Retail pharmacy business analysis

AN EXPLANATORY list of nine key performance indicators (KPIs) used in the general retail environment are equally applicable to community pharmacy retail endeavours according to Pharmacy Accountants Director of Peak Strategies, John Thornett.

Writing in a Pharmacy Guild of Australia blog, Thornett said these were often overlooked in pharmacy, but help owners review their pharmacy practice “in a different way”.

In what amounts to a brief Retail Business Analysis 101 course, he identified Average Customer Spend/Basket Size calculated as sales divided by the number of transactions, but pointed out that Gross Profit Per Transaction was more useful and more accurate and is calculated as Gross Profit divided by the number of transactions.

Sell Through Rate can be measured by units sold divided by opening units on hand.

Cash Conversion Cycle is a formula: Debtor Days + Stock Days – Creditor Days and Thornett defined each element.

Other key elements to this analysis are Customer Loyalty Program KPI’s which include the Members to Non-Member ratio, Active vs Non-Active Members, Net Member Growth, Average Transaction Values Member to Non-Member and the Percentage of Transactions that involve a loyalty card.

The pharmacy blogger recommended setting up a monthly self-reporting framework to track trends.

See details at guild.org.au.