Many distinguishing factors set apart hospital gift shops from other retailers. They operate with largely volunteer staffs in sensitive environments, merchandising to a captive customer base. If managed properly, these stores can both contribute to a hospital’s healing culture and be significant sources of revenue for their organizations.
To learn more, The Academy recently spoke with Cindy Jones, a nationally recognized hospital gift shop expert who publishes a biweekly newsletter that reaches over 1,800 managers. She spent over 30 years as a consultant, designing hundreds of stores across the country. Her conversation with The Academy has been lightly edited for clarity and content when appropriate.
The Academy: How would you describe the current state of the hospital gift shop industry?
Jones: I would say that it is growing. It is very common to have a shop that can gross $1 million. But you can have $1 million in sales and still have a very low net profit that you can give back to the hospital.
The Academy: Why is that the case?
Jones: Unless you have a professional—somebody with some retail experience—you are not going to be able to get a good bottom line. A college education should be on every single manager’s job description, but that is not always the case. For instance, at all the university healthcare institutions, you will find a professional hospital gift shop manager—one who has retail experience, one who knows that there are a lot of things that go into a good bottom line. The same basic retail axioms apply as if you were running one of the big flagship stores: the financial end, the merchandise piece, the inventory mix.
The Academy: Specifically, how does a shop that grosses $1 million not end up making a profit for the hospital?
Jones: Lots of hospital gift shops do not make any profit in this country, sadly. Let’s say you go out to a gift market and buy $20,000 worth of merchandise to fill up your shop. If you do not price it correctly, your profit margin will be less than the cost of operating the shop. You have got to be able to mark it up 50% or more, plus shipping. You can have a shop—and I’ve seen them before—where the manager is not experienced and goes to the market and buys tons of merchandise to fill the shop. Everybody is oohing and aahing. Then a year down the road, when somebody asks about the profit margin, it’s a big goose egg because of the operating costs.
The Academy: What is the general mix of the clientele at a hospital gift shop?
Jones: 80% of the customers for a hospital gift shop are hospital employees—not patients or family. You will get some sales from others, but nothing compared to all the sales you get from the captive audience, which are all the employees in the hospital who really aren’t able to leave the physical setting.
The Academy: What does the typical customer at a hospital gift shop look like?
Jones: I would say it is a female employee between the ages of 22 to 55.
The Academy: Who handles oversight of hospital gift shops?
Jones: One of the biggest changes I have seen is that five to ten years ago, there was a majority of volunteer managers. Now I would say it is almost up to 80% paid managers. These typically are hospital employees who report to the director of volunteer services.
The Academy: What is selling in hospital gift shops? Is that different from what is making the most money?
Jones: Candy will probably always have the most sales. But even though they have the highest sales in the shop, they have a lower profit margin. While it may not be the biggest profit maker, it brings people into the shop. So I always recommend putting candy at the very back so customers have to traverse all through the shop. Apparel and jewelry are selling and are two categories where the money is for sure.
The Academy: Who is doing the purchasing for gift shops and how? Are they volunteers who are receiving visits from vendors and going to markets around the country?
Jones: That’s right.
The Academy: What about purchasing networks, similar to the group purchasing organizations used by hospitals?
Jones: I think some shop managers like that discount, but it is not a huge amount of savings.
The Academy: What capabilities are important in a point-of-sale system?
Jones: You definitely want inventory control so you can make sure you know what is coming in, what is going out, and what kind of profit margin you are getting.
The Academy: What are the current challenges facing hospital gift shops?
Jones: One would be getting more employees into the shop. The loyalty programs help a lot, but also special sales and promotions. Some hospitals have electronic newsletters where they allow the gift shop to put a posting about a product or an event. Recruitment of volunteers is a real challenge. The shortage is acute, and it has been for a lot of years. And assortment of merchandise is key: You have to know your customer.
To learn more about one hospital’s gift shop practices, please see the May 2017 edition of Supply Chain Management, a monthly journal published by The Academy. Not a member? Click here to contact us about becoming part of the community!