Discounts in the Death Business

July 11, 2005 — -- A price war is shaking up the staid, somber business of burying a loved one.

Caskets have long been an expensive part of a funeral, but an increasingly aggressive band of retailers is working hard to give mourning families more affordable options.

Discount retailers like Jeff Burch, who owns Quality Discount Caskets and Funeral Services in Decatur, Ill., say the funeral home industry has inflated prices for years, often charging up to five times the wholesale price for caskets.

"They call guys like me 'discounters,' but the only way that we sell at a price that's a discount is that basically we're the only ones not ripping people off," Burch said.

Burch sells caskets that range from $680 to $1,390, a far cry from the thousands often charged by more traditional funeral homes. Industry wide, discounters mark caskets up about 50 percent above the wholesale price -- more than enough to make a profit, they say.

Quality Discount also organizes full funeral services for about $3,000, Burch said. That's less than half the estimated $6,500 paid for the average U.S. funeral, according to the National Funeral Directors Association.

"It's way below the norm, and the people that we've served have been very happy about what we're doing. The only people that aren't happy are the funeral homes," Burch said.

Spicing Up a Solemn Business

Many discounters have foregone the somber funeral home business model for a more direct marketing approach. Burch's bright storefront displays caskets in a window that is lit 24 hours a day near a busy intersection in Decatur. And others have found that, as with many products, there is a strong customer base willing to shop for discounted caskets online.

But despite the lower prices, discounters have had a tough time breaking into the market. Most say the reason is twofold: consumer ignorance coupled with a decades-old effort by funeral homes to dissuade families from price shopping for their arrangements.

Larger, established funeral homes and mortuaries tout their service and convenience when explaining why their rates might skew higher. They say families looking to put funerals together in a matter of days find it easier to make all their arrangements under one roof and are willing to pay for that convenience.

The prospect of finding different vendors for every portion of a funeral, they say, is difficult on families already stressed in dealing with the loss of a loved one. Many also believe discounters are unable to guarantee the quality of the caskets they sell.

But discounters say those are just excuses to bilk people out of money.So in addition to selling caskets, the discounters believe their goal is simple: to make people aware that caskets and funerals should be priced and purchased the same way as any other item.

"People are largely unaware that when you're looking at a funeral, one place might charge literally $2,000 more for exactly the same product," said David Swim, owner of Casket Xpress, a California-based company that sells discount caskets online.

Funeral Homes' Longtime Dominance

In 1994, the Federal Trade Commission changed the "Funeral Rule" that guides the funeral services industry, making it illegal for funeral homes to charge a fee to bring in a casket bought from a third party like a discounter. The change was meant to lessen the homes' ability to monopolize the funeral process and pump up prices for caskets or funeral services.

But many discounters found the going tough in the early days after the rule was changed. As discounters entered the market, many funeral homes, they say, made the discounts irrelevant by matching the prices on caskets only to raise their prices on funeral services. Others told families that discounters sold shoddy products that could fall apart during funerals or suggested that shopping for discount caskets dishonored the memory of the deceased.

"The funeral industry has made a connection in our minds between how much we love our dead and how much money we're willing to spend on a lavish display of a funeral," said Joshua Slocum, executive director of the Funeral Consumers Alliance, a national nonprofit consumer group.

But the more people become aware of the less expensive options, the better, Slocum said. Consumer awareness is likely to grow as the concept goes mainstream.

Costco Enters the Market

Last August, retail giant Costco began selling caskets in six of its Midwestern stores and online. Caskets ordered from a Costco store kiosk range in price from $800 to $1,100, often less than a 15 percent markup over wholesale, according to Bill Jaehnig, president of Preferred Funeral Choices, which coordinates the Costco program

And Costo has taken the pricing fight directly to local funeral homes. Costco members can get a 20 percent discount on funerals if they book services at a home within a network of homes organized by Jaehnig's company. And to combat funeral homes that might undercut the price of the caskets and pump up the price on other services, Jaehnig said Preferred Funeral is prepared to build new funeral homes to offer discount packages to communities that have Costco stores.

Sales have gone well enough that Costco plans to offer caskets in 22 additional stores by August.

"Costco has something like 47 million members, and they have the ability to communicate that discount with all of those people," Jaehnig said.

Discounters Still a Small Percentage

For now, discounters still make up a very small portion of the funeral services and products industry. The National Funeral Directors Association counts over 20,300 members, and Casket Xpress' Swim estimated that there were only about 250 discounters nationwide, accounting for less than 5 percent of total casket sales.

The problem, he said, is that most people do not consider funeral arrangements until someone dies. And that leaves them susceptible to the higher prices at funeral homes. But he's hopeful consumers will eventually see the light.

"Informing consumers is really the only way for us to stay competitive. But this generation of consumers is probably the most buying savvy ever, and the more they learn about the industry the more of them will look at discounters as the best option," he said.