Opinion: Retail Competition | October 2015 Hearing Review
Mass retailers are finding hearing aids to their liking
For mass retailers looking to tap into health conscious seniors and Baby Boomers, hearing aids are a dream come true.
It is no secret that retailers have discovered hearing aids in a big way. Large chains such as Costco, Walmart, and Sears have been selling hearing aids for years. Traditionally, these companies have had relatively few outlets and their activities had only a modest impact on the overall hearing aid market. However, in recent years, hearing aids have increasingly become the darling of Big Box retailers in the United States.1,2 This article looks at 10 factors contributing to this huge increase.
1. Profit is king. Hearing aids are still considered medical devices and as such are sold at a premium. When retailers began to treat hearing aids as consumer products, these devices were (and still are) priced much higher than any other electronic devices. By lowering the selling price to the consumer that thinks of hearing aids as being outrageously expensive, retailers are able to attract a large market that still sees them as high-priced medical devices.
This has resulted in a huge profit windfall for retailers. By purchasing the same hearing aids fitted by the private market at a deep discount, retailers can sell them cheaper and make a terrific profit margin. In a consumer retail industry that survives on a 1%-2% profit margin for some goods, the high profits generated from hearing aids make them irresistible.
2. Space is queen. High profits are only one reason retailers love hearing aids. But the physical space required for hearing aid retail is probably not far down the list. For example, an optical department requires a large floor space with several fitting stations and hundreds of pairs of frames on the walls; in contrast, a hearing aid department occupies a fraction of the space. An unused corner in the store can be outfitted for hearing aids with an 8’ x 8’ area including a booth and storage. No large inventory is required, and each customer is seen individually—eliminating the need for several fitting stations.
3. Overhead is low. Unlike an optical department that needs to have the services of an unaffiliated Doctor of Optometry, opticians, and several staff salespeople, a hearing aid department can operate quite nicely with one hearing aid dispenser and perhaps a clerical person (space permitting). Although fitting a hearing aid requires a license in most states, obtaining a license is relatively easy. There are usually no advanced educational requirements for licensure. In New Jersey, an applicant must have graduated from high school and be of good moral character.
4. Competing for senior adults. One of the key demographics that Big Box retail wants to dominate is senior adults. We’ve all seen the statistics about the buying power of the age 65+ crowd, but it should also be acknowledged that Big Box is doing whatever it can to accommodate this important segment in terms of access, mobility, sitting and eating areas, cost-conscious products, free samples, etc. Low-cost hearing aids and other healthcare products are a natural fit and add value for their members and/or patrons.
5. Help from accomplices. Retailers would not have success selling hearing aids if it wasn’t for the role of hearing aid manufacturers. Most are tripping over themselves to get their product into retail stores—often at the expense of their regular customers, the small private practices.
At first glance, selling hundreds of thousands of hearing aids at a lower price seems like a great idea. However, as more manufacturers get into the game, mass retailers are quickly understanding that they have a home-court advantage. As a buyer purchases more of the supplier’s goods, the buyer can dictate the price and terms. It is a common practice for large companies to tell smaller suppliers to sell to us or “we’ll go elsewhere.” Some are famous for it, and even reach into the distribution/transportation of their suppliers’ products.3
In the meantime, the hearing aid manufacturer’s executives who came up with the plan to sell in bulk have moved on. This is especially hazardous to hearing aid companies that are small in the grand scheme of things or not diversified enough in their distribution. Beyond depressing average selling prices (ASPs), if a large buyer changes suppliers, it can have disastrous effects on the manufacturers’ bottom line and stock value.
6. Little or no marketing required. Large retail stores host hundreds and even thousands of shoppers daily. By placing a hearing aid department in a conspicuous corner, the traffic alone will generate sales. There is no need to offer any kind of special, purchase newspaper ads, or send direct mailers. If a retailer does advertise by mail, the hearing aid department is often included as part of a larger piece.
7. Hearing aids are easy to buy. Anyone over the age of 18 can buy a hearing aid. Except for a medical waiver that almost all consumers sign, hearing aids are arguably easier to purchase than cigarettes or beer. Of course the FDA’s “Red Flags” are enforced, but few customers have, or report, anything that would stop them from purchasing a hearing aid. Since the advent of RIC instruments, most customers can be fitted on the spot with a minimum of programming. A quick field test by walking around the store often results in an on-the-spot purchase. There are no impressions to be taken, earmolds to fit, or hearing aids to modify. If the customer doesn’t like the hearing aids, there is a full refund with no questions asked.
8. Testing is always free. Unlike vision tests charged by a doctor of optometry, all of the retailers offer free hearing tests. They use some type of disclaimer that the “hearing test is for the purpose of selecting a hearing aid and is not an audiological evaluation,” but few people pay attention to the fine print.
9. Retailers offer good pay. The person hired to fit hearing aids is considered a salesperson. When compared to vision services, a doctor of optometry would be considered a professional whereas the doctor of audiology, if employed as a hearing aid distributor, would still fall into a salesperson’s category. Of course, in a tight market, the retailer’s wages can exceed what is paid in the private sector, and most retailers offer generous benefits to attract and retain their employees.
10. An inexhaustible market. With about 30 million Americans having high frequency hearing loss in both ears, and only 20% market penetration for hearing aids, the hearing care market is a retailer’s dream. And it includes Baby Boomers who are hearing impaired and addicted to shopping in Big Box stores.
Potential Roadblocks for Big Box Retail
Of course the buyer’s market could become saturated, but that would take time. The most likely roadblock to mass retailers is availability of professional staff. If state licensing laws are tightened to require more training and education to obtain a dispensing license, it could have a negative impact on acquiring staff. If retailers have their lobbyists fight to reform state licensing laws, they might be able to reduce or eliminate the need for hearing aid salespeople to obtain a license.
As the non-retail professional market is impacted by the increase in retail sales, professional associations might move to restrict retail hearing aid sales by requiring an audiologist’s involvement, as the optometrists have done with eyewear or present some other plan to control fitting hearing aids. Unfortunately there is no unified audiology professional group, and the fragmentation resulting from the three associations (ASHA, AAA, and ADA) doesn’t help to develop a working strategy. Perhaps the best group to find a way to control the way hearing aids are fitted, if any could control it, would be the International Hearing Society (IHS). This is not a fragmented group, and it has already taken steps to develop a more comprehensive national examination for hearing aid dispenser license applicants.
To summarize, large retailers are not about to abandon hearing aids. The devices are far too profitable with a market that is inexhaustible. Hearing aids take up little space and require minimal formal training to fit. They are the best things to come along in years.
Robert DeVita president of DeVita-Friedman Associates licensed real estate brokers and developers assisted in providing information for this article.
1. Hopkins J. Wal-Mart’s influence grows. USA Today. January 29, 2003. Available at: http://usatoday30.usatoday.com/money/industries/retail/2003-01-28-walmartnation_x.htm
2. Stock K. Why Costco rules in hearing aids…and gummy bears. Bloomberg Business. July 11, 2013. Available at: http://www.bloomberg.com/bw/articles/2013-07-11/why-costco-rules-in-hearing-aids-dot-as-well-as-gummie-bears
3. Tice C. Wal-Mart’s endgame: Take over shipping from suppliers killing their markup as it goes. CBS Moneywatch. May 5, 2010. Available at: http://www.cbsnews.com/news/walmarts-endgame-take-over-shipping-from-suppliers-killing-their-markups-as-it-goes
Granville Brady, AuD, is a well-known author and educator, and has owned a private audiology practice in Clifton and East Brunswick, NJ, for 30 years.
Correspondence can be addressed to HR or Dr Brady at: [email protected]
Original citation for this article: Brady G. Top-10 reasons why big box retailers have a love affair with hearing aids. Hearing Review. 2015;22(10):20.