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Pharmacy: the end of the retail era?


07 Mar 2016

Is it time that independents gave up on retail and instead concentrated on the professional side of their businesses? Ross Ferguson investigates.

Let’s face it, dwindling retail sales have dogged independents for years and the balance of the average business is heavily weighted in favour of NHS income.

In fact, according to the Pharmaceutical Services Negotiating Committee (PSNC), 85-95 per cent of the average pharmacy turnover is due to NHS income.

This won’t come as a surprise to independents, but the problem is that all know where NHS income seems to be heading, and it’s not looking good.

As one would expect, multiples on the other hand seem to have things a little easier, with the vertically integrated companies able to offer products at cheaper prices, entice patients with promotions and advertising, loyalty schemes and take advantage of new technology.

Boots’ online business has experienced significant growth, with sales increasing by 30 per cent year-on-year (March 2014), which the company attributes to the introduction of its click and collect service, meaning that patients who order products online by 8pm can pick them up in-store the next day from 12pm.

Boots has around 17.8 million loyalty card holders (March 2014) and it is estimated that 60 per cent of the company’s retail sales are made by card holders who spend 60 per cent more than non-card holders.

Other initiatives that further engage with customers include the company’s digital Health & Beauty magazine.

LloydsPharmacy, which has more than 1,500 pharmacies, has also harnessed the benefits of vertical integration to offer its patients a click and collect service. Products ordered by patients online are delivered via their current distribution network to a pharmacy of their choice.

In January 2015, the company reported overall sales growth of six per cent, and experienced increases of 62 per cent in the skin health and 23 per cent in the pain management categories. This was also reflected in online sales where skin health grew by 170 per cent and the pain category was up by 168 per cent.

Meanwhile, independent chain, Day Lewis, which owns more than 250 pharmacies trialled click and collect in 10 of its stores in January 2016 and expects roll-out to occur to all pharmacies in March.

Should independents be considering this approach?

Come back tomorrow for part two of our weekly feature as Ross explores omni-channel opportunity.


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