Stocking a more limited range of the right products can make a big difference to your profits, as Jane Powell, Numark’s consumer brand manager, explains

In order to both defend and develop your pharmacy business in an increasingly competitive market place, you need to consider your business from each and every angle: your financials, your team, your pharmacy environment, your customers, your current offering, opportunities, and how you market your business to your local community. But, as pharmacists and pharmacy owners, there is a plethora of resource available to support you – you do not have to do it alone.

Your team holds a myriad of skill sets that are not being utilised. You can make positive changes to your business’s profitability by delegating key tasks to appropriate team members. And now is the time to make some changes. Start small to gain confidence and prove theory and then extend this confidence to other areas of your business.

Making a small change to the products that you recommend and sell can make a great difference to your profit – for better or for worse. It is vital that we do not allow our retail business to walk away from us – particularly the medicines component.

Many pharmacies, particularly independents, stock too many products. Implementing a core range of the top 2,500 selling lines is essential to grow your average transaction value, gain loyalty and increase profits.

Profit from one change

Overstocking on like-for-like products is not only confusing for customers but damaging to profits and your brand. Consumers are used to choosing between a brand leader and an own brand – this strategy gives the consumer choice and ensures loyalty and profits for the retailer. Pharmacy should be no different.

Consider the cash margin you would receive if you purchased a product for 21p and retailed it at 68p, compared with buying a product for £1.50 and selling it for £2.66. This is often the price difference between a branded product and retailing a cheap tertiary or cheaper generic product. You could make a cash margin difference of over £130,500 per annum – by making one small change!

You could make a cash margin difference of over £130,500 per annum – by making one small change!

Selling 12 generic ibuprofen products per month at 68p would give you a cash margin of £4.23*. Selling 12 like-for-like branded products at £2.66 would give you a cash margin of £8.59. So the cash margin difference is £4.36 per month. Multiply this out over a year and the cash margin is £52.26 on one product. If you extrapolate this out across pharmacy’s core range of around 2,500 products you could make a cash margin difference of over £130,500 per annum – by making one small change!

It’s not realistic for pharmacy to just sell the brand, is it? No, not really. But changing your habits from selling the cheapest generic product to having a value alternative on offer, such as an own brand, means you are meeting somewhere in the middle. Offering the cheapest product available is not why consumers buy from pharmacy. Consumers buy from pharmacy because of the service they receive and the advice that goes with that sale. A customer that is only interested in the cost will never be loyal and will always be shopping around.

Find your retail champion

To make a change, pharmacists need to delegate responsibility to a retail ‘champion’. Giving each member of your team responsibility for an area of your business, be it a service, OTC sales, customer service, your retail environment or launching a marketing campaign, will give you more control over who is accountable for ensuring things are done. It also allows an open dialogue with team members about how things are progressing, areas they are struggling with, or areas of opportunity for the business.

Once a retail champion is identified and briefed on what is expected of them and why, ask them to start with one category, eg, analgesia. Sell out all of your cheap generic products and do not replace them. Make your consumer offering the brand leader in each format, ie, tablets, solution, gel, and one value alternative. Where possible, make this a brand that offers a range of products across the category so consumers learn to trust that brand. Choose a mid-priced range to ensure cash margin is increased.

If you do not stock a product that a customer is asking for, and an alternative simply won’t do, offer to order it in from your wholesaler for next-day delivery. There is no need to stock 8,000 products – over 85 per cent of pharmacies’ retail profits come from a core range of 2,500 lines.

Put time in the diary for a month later to discuss how this process is going, what the obstacles are and how can they be overcome, and what the benefits are and how can these be used to move on to another category.

*Cash margin is worked out by subtracting the cost price (ex VAT) from the retail price (ex VAT) – the equation in this instance therefore is (0.68 ÷ 1.2 - 0.21) x 12.

In order to support member pharmacies, Numark offers a comprehensive Defence and Development programme, accompanied by tailored one-to-one business consultations for its members. To book an appointment with a Numark pharmacy development manager, call 0800 783 5709.