Online retailer Betty Mills can spot a good business opportunity when it sees one, which is why seven years ago it began testing the healthcare equipment market to see if consumers and small businesses would buy medical supplies such as bandages, canes and walkers online.
Once it began selling those products online, sales followed. Today, healthcare equipment and supplies is Betty Mills’ biggest and fastest-growing segment. While total web sales for Betty Mills grew about 13% to $14.8 million in 2017, healthcare product sales grew nearly five times faster, reaching $8.6 million. “Our future is squarely focused on healthcare,” says Betty Mills CEO Victor Hanna. “It will be 75% of our business this year.”
As consumers spend more out-of-pocket on healthcare and take on greater responsibility for managing their own care, they’re finding themselves buying more medical equipment and supplies, and many are going online to do so. And that increase in consumer spending is opening up new e-commerce opportunities for web merchants willing to take on the complexity of selling healthcare products online, say e-commerce analysts.
“Healthcare is an e-commerce market with a lot of growth potential,” says Kate McCarthy, a Forrester Research Inc. analyst. And it’s already a sizable market; consumers spent an estimated $12.0 billion on online healthcare equipment and supplies in 2017. Those numbers are based on an analysis of more than 200 healthcare equipment and supplies merchants by Internet Health Management, a sister publication of Internet Retailer. Either web retailers disclosed their web sales or retailer estimates were formed by Internet Health Management based on metrics that included monthly visits, average ticket and conversion rate.
Betty Mills is typical of the web merchants that target healthcare equipment and supplies as a new source of online shoppers and sales. It now carries more than 50,000 SKUs in more than a dozen product categories that range from briefs and under pads for incontinence to test kits and specimen collection jars for laboratories and medical offices. Betty Mills expects that vast array of products will help grow its healthcare product sales another 17.6% this year to more than $10 million. That same growth scenario is playing out for scores of other online retailers, including Amazon.com Inc., which is selling medical equipment ranging from beds, wheelchairs and blood pressure cuffs to healthcare supplies such as bandages, wraps, heating pads, and other specialty and over-the-counter products.
Look across the broad spectrum of retailers selling healthcare-related products and you’ll find a wide array of retailers. There are giants such as Amazon, Walmart Inc. and Target Corp. and big drug store chains such as CVS Health and Walgreen Co. There also are a number of smaller niche merchants, including Medex Supply, Blowout Medical LLC, Overstockdrugstore.com, and others that sell medical equipment, and online retailers such as Perkins Medical Supply, Volusia Medical Supply and Reliable Medical Supply Inc. that sell healthcare supplies.
Consumers are shopping online more for healthcare products because they are paying more out-of-pocket for all forms of healthcare including for products, services and treatments outside of hospitals and doctor offices. Last year, the average consumer spent about $9,596 on all forms of healthcare, up 24.6% from $7,700 in 2007, says the Centers for Medicare and Medicaid Services.
“We are an aging population spending more on canes, walkers, glasses, supplements and a wide variety of other products as we each personally manage more of our own health and wellness or become care givers at home for our families,” says Gene Alvarez, Gartner Inc. vice president and e-commerce analyst. “A lot more of that buying will happen online.”
Not surprisingly, Amazon is the largest online retailer in the category, having sold $2.0 billion of healthcare-related products last year, according to Internet Health Management estimates. Even so, healthcare sales represent only about 1.3% of Amazon total 2017 e-commerce sales that include sales on its site through its marketplace.
Amazon currently has more than two dozen medical supplies categories on Amazon.com, and the categories are extensive, ranging from suture thread and stethoscopes to wheelchairs and over-bed tables. And the online retail giant reportedly is ready to become an even larger medical supplier by selling to bigger buyers such as hospitals. Amazon declined to comment if—or at least when—it will sell directly to hospitals—although published reports say Amazon has been in talks with various unnamed health systems for several months about the feasibility of more hospitals buying medical supplies from the Amazon marketplace. Specifically, Amazon would create custom buying programs under the auspices of Amazon Business for each hospital beginning with outpatient facilities such as doctor offices, walk-in clinics, rehabilitation locations and other facilities.
A majority of hospitals and health systems would welcome the world’s biggest online retailer diving deeper into healthcare, according to a new survey of 152 hospital CEOs, materials managers and related executives with supply chain, e-commerce and procurement responsibilities by Reaction Data, a healthcare research firm. The survey found that 62% of survey respondents also would welcome Amazon selling medical supplies on Amazon and on its marketplace.
“Amazon is seeking to disrupt the traditional healthcare supply chain by selling everything from bandages to hip replacements to syringes,” says Jeremy Bikman, Reaction Data’s CEO.
To compete with Amazon–and find new ways to sell healthcare products to a growing base of consumers and business buyers—many web merchants are focusing on a specific product or market niche. For example, FSAStore.com sells 4,000 healthcare products consumers can purchase using only their pretax flexible spending account or Health Savings Account dollars. Health Savings Accounts, or HSAs, are individual savings accounts that allow consumers to set aside tax-free dollars to purchase medical products and services.
The 8-year-old FSAStore.com has grown at a compound annual growth rate of more than 80% over the past five years, although the retailer declined to break out actual sales. Late last year, FSAStore.com added a learning center to help educate buyers with an FSA or HSA account on which products they could—and couldn’t—buy online and how to better anticipate “use-it-or-lose-it” funds when year-end deadlines hit.
That type of information has become increasingly important as the number of FSAs and HSAs have grown. Today, there are 22 million consumers with an HSA or FSA account compared with just 6 million eight years ago.
“We’re unique because every product that we sell has to fit a medical care description,” says Jeremy Miller, the retailer’s CEO. “It has to be for the diagnosis, cure, mitigation or prevention of disease.”
Healthcare is a growing segment,but it’s also not a segment ideally suited for all web merchants, say analysts. Web merchants that want to sell online in healthcare need to be especially flexible in selling products that are in compliance with the Food and Drug Administration and patient privacy laws. They also may need to deal with red tape and bureaucracy from insurance companies and others.
In some niches, patients also need a lot of help buying a very specialized product they only need with the onset of a new medical condition such as for sleep apnea, a disruptive and potentially dangerous sleep disorder.
That’s where a retailer like CPAP.com fits in. CPAP is a highly specialized retailer that carries about 1,000 products, including 230 masks, 60 machines and 70 comfort items. Shoppers on the website often need help finding the right device, which is why the retailer has rolled out features such as a learning center with content including videos to answer equipment questions and queries about sleep apnea, says John Goodman, the retailer’s CEO.
Newer site features also include a replacement parts finder and detailed product pages with videos, product specifications, customer reviews and other specialized content. “Our customer is typically a male who’s 45 to 65 years old, and it is likely that they are newly diagnosed, or that they’ve been through and been disappointed by the traditional insurance-based system to receive CPAP,” Goodman says. “We have a ‘keep it simple’ focus and mantra—we’re going to do CPAP better than anyone else.”
Online healthcare retailers also need to deal with patients that need something almost immediately when they or their family members get sick. At Betty Mills, where the customer base is about 65% consumers and 35% healthcare business buyers, consumers generally need to shop and find products quickly, especially products for wound care and care at home.
“We have patients that have a condition so we do a lot in the incontinence space, in the wound care space, and in the dietary and nutritional space,” Hanna says. “It’s a cash market for people that have a need for an item, and they’re willing to reach into their credit card to obtain what they need for their medical condition or their family.”
With Nielsen Co. forecasting that consumers spent $34.3 billion on a range of over-the-counter products from cold medicine to contraceptives compared with $31.4 billion in 2011, the online sales of healthcare equipment and supplies will likely grow and evolve. “There are a lot of growth drivers in this e-commerce space,” Alvarez says.
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