Will the small pharmacy store survive?
If a product, other than food and drink, goes onto our body or into our body we tend to ask for advice.
That’s what makes the pharmacy or drug store sector such a fascinating sector of retail around the world, and one which has been through a huge amount of change over the past 15 years – except in Australia.
In many parts of the world popping into a pharmacy and doing some food, household, and often beer and wine shopping is pretty much normal for most shoppers.
The concept of ‘category creep’, where a retailer of one category of items, say food, begins to offer their customers a new but adjacent item, say wine and beer, has been a key part of retailers growth for over a century.
The department stores, supermarkets, convenience stores, post offices, corner stores, and service stations have all grown the number of stores they operate, and the range of items they sell through the normal process of offering time poor shoppers the choice of buying other items while instore.
The largest drug store chain in the world is Walgreens. It was the largest drugstore chain in US, but in December 2014 it bought the UK’s largest pharmacy chain, Boots Alliance. Walgreens has large bright airy stores with a huge range of items for sale for time poor shoppers looking to collect initial or repeat prescriptions.
The back of the store is for the specialist pharmacist to ensure that drugs and advice are dispensed accurately and in a caring manner, and the front of the store is for selling everything you would expect to see in a supermarket, bottle shop, or newsagency. Prices for non-prescription items are lower than small pharmacies, but not lower than a supermarket. It’s a convenience offering to the shopper, not a discount offering.
But not so much in the humble Australian pharmacist. Not to be confused, service in an Australian pharmacy is generally of a very high standard, it’s just that Australian pharmacies haven’t grown and adapted the way the rest of retail in Australia has.
Australia vs international
I walk a lot of US and UK pharmacies and drug stores and have seen their growth in range, service, convenience, and overall number of stores in a way that we haven’t seen here – the closest would be Chemist Warehouse and Priceline, so it’s not a retail thing, or a pharmacy thing, it’s an Australian pharmacy thing.
So what makes pharmacy here so different to the rest of the world? Well, basically the rules around who, where, why, how, and when a pharmacy can operate but not what a pharmacy can sell. And, those rules when you dig under them actually have nothing to do with giving the shopper what they want, and everything to do with giving the pharmacist a very protected business.
Okay, now I’ve upset the 28,000 registered pharmacists in Australia. Half are under 40, half over 40, but 30 per cent are under 30. It’s a youthful occupation, with two thirds of all pharmacist women. A pharmacy is a busy place with the 5240 community pharmacy stores talking to shoppers and dispensing an average of 40,000 prescriptions per year per store.
It’s big business with more than $7.5 billion in sales. It also employs almost 34,000 very loyal and well trained pharmacy assistants, with less than 30 per cent of them being full time. On average, pharmacists work 38.3 hours a week compared with an average across all occupations of 41.3 hours a week, and they are some of the best and most attentive retail assistants in the country.
The average time from entrance to welcome of a shopper in a small pharmacy is about five seconds. I’ll just say that again, five seconds. That’s quicker service than at a Maccas drive through!
I’ve worked in and around Australian pharmacies for retailers and suppliers for many years. Training PA’s, as pharmacy assistants are better known, in product knowledge from suppliers, and training pharmacists in broader retail skills. Therein lies the dichotomy for this sector of retail.
Most pharmacists are knowledgeable, well trained health care professionals who are passionate about helping patients, but aren’t passionate about retail.
Most PA’s are passionate about retail and customer service at the front of the store, but aren’t involved in the business of prescribing drugs at the back of the store. Opticians have a similar dichotomy.
Therefore, why if service is so good, and the value set of the pharmacists so pure do I think that the sector isn’t changing and adapting to meet Australian shoppers needs in 2015?
Well here are some shopper ‘frustrations’ shoppers say they feel when they need to go to a pharmacist:
- There aren’t many of them
- They are difficult to find
- Their opening hours are short
- Parking is woeful
- They are small
- They have a tiny range of high priced health and wellbeing items.
This has got me wondering, why? Well, there is something called “The Fifth Agreement between the Commonwealth of Australia and The Pharmacy Guild of Australia”. It’s a set of ‘rules’ on how a pharmacy can retail, and they are based on UK laws from 1868. Apparently.
These are some of the provisions within the agreement, and agreement that is up for review this year, on June 30, 2015. These rules explain why shoppers often feel the frustrations they do.
- A new pharmacy cannot be directly accessible by the public from within a supermarket
- A new pharmacy in a mall must be at least 500m meters away from an existing pharmacy
- A new pharmacy must be 5km from an existing pharmacy unless near a transit hub
- Depending on how many shops there are in a small mall there can only be one pharmacy.
The corporatisation of pharmacy
The corporatisation of pharmacy is happening because shoppers want it to happen, but is happening by stealth, via franchise model, the very effective retail model that has delivered us Australia’s largest private company, convenience retailer, 7-Eleven.
The difference between a successful growing major corporation and a small independent company is found in two key areas – access to ongoing training and access to technology.
The franchise model delivers this to its members but without the single ownership of a corporation. Pharmacy brands such as Priceline Pharmacy and Chemist Warehouse are all growing large format stores that fill prescriptions while selling a wide range of other items.
There are around 350 Priceline stores nationwide, of which around 200 are pharmacies. Terry White Chemists is opening new franchise stores, with almost 160 now serving shoppers.
The issue of “banning” all the grocers, Woollies, Coles, Aldi, IGA, and a list of many other independent regional grocery stores from offering pharmacy services via trained pharmacists, is now more hotly in debate.
With a June 2015 end to the Fifth Agreement, will there be a change to allow adjacent tenancies with supermarkets in the same way as the liquor industry has moved? I don’t know, but I do know that rules are never a good way to deal with shoppers needs.
Shoppers always find their way around rules that rob them of time and retailers find a way to help shoppers.
Chemist Warehouse has a successful discount store format that shoppers are flocking to, but it now has an even faster growing online e-commerce platform which registers more traffic than Coles online or Woolworths online.
It will be interesting to see how 2015 develops for our pharmacy stores in 2015. Whatever the change I do hope we are able to improve convenience, without losing the amazing service we have come to expect from small community pharmacies.
Kevin Moore has worked in the marketing field for more than 25 years and serves as chairman of Sydney-based integrated marketing agency, Now Comms Group.