A HEALTHY DOSE OF CHANGE
Innovation is on the prescription for go-ahead pharmacy chains that aim to deliver first class customer service in the changing health sector.
Innovation is on the prescription for go-ahead pharmacy chains.
Pharmacy growth is limited by regulations that mandate the approved number of pharmacies allowed in any given area. Douglas Kuskopf-Dallas, Discount Drug Stores general manager, points out, “We cannot open a store wherever we want and therefore we seek pharmacist owners to partner with who share our vision for the brand and the planned evolution of the brand.”
Ongoing challenging conditions and further regulatory changes are projected for the pharmacy industry over the next five years.
In its May 2018 response to the 2017 final report of the independent Review of Pharmacy Remuneration and Regulation, the federal government recognised the pivotal role of the community pharmacy segment in delivering medicines to local communities. The government also acknowledged the gradual transition process the segment is currently undergoing, as it moves away from its traditional product-supply focus towards a more patient-centred and outcomebased system. New pricing arrangements for high-cost medicines outlined in the 2018–19 Budget are anticipated to benefit pharmacies over the next five years.
Despite this, there’s no stellar financial growth. Industry revenue is forecast to grow at an annualised 0.7 per cent over the five years through 2023–24, to $16.3 billion. New customer service-based business models and Australia’s ageing population are projected to drive revenue growth over the period.
Profit margins have been curtailed by the reduction in medication costs as a result of changes to disclosures – most pharmacies make their money in the dispensary.
It’s a different story at Priceline, however, which has carved out a niche for itself in the beauty landscape. Heading up the 35-year-old Priceline business, CEO Richard Vincent agrees the pharmacy market is increasingly competitive. “There are international and local retailers who are doing a fantastic job in the beauty space. There is a competitive tension.”
So what gives the highly identifiable pink branded Priceline chain a point of difference? Tamalin Morton, Priceline’s general manager, points to four elements the business has focused on for its newest campaign: the breadth of products (17,000 items), value, rewards and service.
As beauty trends move into the so-called masstige and prestige space, Priceline is right at the forefront of new and exclusive products, catering for the choosy Millennial who wants to investigate packaging and ingredients before purchasing, as well as the brand loyal customer who continues to use his or her favourite product over many years.
It’s this broad appeal that helps position the business. There are 650 beauty advisors across the country who offer customers brand-agnostic advice [general advice loyal to no particular brand] and this is a highly popular service, Morton confirms.
The health space is crucial too. At Priceline there is an advisory committee that ensures the pharmacy treatments and services remain effective and efficient.
Priceline offers quick and effective vaccination programs, conducted in a consulting room, which allows customers to avoid the doctor’s queue, says Vincent.
The pharmacy chain has introduced a dementia-friendly quiet hour and is taking steps such as removing black mats that can appear as a black hole for someone suffering dementia. It has also launched an app for prescription and pharmacy needs that is designed to benefit elderly customers.
JOINING THE FRANCHISE
Each year the chain has a net increase of about 20 pharmacies, existing businesses who are keen to take on the Priceline mantle.
“The model is very different from a typical pharmacy,” points out Vincent. “The number of SKUs [stock keeping units], the investment in stock, the standardised systems and discipline,” he says.
Following an initial conversation there’s an immersion session in Melbourne, which takes the pharmacists one step closer to signing with Priceline – and that’s a crunch point. If they’re committed after that, the process continues.
As for any existing business owner looking to convert into a franchise, there are the challenges of knowing how to run the business one way along with the need to adopt the franchise method.
For an independent pharmacy operating under its own engine power there can be constraints. Vincent believes in facing these challenges early on in the process of conversion.
“We have an upfront conversation:
‘Do you really understand what you’re getting into?’” he says.
“There are nuances. So we invest effort and time upfront. We don’t want
there to be misunderstandings.”
The Franchise Relationships Institute helps the business compile an annual franchisee survey, which most recently showed that the brand rating scores well above average.
“We use that process to think about how to engage franchisees. We have all sorts of forums, inventory management, conferences, advisory boards. “Engagement is critical.”
Earlier this year the parent business API acquired 42 Clearskincare Clinics across Australia and two in New Zealand, and this could be opened up to the franchising model.
DISCOUNT DRUG STORES
The general manager of Discount Drug Stores believes the chain has a strong reputation for everyday low pricing alongside its suite of health services.
But, says Douglas Kuskopf-Dallas, it’s also important to continue evolving the brand in line with consumer expectations in a rapidly changing retail environment.
In June, Discount Drug Stores announced a new health foods concept – a “store within a store” – as well as a pharmacy and health foods “big box” model.
“By offering all of the traditional pharmacy products and services, along with one of Australia’s widest ranges of health foods and organics, our goal is to become a total holistic healthcare destination supporting overall customer wellness,” he says.
“Health benefits are a major driver for increased spending by organic purchases. We’ve identified a clear gap in the market and this concept is our response to meet a growing consumer demand, and widen our ability to provide holistic healthcare beyond dispensing drugs and health clinics.”
Kuskopf-Dallas indicates the rollout of the health foods concept will be a focus for the next 18 months across the network.
Not that that’s slowing the implementation of other projects.
“We’re also rolling out a number of other initiatives including our new point of sale system, Next Generation Retail Platform powered by FRED NXT, which allows our stores to go paperless with a range of processes and gives staff the ability to better manage front-of-shop operations.”
With a clear focus on the future, the business is preparing for e-health services and digital pharmaceutical prescriptions with a number of programs that deliver extra support to customers, such as the MedAdvisor Health
Services Hub and Doctors on Demand. “Meanwhile, our new Discount Drug Stores Retail Academy will also launch this year, with a focus on upskilling and training key retail staff to enhance the customer retail experience.”
The overall goal for the Discount Drug Stores chain is to deliver strong customer service and operational efficiencies for pharmacists, and to develop a support infrastructure to manage the growth of e-health channels, which Kuskopf-Dallas expects to rapidly change the pharmacy industry.