Problem Solvers

The Finer Points of e-Commerce

Once providers embrace the right perspective about e-commerce they'll see the learning curve isn't that steep.

• By David Kopf
• Dec 01, 2016

The value of e-commerce is undeniable. 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 support retail transactions online?

The numbers are undeniable. 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. Moreover, 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. And if you add in the fact that the 78 million-person Baby Boom demographic — which is Internet savvy and regularly purchasing items online — is retiring at the rate of 10,000 people per day, it’s hard for HME providers not to sit up and take notice of e-commerce as it relates to retail DME sales.

But 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, who adds 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?

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 says. “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 December 2016 issue of HME Business.