds. Media to mining data analytics, creating, maintaining and measuring your customer pipeline is perhaps the biggest learning curve for online HME providers. The more a provider knows and acts on your data, the more successful it will be at building an online presence, regardless of the level.
Model 2 provides even more convenience to your customers. This model allows customers to explore more information online, such as individual products with purchase capabilities. Unlike model 1, model 2 can have elements of e-commerce, which is the ability to order, re-order and purchase online using credit cards — so customers don’t have to come in the store to get what they need. The online strategy is likely limited in its use of online marketing campaigns to bring in new customers. Like model 1, the focus is on a local presence, but you are giving convenience to current customers and potential prospects by letting them purchase online.
“You’re not only reengaging, but the thing that’s really changed in model 2 is the selling and fulfilling is,” Throndson says. “You’re still going to utilize your existing audience, you’re still going to push your local presence.”
Model 3 could incorporate some of the goals and tools of model 2, but the main focus is running a full-fledged e-commerce platform (purchase, fulfillment, online marketing, social media, database management, etc.) that lets providers re-engage with past clients and seek new ones. E-commerce HME providers must realize that they compete online with retail heavyweights, such as Wal-Mart and Amazon, so a strategy of adding value that differentiates the provider from big-box retailers is integral to success. It can also be difficult to re-engage as this model is often seen as a transactional (onetime) experience.
“Model three is really standalone,” Throndson explains. “A lot of times a different DBA with nothing to do with MediCare. It’s not so much about the local business, because while that can assist, a lot of times they can’t go hand in hand, or it’s at the least very difficult, especially if the local business billing Medicare because your pricing is a huge factor.”
In model 3, not only is visibility crucial — ranking high on search engines and advertising on a wide scale —but so too are pricing and legitimacy. Throndson explains that people will research as many as 10 different online retailers before making a decision, especially on items costing more than $100. And, if any of those online retailers that do not provide phone numbers, return policies and all the reassurances that online buyers expect, customers will click past. Make no mistake, model 3 is the territory of dedicated players.
Understand Scale and Marketing
HME providers have traditionally traded on a reputation for product and care expertise, and particularly at the local level. That has been their sweet spot and the value that they bring to the home medical supplies and equipment market. Most people would reasonably look at the global reach of e-commerce, and conclude that the business model would be very different. A provider could easily be bowled over by a massive surge in demand.
Bearing that in mind, providers should start out identify two or three products they can offer online and consider how well those products can scale quickly if the provider sees some initial success. Can they get enough from their vendors? Are their vendors confident they can maintain that supply? And then the provider needs to think of the next two or three or products that can translate well to e-commerce. This gives the provider the ability to ramp up.
But the provider can also control it reach through marketing. The Internet is not an out-of-control firehose when it comes to e-commerce; it is a spigot. By controlling your marketing, you can control your exposure.
Even though the web gives providers national reach, they can fly under the radar and limit their exposure. Since there are so many players online, if a provider decides to focus geographically, the rest of the world will likely see other businesses, while the provider is chiefly visible to just its local market.
In fact, online marketing can be as highly targeted as it can be global. So if a provider actively pursues an online marketing initiative that targets people in certain zip codes and on certain keywords around very focused types of medical equipment, then it will find those people and those customers will find that provider.
Adapting to Customers
Next up, providers must start to focus on how they will build out the actual e-commerce interface. This is where the provider really needs to do a deep dive with a service provider. Experience is everything. Just like in the way providers want their customers’ in-store experience to feel like any other brick-and-mortar retail establishment, they want their customer-facing e-commerce offering to feel like any other.
In tandem with that effort, the HME provider needs to work with its e-commerce vendor to consider how the payments are going to be handled and how they will work with the business’s back end. They want to address whether or not transactions will be strictly credit card handled via the provider’s existing processing company, or not, and how everything will be tied together in terms of accounting systems.
But there’s another important element of the customer experience: being flexible. Too many providers think in black-and-white terms when it comes to e-commerce — it either takes place in-store or online. Frankly, that line of thinking is off the mark. If anything, e-commerce can be a blend of both, Health Mobius’s Haddad explains.
Providers should ask themselves, why can’t e-commerce serve as an easy-to-access cash register? For instance, when a service tech is in the field making a delivery, that tech could assess the home and suggest some appropriate retail items kept in the truck. From that point forward, the tech could handle the retail transaction via an iPad or similar device.
“What we’re trying to do, even though we are an e-commerce company, is we’re trying to rephrase it into the cash register or point of sale in providers’ hands,” Haddad explains. “It’s more consistent with the retail mentality. It’s the same product at the end of the day.”
This article originally appeared in the March 2018 issue of HME Business.