Overpaying Is Not Dignified

May 01, 2003 9:30 PM  By

IT MAY SEEM IRREVERENT to buy funeral supplies over the Internet, but as the aging U.S. population gives renewed impetus to the funeral business, sending the price of death soaring to outrageous highs, low-cost distributors of funeral supplies are finding that consumers are more than willing to flock to the electronic medium.

The American funeral industry earns more than $20 billion annually, not counting another billion or two for burial insurance sales. A funeral with all the trimmings can kill a college fund, drain a savings account, or put a retirement plan in jeopardy. Few who mourn the recent loss of a loved one complain too loudly when the bill arrives, as they have other matters on their minds.

Precisely how do funeral homes earn their green? In addition to collecting the corpse and preparing it for burial, they may write the obituary, line up support services (such as flowers and clergy), provide emotional counseling, and choreograph the send-off. They also sell supplies, caskets mostly, at heavily inflated prices.

“A funeral home is different than any other type of business,” says Dean Magliocca, president and CEO of Funeral Depot Inc., an online provider of brand-name funeral products based in Hallandale, FL. “No one shops funeral homes. Most people aren’t in the emotional state to think about shopping when they need one. A family has only about 48 hours to make funeral arrangements, a fact of which funeral directors are well aware and take full advantage. These guys get top dollar for everything in the store. Caskets alone average a 600% mark-up. Six hundred percent! What applies to caskets also goes for all accessories — flowers, burial vaults, markers, cremation urns, jewelry, the works. The funeral industry may be the last virtual monopoly in the U.S. The system is totally entrenched, and it’s closely guarded by the people who benefit most from preserving the status quo. It’s a closed loop, and breaking in isn’t tough, it’s damn near impossible.”

Funeral Depot sells caskets and other funeral supplies directly to consumers over the Internet. “We have what we believe is the best guarantee in the business,” Magliocca says. “If you place an order on a weekday, we’ll get it to the funeral home of your choice by five o’clock the following afternoon. We make this promise at no extra charge, and can sometimes deliver faster still for a few dollars more. The funeral industry doesn’t like that much, but there’s nothing they can do about it legally. The FTC mandates that consumers have the right to buy their caskets anywhere they want. A funeral home that gets in the way of that right in any way, shape, or form can be fined up to $10,000 per incident. Right now our market share is approximately an eighth of one percent of the total market, and growing. Our site is keyword-driven, and at the moment most of our customers are baby boomers looking to attend to the final needs of their aging parents. They bookmark our site and come back to us when they need us.”

BEATING THE SYSTEM Back in the 1990s Magliocca made part of his living selling urns and tombstones in the Florida market. Struck by the incredibly high margins such products could bring, he came up with the idea of Funeral Depot. The funeral industry was a silent partner in the enterprise, whether it wanted to be or not. Its relentless gouging had created a demand for what Funeral Depot hoped to provide — funeral products at prices anyone could afford. The Internet made this miracle possible. Essentially, it opened the closed loop within which the funeral industry had protected itself for more than a century.

“The entire funeral infrastructure is supported by three major casket manufacturers who operate their own distribution channels, to which funeral homes have easy access,” Magliocca says. “The suppliers even have their own fleet of delivery trucks. We tried to buy from those guys directly, but they wanted nothing to do with us, so we had to come up with another strategy. We now buy stock from independent funeral homes and casket distributors located at strategic points throughout the country. At the moment we have 45 relationships. It wasn’t easy to make these marriages. Many of the companies we contacted were as unwilling to talk with us at first as the major manufacturers.”

A typical Funeral Depot transaction goes something like this: A woman calls from California after browsing the Web site for a casket. She chooses a model, then after she provides all pertinent information, including credit card data, she’s given an approval number. Shortly thereafter, Funeral Depot calls one of its partners in California, and requests that it verify product availability with a manufacturer. When this is done successfully, the partner company orders the casket from the manufacturer. The latter drop-ships the casket to the partner firm, which either delivers it to the funeral location for a fee, or holds it until Funeral Depot can arrange to have it picked up by a freight company.

Funeral Depot lures new partners to the network through a quid pro quo program. When bargain-hunting consumers call, the company passes the leads to prospective partners as a courtesy, hoping eventually to purchase caskets and other supplies from them on a dealer-to-dealer basis. Though Funeral Depot pays a premium for these items, prospects sometimes reject the idea of selling wholesale because they make so much more when they place products with their own clients. The leads are a big enticement, however, especially to an independent operation that must compete with corporation-owned funeral homes that have money to burn on flashy amenities, PR, and advertising.

OLD-SCHOOL THINKING “The funeral homes either get it or they don’t,” Magliocca says. “When they balk at the idea of selling to us it’s usually because they’re old school. They don’t see why they shouldn’t get all the revenue from the business. They have a gut reaction against us and call us ‘pirates,’ echoing what the industry tells them they should think.” That kind of reaction has failed to discourage Magliocca. “We keep working on them,” he says. “For us, the independent funeral homes and distributors are the keys to the kingdom. There are people out there who understand this concept. They know that when the phone rings and it’s Funeral Depot, they’ll make money.”

Magliocca claims that propriety in the funeral industry is just a façade. “Our motto is ‘Where Overpaying Is Not Dignified,’ and for me that pretty much sums up this industry’s hypocrisy,” he says. “The funeral business plays at being consumer-friendly, but it really isn’t. Bottom line, it’s all about making money. We want to make money too, but we do it by being consumer-oriented.”

D. Douglas Graham is a freelance writer based in St. Louis, MO. He can be reached by e-mail at mahakala@charter.net.

Storefront Warehouse

Funeral Depot’s company Web site went live in 2000, and today it offers a wide selection of caskets, urns, vaults, and grave markers, all from major manufacturers. Customers make inquiries through a toll-free number or by e-mail. Funeral Depot makes the order through one of its partners and arranges delivery to the client-named funeral home.

“There are thousands of potential partners out there, but it took us more than three years to build our network of 45,” says Dean Magliocca, president and CEO of Funeral Depot. “We have no warehouse at all. We’re a storefront operation with five people manning the phones and two back offices. We drop-ship through Federal Express, UPS, or one of the trucking lines. Our operation is simple and amazingly complicated at the same time.”
DDG

INDUSTRY STATS

No. of U.S. funeral homes: 22,000
No. of U.S. cemeteries: 115,000
No. of U.S. crematoriums: 1,155
U.S. death rate: 2.3 million a year
Est. no. of casket stores: 300
“Pre-need” trust funds: $25 billion
Largest U.S. funeral home chain: SCI ($2.5 billion in revenue)
Market share of five largest funeral homes: 18% (approx.)
Revenue earned by five largest funeral homes: 20% of industry total

Sources: Industry associations