Getting up to speed on home health care products can be a costly, complicated proposition for supermarkets, but the profit potential is there for retailers that get it right
As anyone who's ever been on crutches can attest, those first few steps with the new equipment can be awkward.
Similarly, the home health care products business — including walking aids like crutches, canes and walkers; equipment like pill boxes and cutters; and technical items such as diabetes monitoring supplies — might take some getting used to as well. Supermarket pharmacies intending to sell these items can expect to encounter challenges ranging from staffing to space allocation to meeting onerous government standards and expenses, experts say. But those willing to learn the ropes will be rewarded with participation in a large and growing category, increased loyalty from their customers and the chance for strong profit margins for many items.
Various studies peg the U.S. home health care business at $4.3 billion to more than $7 billion annually, depending on the range of categories included. According to the Freedonia Group, it's a market that is growing around 6% annually, with breathing assistance products, mobility aids and patient home monitoring products leading the growth.
Behind that growth is an ever-increasing field of end-users, including a Baby Boomer generation churning out thousands of new retirees daily, and their trends toward maintaining a healthy lifestyle and taking health decisions into their own hands. That group also includes millions who consume home health products not for themselves but for elderly family members, sources said.
“The fact is, 6,000 Baby Boomers are retiring every day,” Bill Popomaronis, vice president of the National Community Pharmacists Association, said in an interview. “Most of them want to remain independent for as long as possible, many of them are weekend warriors dealing with sprains and bruises, and more often than not they want to stay in their home for care and require aids to daily living to do so.”
Popomaronis in his role for NCPA encourages pharmacists to partner with independent grocery stores as a means to grow their respective businesses. He said he sees home health equipment as a considerable growth category in pharmacy.
“Just the sheer magnitude of the Baby Boomers makes [home health care] a significant opportunity for pharmacies, whether or not they are located in supermarkets, to provide convenient access to durable medical equipment.”
Despite those signs of growth, supermarkets and supermarket pharmacies have historically been cautious about entering the home health products field. And not all of their attempts have been successful, according to Jack Evans, a Los Angeles-based consultant whose firm, Global Media Marketing, specializes in retail home health care. In an interview with SN, Evans maintained that no one company — in any retail channel — has developed the optimal combination of home health product knowledge and retail savvy.
Evans said home health products — even “cash” products sold off the shelf — tend to require salesmanship and attention to move.
“The main obstacle is that most of these products can't be sold off-the-shelf without having someone to explain it to them. It really calls for a boutique approach to educate the customer, to find out what they need, and show them what it is,” Evans said. “A customer can come in and buy something simple like an orthopedic support or a compression stocking, but even those can be confusing items. But walkers, rollators, bath chairs … these are cash items people don't necessarily know what to pick.”
Stores can sell these items, however, by attending to the needs of the customer. Today, said Popomaronis, good home health merchants are realizing that it's the home care provider — and not the patient, necessarily — who needs that attention at retail.
“There's a hidden group out there — I call it the sandwich generation — comprised of caregivers,” he explained. “It's the person who's taking care of the needs of parents in their 80s who live with them, and in addition is raising teenage children. They are stuck in the middle, and it's a tremendous stress.
“Pharmacists that can identify that caregiver, and help them, is the key,” Popomaronis added. “The [caregiver] may not know how to properly lift a person. They don't know about end-of-life decisions. You need to identify the needs of the caregiver to properly dispense durable medical equipment.”
If that all sounds too intense for a supermarket, it often is — not to mention the added complexities of complying with what some feel are onerous and constantly shifting regulations concerning those products requiring a prescription (see “The Politics of Certification,” this page). Typically, sources said, food retail pharmacies eschew those items requiring a prescription and focus instead on sets including a mix of OTC items.
“Many supermarket companies will have a 12-foot planogram, maybe 24 feet, including a smattering of retail cash products they can buy as OTCs,” Evans said. “That could be a designer cane, a rollator, two feet for orthopedic supports, two feet of compression, and some bath safety and personal care items. The value to the chain is that it's still offering a profitable product. You compare that to paper towels and toilet paper, and you're looking at a profitable front-end category.”
According to Evans, 12-foot planograms doing cash sales can do around $400 per square foot a year with a 40% profit margin. But with a commitment to sales space and sales help, “they can do better than that,” he maintained.
“The thing about medical equipment is, the more you display, the more you sell,” he said. “And the ideal display is to take out a gondola and make a valley. Then it can become really profitable and you can push $800 a foot.”
Matt McElduff, president of Carex Health Brands, Sioux Falls, S.D., said his company's products — typically cash items like canes — don't tend to turn as quickly as typical supermarket items but carry attractive margins and tend to draw the same buyers who are already in the stores. “A typical caregiver is a woman in her 40s or early 50s, who is shopping for her kids as well her parents,” McElduff said. “If they can find more of their needs in one location, it bodes well for the retailer.”
Evans said the success of large displays was proven by the pioneering efforts in the category from former supermarket operator American Stores, which developed a successful “Home & Health” concept in its Osco and Sav-On drug chains. These departments were even more successful in limited trials when moved from the pharmacy departments into Albertsons stores at select locations following American Stores' acquisition by Albertsons. (Albertsons' subsequent sale landed the Osco and Sav-On brands with CVS, which continues the program, Evans said).
“The hardest thing for a chain to understand about this category is that it's not just putting things on a shelf but making room for it on the floor,” he said. “I used to see stores that wouldn't put medical equipment on the floor but on top of the gondolas.”
Tim Purser, business director of pharmacy for United Supermarkets, Lubbock, Texas, said United does a limited business with home health products, including testing strips, meters and nebulizers.
“What made it more difficult for us is the legislation that came down and requirements for surety bonds and requirements that have tried to prevent fraudulent activity. From our standpoint, we have supported legislation to not limit access to care,” Purser said. “Our issue has been to try to provide services to customers without it being completely cost- or legislatively prohibitive.”
For Stater Bros. Markets, San Bernardino, Calif., home health products have become part of an integrated pharmacy offering that's helped build sales and customer loyalty, said John Acosta, vice president of pharmacy for the 167-store chain.
Stater, which gained accreditation from the Centers for Medicare and Medicaid Services (CMS) to sell durable medical equipment, merchandises the products in pharmacy and in the front of the store and saw sales in the category improve by more than 50% last year, Acosta said.
“Our stores are unique in that we have got a pharmacy and a pretty extensive OTC section in front of the stores. We have five gondolas and, adjacent to them, endcaps devoted to DMEs. We carry five different types of DME sets, including one endcap of doughnut pillows, one endcap with apothecary — pill-cutters, droppers and those things. And we have a wall unit with Ace bandages, urinals and the whole Carex line schematic.”
Acosta attributed the sales growth to better execution within the category, particularly stock replenishment, and to doing a good job elsewhere in pharmacy, with prescription volume rising behind $4 generic and free antibiotic programs, he said.
“Initially we had outside vendors who wanted us to do their DME offline; in other words, they wanted to supply us with the products, and bill for the products through their facility, and all we would do was provide the patient. Some other chains have done it that way, but it that wasn't optimal for us,” Acosta explained. “We'd lose contact with that patient, and so we kept it in-house, even at an additional expense.”
James Gabriele, partner with Henry Rak Consulting Partners, Chicago, said he sees health care products, particularly products for glucose monitoring, as a growth engine for pharmacy. “That's a segment of the market that's doing pretty well because consumers are taking better care of themselves at the direction of their doctor. This is an opportunity for supermarket pharmacies,” he said.
But Gabriele said he worries that a move toward centralized health care — and away from a burgeoning “patient-centric” health care model — could complicate things.
Evans noted that not all attempts to sell home health goods at retail have been successful. Several years ago, he helped to launch a program at Wal-Mart Stores that didn't meet its intended goals.
“They didn't get the crossover,” Evans said. “In chain drug, 15% to 20% of patients with scripts also need home health equipment, so they have that need there. But a mass merchandiser is not capturing the pharmacy customer; you're trying to sell another department within a mass merchandiser. So the product has got to be cheap, and unfortunately, it doesn't work that way.”