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Australian Journal of Pharmacy : May 2008
business feATure | PhArmAcy grouPs HealtH and retail Most pharmacies can’t compete on the same playing field as the big box pharmacies—and so they need to bring the focus back to health or front of shop to retain customers. ‘What is their offer to the consumer, or the patient?’ questioned Richard Vincent. ‘Is this person indeed a consumer or a patient? ‘In the end, you need to stand for something significant: you can’t be all things to all people. ‘One care offer is the clinical model, which would be appropriate in an older demographic where people are on multiple medicines. There may be issues with management of those medicines and the patient is working with their pharmacist to make sure those medicines are being used properly. Independence day Fred Raven, managing director of Raven’s Business Services, looks at reasons to stay independent. If done without due consideration, joining a group can be fraught with problems. It’s very important to really read the fine print with the help of your solicitor and accountant. Give particular consideration to the sections on head leases and the group selling your pharmacy, which I do not believe benefits individual pharmacy owners. It’s becoming common for the group to take the head-lease on the premises and sublease it to the pharmacy owner. The groups say they can arrange better terms, and this may be so, but the leases we see seem no better than other similar situations. The main problem is that the group has complete control over your business, and by exerting subtle pressure, direct you to sell to a person they nominate, which may not be in your best interest. Consider joining a buying group instead. You get a buying advantage without buying masses of stock. It’s very easy, when in a group, to buy too many specials, and then you see unsold stock accumulating. With today’s graphic design technology it’s very easy to do your own in-store banners and price cards. We see many stand-alone pharmacies that do all of their own promotions very well; they’re more personalised and targeted exactly at their catchment area. Compliance is one of the biggest problems with groups. I know of a group of 30 pharmacies where only five in the group fully follow the group direction, which dilutes the efforts of the whole group. Conversely, strict compliance can also inhibit the entrepreneurs in a group. Demographics are also often not taken into account. For example, a nappy promotion in a retiree area. This is one of the weaknesses of groups, and needs to be thought about before you join. The AusTrAliAn journAl of PhArmAcy vol.89 mAy 2008 70 ‘These people are regularly back in the pharmacy, and would come in at least once a month, often more. This area would suit a Pharmacist Advice-type model, where the focus is not the front-of-shop. ‘Then at the other end there’s the retail-based model, with a very strong consumer offer and a focus on the front-of-shop, such as Priceline. People wander past, they see something they like in the window and come in to have a look. It’s about depth of range—the range is much better than you would find in a supermarket. ‘That strong front-of-shop offer drags foot traffic through the door and increases script numbers. ‘Then there’s traditional pharmacy, with a good solid front of shop, a strong middle of shop—the coughs and colds, analgesia and so on—the things where people won’t necessarily need to see a doctor. ‘Those that are strong in this middle shop section are bridging the front-of-shop and the dispensary.’ How do you cHoose? As well as considering which groups are appropriate for the specific marketplace, the culture of different banners, brands and franchises also needs to be given serious consideration. There’s more to being part of a group than sitting back and reaping the rewards of catalogue promotions. The pharmacist needs to look at what happens when they join a group, as well as improving their buying power and competitiveness, said John Koot. ‘By joining a banner group you can buy better, get catalogues and so on, but that doesn’t ultimately help you take a position with the consumer. You need to decide as a pharmacist how to take a position with the consumer. What do you want to be known for?’ ‘The individuals we speak to consider the costs of being in a group versus the value they’re likely to get from that group,’ said Peter Tilley. ‘Joining a group involves giving up a level of autonomy in return for programs that improve the value and return of their business. ‘The decision depends on the individual, but essentially it is a cost/value equation and their local marketplace has a big impact on the type of retail model they should choose. As groups become better at retail marketing, branded pharmacies are drawing consumers from a wider trading area. Therefore, independent pharmacies that have never considered joining a group are now finding that they have to have access to strong retail programs to compete in this new environment.’ Garry Scott owns two very different pharmacies in Carlingford Court, a shopping centre in north-western Sydney—downstairs is an Amcal, upstairs a Priceline Pharmacy. The existing Amcal has just been re-opened with a visible automatic dispensing system, compounding lab and WebsterPak service. Mr Scott said that he wanted the two pharmacies to complement each other, and that he believed he had found a good combination. ‘In our Priceline, we see customers pick up a basket at the front door and basically go shopping,’ he said. ‘They shop it in a similar way to a supermarket. If we put the same baskets in the Amcal, they wouldn’t pick them up at all. The customers have a totally different expectation from the two shops. ‘In Priceline they don’t seek a lot of advice but the average sale per customer is much higher— toiletries, hair care, skin care can be bought in one go.’ In contrast, the new-concept Amcal had already attracted a ‘larger than normal’ number of new patients presenting with prescriptions. ‘This model feeds off the