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Star Legacy, Casket Supplier to Walmart, Looks to Partner With Funeral Homes in Employee Benefits Program

      
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 When news started circulating on Oct. 20 that Walmart had begun selling caskets through its web site, many in the industry recalled Costco’s entry in the funeral service a few years ago. Although much was made of the foray at the outset, the numbers didn’t really cause funeral directors to lose sleep at night.

What Costco’s decision to sell funeral goods did do was to reinforce the notion that funeral service practitioners no longer had a corner on the product market. The handwriting was already on the wall by then as third party retailers started springing up with increased frequency.

Today, when a behemoth like Walmart starts working your side of the street, things could get interesting, with the obvious reaction being this will cause further downward pressure on retail casket prices.

“Walmart represents a bigger threat than Costco since they have so many nearby locations,” said David Nixon, president of Nixon Consulting, Chatham, Ill.  “Even though their caskets are only online, the retail power is the largest in the United States.”

“This is not an overnight cataclysm, but a slow, inexorable chipping away of pieces,” said Alan Creedy, president of Trust 100, Raleigh, N.C. He sees Walmart’s entry into funeral service as part of ongoing trend toward unbundling.

To meet the challenge from third-party sellers, funeral directors responded by raising service charges thereby lowering their casket margin dependence. However, as a whole, the profession is still not heavily tilted in that direction.

According to Nixon, it is the service charge that is the most frequently compared aspect of funeral service. Firms such as Everest Funeral Package offer consumers funeral price comparisons, primarily on the service charge. As a result, there can be downward pressure on the service charge as well.

Mark Allen, executive director of the Casket & Funeral Supply Association, sees Walmart’s entry into funeral service as a good news/bad news situation. “The good news is that Walmart, like Costco, is putting the option of choosing caskets — domestically-produced caskets — in front of buyers. The bad news is that mass marketing a limited number of styles based on low pricing encourages consumers to regard caskets as a commodity rather than as an important way to add meaning and personalization to the memorialization process. Plus, it offers consumers yet another opportunity to skip the funeral director when planning a funeral.”

Prices of the Walmart selections range from $999 (for 18-gauge steel) to $3,199 (for a bronze casket).

Another Angle Unfolding

While most of the attention has been directed at Walmart, another angle to this story is unfolding. Supplying the caskets, urns, jewelry, flowers, and pet memorialization items to Walmartis Star Legacy Funeral Network, McHenry, Ill. Founded in 2006, the company supplies funeral-related products to end users and also assists consumers with planning and preplanning funerals.

In addition to Walmart caskets, Star-Legacy currently supplies urns for Costco, and offers a wide range of funeral items for the Internet site Overstock.com.

Since 2007, Star Legacy has supplied funeral product as part of Walmart’s employee benefits program, which is separate from Walmart online. Through this program, Walmart employees are able to purchase funeral goods, including flowers, urns and caskets, just like life insurance is a benefit.

It is the vision of Rick Obadiah, Star Legacy president and CEO, to create a network of funeral homes as part of benefit program Star Legacy provides to major corporations such as Walmart.

“Our goal is to create a major benefits program that has within it, as one of its components, a directory of affiliated funeral homes,” Obadiah said. “Because of our contacts in the mass market, we will be able to bring customers to that network.”

Other principals in the company include Joe Semon, director of manufacturing and product development, who has been in funeral service for 43 years; Wes Johnson, director of information technology; and R.J. Grissoff, director of sales.

Michael Kubasak, a funeral director and long-time consultant and industry speaker, serves as a consultant for Star Legacy Funeral Network.

“Walmart employs a couple million [1.5 million] people and those people have deaths in their family,” Kubasak said. “A part of that network is going to suggest an affiliated funeral home to the employee. That is going to be the key ingredient for a funeral home to realize additional business [from the network] through exposure to many potential buyers. Plus there will be the assurance to the consumer that I am dealing the best funeral home in the area.”

A funeral director advocate for many years, is Kubasak concerned that his affiliation with Star Legacy will be interpreted as a sign he is now a competitor? “At present there may be funeral directors who see Star Legacy as a competitor,” Kubasak said, who has been consulting with the company for about a year.  “However, as I, and other industry consultants and experts have been saying for years, funeral directors must learn how to emphasize the service aspect and not look for the majority of their profitability merely from the sale of a casket.”

It is here where Obadiah and Kubasak are hoping funeral directors look at the overall plan and not just on the online casket sales aspect.

“For us, we look at funeral homes, everybody in the industry as our potential partners, whether they are funeral homes, urn suppliers or casket manufacturers,” Obadiah said, “And our customers are the end users. We don’t view a funeral home as a customer to buy our product, of course if they want to, they can. And that distinction is what differentiates us.”

Obadiah expects the specifics about the network to be rolled out to funeral homes no later than June 2010.

Kubasak added that if funeral directors walk away thinking that Walmart is going to cause them to lose a casket sale, they would be missing the most important point. The key word here, Kubasak said, is network. “In a very short period of time, the network is going to be in place,” he said. “It is the network portion that has to excite the funeral director. It’s a great way for an independent funeral home to get their name in front of a lot of potential purchasers in their marketplace.”

Reiterating a point Kubasak made at many a seminar, “anyone can supply a box. In addition to Costco and retail casket stores, we know of churches that build and provide caskets for their members,” he said. “It is evident that anyone can supply a casket, but very few people or companies have the skill, the ability to provide the sensitive, caring service when a death occurs. Few are willing to make the investment in a facility and fewer less have the expertise and the experience and the know-how that funeral practitioners possess in dealing with death and helping say goodbye — not just a typical funeral but to really help people say goodbye in a meaningful way that may be entirely different from my father’s or my grandfather’s idea about what a funeral should be.”

According to Obadiah, Star Legacy is the “manufacturer of record” for the caskets. Kubasak said that all of the metal caskets are manufactured in the United States. All of the wood caskets, at present, he added, are imported from Canada. He emphasized that Star Legacy caskets are not imported from China or Mexico.

Product is shipped from one of four warehouses (Pennsylvania, California, Illinois, Tennessee) with locations in Texas and the Pacific Northwest expected to open by January 2010. “We have an arrangement with FedEx, because our goal is to be able to blanket the country with overnight delivery,” Obadiah said.

Look for a follow-up to this story in the November edition of the Memorial Business Journal

To subscribe to Memorial Business Journal, check www.memorialbusinessjournal.com for details. Sign up before Dec. 31 to take advantage of the Pre-launch Special Subscription Rate of $149.

Christine.Hentges's picture

Welcome to Reality

When this article was published, I received an influx of comments from people "outside" our industry, but who we work with on investments, trusting, etc. They understand our business, but really don't "get it" altogether. I found it interesting that they were concerned about our company's business over this supposed threat.

I hate Walmart and I know I can't be the only one that does. The people that generally shop at Walmart are shopping for merchandise that they need everyday, for a good price. To walk into Walmart and suddenly see that there is a great deal on caskets is really not something that we need to be concerned about. There are savvy consumers everywhere and if they are looking to make a casket purchase, perhaps they may see the "bargain" they will get from Walmart, but likely there isn't a threat anywhere.

What intrigued me most about this article - although it was not stated in the one above, but was in other publications - was the reiteration of the fact that funeral homes cannot charge additional fees if the casket is not purchased from them. It is true that I have never seen a separate line item on the funeral home's invoice that indicates this, but additional charges are happening on a daily basis if consumers do not purchase the casket from the funeral homes. I have seen it countless times since we started to sell and deliver caskets. It is disguised as "Package A" vs. "Package B" and generally is an $1800-$2200 ADDITIONAL FEE if the consumer does not purchase from the funeral home. The additional charge is generally so vaguely stated that even if you know what to look for, it's difficult to know what it's really saying.

I have researched this and disputed this hard with the NFDA as well as the FCC to no avail. After countless phone calls to the NFDA office, with no return calls, I finally was able to talk to someone who told me that this additional charge "is standard business practice" and that there was nothing illegal - or (gasp!) unethical - about it. The lady I spoke to made me feel like quite the moron for even questioning these practices.

Regarding my complaints to the FCC, I have filed logs of first hand accounts of consumers being charged additional fees when they don't buy caskets from the funeral home. But, since my complaints don't show a pattern consistent with just one funeral home, nothing could be done until a pattern had been formed. I have no clue of how many times this violation would need to occur to form a pattern.

So, here I am, writing a comment to an article which infuriated me not for the move that Walmart made, but for the false remarks made on many other versions of this article that were written by others. But, the bright side of the story is that perhaps this "standard business practice" will change and that this will continue to open the eyes of many within our industry who have blinders on.

Standard Business Practice

O.K. so we are looking for a better business deal than our local or corporately owned funeral home can give us...I don't know what line of work you are in so lets just assume a few common occupations and see how this applies... Let's say you are a mechanic...Now you are going to change the oil or brakes or even the engine in someones vehicle. So you are about to turn the wrench and they say "Oh, by the way I brought my own oil, brakes, or engine and I want you to use that", or You own a restaurant and that same person shows up and says "I want steak and potatoes" so you head back to the kitchen to start cooking and they poke their head through the window and say "By the way, use these potatoes and this steak!" You are a school teacher and the parents bring the books they want their kids taught out of.
The caskets funeral home sell are carefully chosen by the management of the funeral home for quality and price. Of course there is a mark up. You want your loved one treated with dignity and respect and given the best funeral for your money right! What you forget is that the Funeral home has employees that have to be paid, the hearse has to be insured along with the funeral home, and it's employees. The funeral home has to make a profit because it is not a charitable business but what a lot of people don't know is that so many funeral homes do good things for their community in other ways. Some funeral homes are tasked with taking care of the remains of those in society that have no one to pay and often absorb the cost of this on their own. If the funeral home has "Package A" and "Package B" it is because the cost of doing business would be different if you bring your own casket in or buy it there! The things that go into a funeral package cost money...It is not free. The funeral home transports your loved one from the hospital, crime lab, nursing home, or wherever they pick them up from to the funeral home(Sometimes in the middle of the night), they bathe the body, reconstructs them in many cases to makes them up to look like they did before death or as close to this as possible, dress them, put them in the casket, provides the facility, coordinates all of the funeral plans, disposes of the things no one wants to think of, like your loved ones blood that is drained, accommodates there family and friends and all their requests during visitation and the funeral, cleans up after all of this, provides all of the paperwork to make this legal and in many cases handles odd or strange request with out question all with the Dignity we demand.
I hope your profession is not the next one targeted that you are using inscrutable business tactics to make a profit... I mean how many funeral home owners do you see on the cover of Forbes magazine? Of course they make a profit but so does every other surviving business!

Christine.Hentges's picture

Dear Anonymous;

We are in the cemetery, precast concrete and architectural business...in Wisconsin where we cannot be affiliated with a funeral home due to our cemetery ownership. If I could own a funeral home, I would and I understand how to run a business, which requires mark ups and profits. We sell caskets and yes, we mark them up. But, they are as far away from being a profit center for our company as they can be. The reason we are selling them is to give consumers a choice, which is the way that America does business. Do we sell to everyone we present to based on the fact that they can save thousands of dollars with us? Of course not! We hear the comment from families many times that the would prefer to pay more to purchase this item with the funeral home due to their loyalty to them and that the rest of their family "has always done it that way". That's fine with us - we don't lecture them, make them feel guilty or put high pressure sales tactics on them. Our theory is to make the consumer 100% comfortable with any decision they make.

I commend your comment about caskets being carefully chosen by funeral homes for quality and price. We feel the exact same way about the memorial suppliers we deal with. When a customer comes in and tells us they bought a memorial online, from what is likely someone working out of their garage, it makes us cringe since we know we offer the best merchandise which is going to last in our cemetery FOREVER. That is our responsibility as cemetery owners, operators and employees.

What I still do not understand is the increased price in "Package B" when you are delivering less product and therefore have less cost to run your business. You do not need to pay the wholesale price on the casket in this case! There is no way to justify the extra expense for this arrangement. Period. Can we, as cemetery operators, charge the family thousands of dollars more money to be interred if they decide not to purchase the memorial for us and justify the charge because we lost the profit on the memorial sale? Absolutely not! But that is exactly what funeral homes are doing and I cannot believe this practice is acceptable.

Not Starting a War

As my subject says I am not starting a war, I think many funeral homes should change their practice of making the casket the way to offset their service fee and let the service fee stand alone. I think that would change the profit margin in independent casket stores and buy on line stores and even your cemetery/casket business greatly. Maybe this would solve our conflict!

Star Legacy Funeral Network's Mission

There is no doubt, that with Walmart entering this business - it represents a paradigm shift in a very old profession. In the end (no pun), equilibrium will be achieved and the cost of a funeral will remain the same.

Star Legacy Funeral Network states "Empowering the consumer".

I agree