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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
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