In­no­va­tion is on the pre­scrip­tion for go-ahead phar­macy chains that aim to de­liver first class cus­tomer ser­vice in the chang­ing health sec­tor.

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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.


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.


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.

Source: IBISWorld re­port Phar­ma­cies in Aus­tralia, Septem­ber 2018

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