What's in a Pharmacy Alliance?
How do you succeed as a small, independent pharmacy in this day and age? What does a point of difference look like in the pharmacy industry? How important is retail to this equation? We sat down with Simon Reynolds, Founder and Managing Director of Pharmacy Alliance to explore these questions and more.
For those who aren’t aware, give us the elevator pitch for Pharmacy Alliance. What do you guys do, what are you about, and where did you come from?
Pharmacy Alliance was started over 20 years ago by myself and some other like-minded pharmacists. I guess our main point of difference is that we are pharmacist-led, so we own stores as do our members and our stores are all run the same way. So we sort of ride the highs and lows with our members. Essentially we offer a lot of products and services to our members, just like the big franchise groups do, at a much lower cost and as a member based organization. This gives the pharmacy owners flexibility with what they can choose and what they can get involved with, and so on.
We have nearly 800 stores across Australia, so pretty much in every corner of our vast land. You know, that has its challenges, but it also gives us that geographical coverage which I guess represents, as you said, one of the largest buying groups in the country.
What is the value of being a part of an organisation like Pharmacy Alliance?
The reason a pharmacy would join Pharmacy Alliance is predominantly to make the store more profitable. We aggregate the buying power and then we pass the discounts and the savings back to the members. So, they'll get a tangible increase in their gross profit dollar wise which obviously flows through to their bottom lin.
The reason the membership is growing, and the reason the members are staying, is not just based on profit alone; it's also based on the other tools and services. As an independent pharmacy owner it can be very lonely out there. You can feel very isolated and it’s great being able to get access to more tools and services such as marketing or ecommerce, and because of our scale we can provide that at much lower cost.
We find that members like the philosophy of being part of a bigger group, yet remaining independent and still being able to run their store with the benefit of the tools and the resources behind them.
It's been a challenging 24 months for a lot of different reasons. I thought it would be interesting to start a bit of a discussion around the importance of retail from the pharmacy side and sort of the role that that is playing in this new world and the different ways that we're having to adapt to that.
I guess Pharmacy Alliance started always as a B2B concept where we would improve their buying power and their bottom line. Roughly five-or-six years ago the membership asked start to ask us ways to how can we talk to the consumer. They we’re saying that “we don't want to be part of a bigger franchise, but we want to be able to talk to our consumer and attract more customers into our stores.” So we came up with the concept of Alliance Pharmacy which allows the pharmacy owner to be an independent operator that has an overarching proposition to the consumer and we have nearly 200 stores that are branded Alliance Pharmacy.
From that we've developed this healthcare heroes campaign which has really come from the experience we've had through COVID, where pharmacists and frontline healthcare workers have really become those heroes in the community. They’re administering vaccines and doing everything they can to support the health of their communities. Through talking to the membership we discovered that it's not only about what Pharmacy Alliance can provide, but it's also about what our suppliers and partners can provide to increase retail sales in the stores.
Independent pharmacy in Australia has always typically been a large percentage dispensary focused, so typically 80% of profit or income comes from the dispensary. So less than 20% is coming from the front of the shop. We need to change that paradigm. We need to move that out to 25% - 30% which we have actually done in the last 12 months. Our average across the healthcare hero pharmacies is now above 30% of incomes coming from front of shop and that's been driven from a number of categories. We've been working closely with suppliers, whether it's been diabetes, pain, immunity and foot care, focusing on some specific healthcare categories. We’re partnering with suppliers to leverage off the innovative things they're doing and then also do some above the line marketing around Alliance Pharmacy to drive consumers into an Alliance Pharmacy rather than a competitor.
It's not only what we can provide but we're in it together with the owners of the stores. It's that execution piece and what they do at a store level is that last bit to complete the sale. Without doing that, the whole program won't work. Our job is to provide those tools and those resources and to track the customers in and then it's that last mile, whether it's staff training and product knowledge or store layout, to then actually enable the sales to transform.
“Look, certainly the last 18 months has created challenges, but through that it has also created opportunity ... People are more conscious of staying well rather than just being reactive and going into a pharmacy when they're sick.”
The beauty of what you guys do is that you're actually on the front lines as well as being the behind-the-scenes support. From that front, what trends are you seeing from consumers and the way that they want to interact with their pharmacies?
Look, certainly the last 18 months has created challenges, but through that it has also created opportunity. We're seeing new categories emerge, such as this immunity category, such as the cleanliness category. People are more conscious of staying well rather than just being reactive and going into a pharmacy when they're sick. They're actually now going in and saying “well, what can you do to keep me well, or to stop me from getting the viruses that are going around”.
It's also changing shopping habits. I mean, I resisted online shopping for a long time and now my supermarket apps are my new best friend. As an independent pharmacy group, it's very difficult for us to build that technology when all the stores don't trade under one common name. They are known as something different in their own demographic and within their community. So it's about finding another channel to market through ecommerce, which has been has been challenging. That’s where this partnership with Storbie has come from, where we've been able to partner with yourselves to create a bespoke model in a way that is cost effective for an independent pharmacy operator. They can talk to their local community and be able to really define what an ecommerce solution would look like for a local pharmacy.
I remember years ago you know ecommerce was something that would be this massive long-tail and you would try to sell product nationally and it was very difficult to get it right. Whereas now it's just another channel to market for your consumers, for your existing customers, and potentially to attract new customers in your local demographic and maybe a little bit wider.
Certainly, a lot of our members have started to adapt or adopt what's happening in that space and we're starting to see some really solid growth through that channel.
You touched on a fantastic point around creating a bespoke offering, and I think that that's always been kind of the challenge of ecommerce and anything online really. Whether you're selling online or not the challenge is, how do you stand out in that online space? I think what we see is a lot of the time that focus on the local community.
What are you seeing in this space, in terms of what working what's working or what's not for finding ways to stand out and to differentiate your pharmacy?
It all starts with the consumer and we're finding that the consumers are more savvy and if you haven't got that offering bang on then the consumer is just going to shop elsewhere.
From my personal experience, I've been doing a lot more online shopping and if I can't navigate around the site, or I can't find what I’m looking for, if I can't get the advice online then I'll just bin it and go to the next one. Consumers are more savvy which then relates to the offering on how we need to market the stores and how we need to position the pharmacies.
You've got to get the basics right. You've got to have your right product, the right price, in the right location. You've got to have your ranging right; you've got to have your message to your consumer right. You have to be as good as everyone else in the marketplace. You can't just rely on convenience, or that you’re a great pharmacist and you’re here for your patients, because every pharmacist needs to be there for their community.
Convenience is a driver but it's only one of the drivers. You've got to have your basics right and ecommerce is one of those basics. It’s just a given now that a retailer needs to have that because if you don't have it, to retain your existing customers, you're going to risk some leakage to other competitors in your marketplace.
“Everything we do is better together, and we are trying to harness that collective muscle. The more that we can grow that network within Australia and provide that benefit then everyone will benefit through the entire network.”
How are you seeing the path forward for Pharmacy Alliance? It's about bringing together groups of independents, and under your own branding as well, to support and help them to grow. So, first of all, can you speak to the upside of coming together as a group, and the power and the benefits you see of that, and then also the path forward and the future for community pharmacy?
It's tough times for community pharmacy. I think we are under threat in terms of corporatisation. We have the Pharmacy Guild, which does a fantastic job in representing community pharmacy, however there are larger groups emerging, even under the current ownership rules. They are becoming more corporate style operators and in order for independent community pharmacy to continue to remain viable we have to do it together. The only way through this is actually banding together and operating as one and then using that as our collective muscle and our clout to work with our supply partners, work with our technology partners, work with the marketing companies.
I believe there even needs to be some form of consolidation with this independent group, whether it's branding or marketing or a value proposition, so that independent pharmacy really stands for something and there's a form of consistency around trust and service. The majority of pharmacy operators are fantastic out there in terms of what they do for their community. This is a way to tell that story and explain that message rather than go to a big box pharmacy or a discounter.
It interesting because out of everyone you talk to nine out of ten shop at a big box, but the sales results don't actually show that. There are still plenty of people shopping at their local pharmacy. But we also need to be sensitive to the consumer in terms of not taking them for granted and being able to give them value right across the value chain. Everything from service, to health outcomes, to knowing their grandchildren, to understanding what they do and having that knowledge base.
Everything we do is better together, and we are trying to harness that collective muscle. The more that we can grow that network within Australia and provide that benefit then everyone will benefit through the entire network.
Thanks so much for sharing with me today, Simon. If anyone listening is interested in finding out more about Pharmacy Alliance and what you guys do, how can they do that?
Probably the best way to do it would be to go to our website, www.pharmacyalliance.com or contact our member support office based here in Melbourne. There's a general number that you can call on the website. Feel free to get in touch and we'd love to have a chat!
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