A clearly defined and thoughtful business strategy is key for pharmacy success

A clearly defined and thoughtful business strategy is key for pharmacy success

The tightening commercial pressures of an increasingly competitive market has seen pharmacy owners become more strategic and innovative in their business decision-making.

This is the view of Moore Markhams pharmacy specialist, Jonathan Roberts who has just released results from the group’s 2019 national pharmacy benchmarking survey, which shows that profitability is on the decline.

“Pharmacy owners are finding it harder than ever to maintain the profitability of their businesses in the face of increasing competition, particularly through recent entrants to our larger centres, and from online options,” Jonathan says.

A total of 170 community pharmacies from around New Zealand participated in the annual online survey that has been running since 2013.

Average net profit before tax this year was 5.4 percent of total sales compared to 8.5 percent in 2013, and down from 5.8 in 2018.

Jonathan says that more successful businesses are introducing new services and products to keep them relevant to the market.

“It’s important to engage patients with a valued service,” he says. “There’s benefit in upskilling pharmacists to be able to provide additional funded services and to find new ways in which to connect with patients – it helps people put consulting with their pharmacist high on their priority list when it comes to their health issues.”

An expansion in the range of over the counter products is another move being made by many pharmacies.

“Natural health is a growing area for them, while cosmetics is dying away as people shop for these online or from specialist cosmetic stores.

“It’s important that owners are quite selective about what retail lines they stock and the balance between enough stock and the right stock is also critical. It’s taking a lot more strategic thought these days to optimise performance” Jonathan says.

“Making the decision to offer discounted products or services needs to be thought through carefully, and if people don’t have a sound understanding of the impact, it can be very problematic. It’s hard to adjust your pricing policies once you have built up an expectation with your customers.”

Jonathan says that the trends year on year revealed in the surveys show that “overall the shape of the industry is changing” but it is not all negative.

“While some of the smaller pharmacies in particular are struggling to get a return on their investment, rural pharmacies, those in close proximity to doctor surgeries, and businesses large enough to gain economies of scale are faring better.

“Location is becoming even more critical and moving or merging with businesses in higher traffic premises definitely makes sense. However, there isn’t always an empty shop in that better site, or there’s often a competing business already there.”

Jonathan suggests that pharmacy students wanting to move into ownership of retail pharmacy businesses should be studying business management in addition to pharmaceutical subjects, if they are to succeed in an increasingly competitive retail environment.

 “We’d like to see basic business principles being a key component of the pharmacy degree studies because a person can be a clever pharmacist but not necessarily a successful business owner and that’s short sighted and ultimately letting these students down.

“We find that the one or two hours that students cover as part of their four-year degree does not arm them with the expertise they need to make sound strategic business decisions. In terms of pricing, margins, staffing levels, purchasing, business strategy, it seems that there is a definite gap in their education.”

A copy of the report is available by contacting a Moore Markhams pharmacy specialist.