RETAIL STRATEGY: Is it frustrating you?
Most every hospital in the U.S. has or is considering retail on their campus in some form. Healthcare Retail is real. It's profitable. It's patient driven. And it's here to stay.
The problem is, for many hospital administrators, the execution of retail is not their core business. Yet, retail has wisely found its way into most strategic plans. So the question becomes: Where do you start?
How does a multi-hospital healthcare system make retail successful? What are the necessary steps? And, as the one leading the charge, how do you even get your head around it?
One word: Infrastructure. Read on to learn more.
Kind regards,
Mindy Thompson-Banko
Traditional vs. Nontraditional retail
One of the most important factors for healthcare systems to recognize when getting into retail is this: There is traditional retail and nontraditional retail.
Traditional retail is how most people view retail. It's the store down the road that sells clothes. It's the shopping mall that leases space to multiple vendors, each selling their own products. It's the website that sells books. Big or small, one store or many, the core business of traditional retail is retail.
Nontraditional retail has a different mission. Airports offer retail stores on site but their main purpose is the transportation of people. Restaurants may sell prepackaged food on site but their main purpose is the preparation and service of food. A healthcare system may offer stores on campus but their purpose is to cure the sick and provide for health and wellness.
Hospitals, clinics and healthcare systems operate within a nontraditional retail environment. A hospital owns 'the house' - the real estate, the structure, the facility management - but it's not a shopping center with the sole purpose of providing cash and carry retail products and services. Because of this fact, it's not used to thinking like a landlord with tenants - trying to use space in new ways to attract and serve customers while measuring each square foot based on profitability.
The Typical Retail Business Models
Think about retail within hospitals today. For those who have pursued it, the retail models are fairly similar:
Retail Model #1: Lease
This model typically represents lease arrangements, such as a pharmacy, food/coffee services or an optical shop. A hospital, for example, using this type of business model, might lease out 1,000 square feet within their facility for a company to sell eyeglass frames next to their optical department.
Retail Model #2: Gift Shop
The next business model introduces a gift shop. Typically, it's run by volunteers with limited professional retail experience. Convenience items, such as candy bars and magazines, are sold within the shop for employees along with flowers or smaller gifts for visitors. The gift shop is mission based and not an integral part of the hospital's business.
Retail Model #3: Insurance reimbursed
This is the HME (Home Medical Equipment) and DME (Durable Medical Equipment) world, which is closely connected with the pharmacy. Though these products are retail and customer focused (i.e. walker, wheelchair), they are insurance reimbursed. Other health related products (i.e. aspirin, cough medicine) typically found within pharmacies are nonreimbursable, cash and carry.
Retail Model #4: Branded leasing
If a healthcare system has reached this level of retail, they are leasing out space to branded retailers, such as Starbuck's, Whole Foods (organic groceries), MinuteClinic, or spa centers. Retail choices still support the mission of the organization expanding patient care and providing convenience, through products and services, to patients, caregivers and staff.
Many healthcare systems, when considering retail, tend to think in terms of these models. This is their experience to date or the experience of the healthcare industry.
Here's the problem: None of the above retail business models have an overarching business infrastructure devoted to managing retail, so operations are fragmented, costs are duplicated and, often, customer needs are unknown and unmet.
The missing link is infrastructure: a Retail System
Have you ever had trouble collecting or handling cash copays? Have you told your patients not to bring money? Have you tried to sell massage services or other cash services and stumbled?
Retail success requires infrastructure. That's the missing link. At Simply Retail, we call this infrastructure the Retail System.
A Retail System is the business foundation for all present and future retail activities. Create the Retail System and not only are your present retail efforts more efficient, but whatever you envision for the future more onsite stores, kiosks, ecommerce, full or miniproduct catalogs, concierge services, executive health services, at home assistance can be introduced with professionalism. Retail becomes an annuity.
Typically, a Retail System is organized as a separate business unit within the larger healthcare system. Management, guided by the Board, chooses the appropriate legal and tax status and reporting procedures. Led by a Retail Director (though a Retail Champion or retail advisory team may jumpstart the initiative), the Retail System provides the necessary policies and procedures to direct and manage multiple concepts within the organization.
Rather than each retail concept operating as a silo, a Retail System coordinates all the retail details systemwide, improving efficiencies and developing economies of scale. The learning curve is established up front so, as new retail concepts are considered and rolled out, the wheel is not continually reinvented.
For example, rather than each concept creating its own overhead and way of doing things, investments are made in five primary areas. This defines the Retail System:
- Retail Management, including executive leadership, legal and tax oversight, strategic planning
- Retail Operations, including Point of Sale (POS) systems, sales planning, hiring and training
- Retail Products, including merchandising, buying, inventory receiving and tracking
- Retail Properties, including store design, fixturization, displays and signage
- Retail Marketing, including point of care integration, branding and messaging
| RetailCapabilities | Retail Channels | Retail Concept Types |
Management
Operations
Products
Properties
Marketing
| Brick-and-Mortar Stores
Services
E-commerce
Catalogs | Family Health Store
Mom & Baby Shoppe
Heart Shoppe
Oncology Shoppe
Rehab Shoppe
Optical Shoppe
ER-To-Go
Pharmacy & General Store
Gift & Floral Shop
Seasonal Kiosk
Community Kiosk
Medi-spa |
A Retail System allows hospitals to proceed with retail strategically. The business infrastructure is in place and procedures are integrated throughout the entire system, so operations can be managed professionally.The strategic crossroads
One more point: In addition to creating a Retail System, many healthcare systems today are choosing between three strategic scenarios:
1. Serve existing customers only.
Many hospitals are choosing to introduce retail or include more retail within their existing facilities. This means focusing all retail efforts on serving the existing, captive audience.
2. Building and developing a new medical complex.
Many healthcare systems are taking an entirely new approach, addressing changing market conditions. Following their own due diligence, they are creating new 'destination' medical campuses with a heavy focus on outpatient services. Retail is included within these campuses as a traffic driver.
3. Both.
Depending on available capital and timeframe required, both scenarios may be pursued. Whatever scenario is chosen, it's necessary to first create the Retail System. The business infrastructure must be built before tactics are executed.
Next steps
It's also wise to roll out retail in phases. Considering how many details are involved, it's not possible to do everything at once.
If someone suggests that or promises the moon, don't believe it.
We define these phases or stages as 'retail channels'.
Phase 1: Stores
Start with brick and mortar stores so you can learn and implement the point of sale system, inventory management, staffing and other issues. Opportunities vary by system. You may choose to outsource all or some stores or find it's better to grow existing capabilities. (i.e. If you already have quality food services in place, one idea might be to expand with a coffee + bakery kiosk.)
Phase 2: Services
This is service related retail, such as executive health screenings, concierge services, dermatology, spa services, at home assistance services. The focus is more labor intensive.
Phase 3: E-commerce
Products and services can then be introduced and sold via the hospital's website.
Phase 4: Catalogs
Products and services can also be introduced and sold through product catalogs, large or mini.
By phasing in retail, it allows the Retail System to gets its footing. There will be trial and error. Each of the channels above are big undertakings requiring seamless integration and fulfillment. The opportunities for improved customer service and satisfaction are enormous.
Want to speak with us directly?
Simply Retail is the nation's leading provider of Healthcare Retail. Based in Minneapolis, we are a retail consultancy and management company specializing in retail planning and implementation for the healthcare environment.
To learn more about Simply Retail and our services, please call us at 612-659-8200, x12 to schedule a Meet & Teach presentation. .
