A quick look at other countries will reveal a similar inclination for pharmacy expansion: Boots, a pharmacy-led health and beauty retailer has over 2,500 stores in the United Kingdom; Walgreen and CVS together held between 50% to 75% of the pharmacy market in the United States 14 largest metro areas.
There is no doubt that large chain pharmacy has brought much convenience to the local population, and to some extent, lowered the overall prices in the market. However, as these companies grow larger there is inevitably the threat of forming a monopolistic or oligopolistic business environment.
As these local giants continue to expand their territory, the greatest threat they pose against small independent pharmacies will be the tough price wars. Incumbent giant companies have the advantage in terms of economies of scale, where bulk purchases almost always guarantee lower costs and greater profit margins overall. Moreover, customers today are particularly price-sensitive. They will not hesitate to switch to another pharmacy that offers much lower prices for the same product.
In the face of the seemingly bleak future for small independent pharmacies, is there a solution that will help them to survive in the competitive business environment? Fortunately, there are a few suggestions that may help them to step up to the challenge.
1. Develop customised services that are not encumbered by bureaucraciesOften, large corporations are tied down by excessive red tape and bureaucracies. This presents a good opportunity for small independent pharmacies to develop customised services that fill in the gap left by the giant pharmacy chains.
For example, some customers may request products that are not typically kept by the pharmacy. With large chain pharmacies, these requests that are outside of the "norm" or "system allowance" may be difficult to fulfill where the customers may be simply referred elsewhere.
Nonetheless, a small independent pharmacy can remain administratively nimble enough to accommodate customers, and this makes a big difference to retaining their loyalty.
2. Develop a speciality areaSpeciality areas are another niche development opportunity for small pharmacies to compete with larger competitors. These speciality areas could be practically any health-focus area as long as it is within legal boundaries.
For example, there is a notable increase in small community pharmacies that focus on skin care and beauty products. Others may have championed in the provision of all-natural and organic foodstuffs and health supplements.
A few pharmacies have also focused on providing medical equipment to patients. These niche areas can better reflect the professionalism of a pharmacist, and highlights the versatility of the profession to serve different needs in healthcare.
3. Keep an eye on operational costsA sensible community pharmacist must keep a keen eye on the operational costs of the store. There are multiple ways the pharmacist in charge can reduce such costs, and the first step is to identify any inefficiencies within the company.
Pharmacy staffs should be sufficiently empowered to identify inefficiencies in their routine work, and given the liberty to pitch ideas for improvement. The pharmacist owner should also cancel services that are underutilised or are outdated.
4. Innovate and be creativeSuccess in a tough business environment is not only determined by hard work but the resolution to continuously innovate and create new markets. In the face of direct competition from large corporations, small independent pharmacies must harness their creative talents in providing professional services.
One such possibility is to look into areas with very little competition, or areas that are famously coined by Mauborgne and Kim in their book "Blue Ocean Strategy". For example, the sales and provisions of orphan drugs is a potentially good business strategy. Hospitals are typically financially restrained to keep multiple orphan drugs in its pharmacy, especially when these drugs are not commonly used.
Nonetheless, there are instances where community pharmacists who saw the opportunities in the collective need for orphan drugs in the society and taken the initiative to endeavour into such trade. MIMS
Disclaimer: The author has no affiliation with any of the book authors or organisations mentioned in the article, and has received no sponsorship or any partnership with any of these authors or organisations.
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Boots. Our Stories [Internet]. boots.uk.com. [cited 2017 Mar 21]. Available from: http://www.boots-uk.com/
Lau P&P Pharmacy. Personal Interview. 2008 June 20