Being a pharmacist who has later on transitioned into fashion & beauty retailing, has changed my view on managing a retail pharmacy.
Stepping into the retail world and learning all the technicalities of it has taught me a lot of lessons that I would apply if I were to manage a retail pharmacy business today.
In this article we will discuss the things you could do differently as a pharmacy owner or manager, in order to maximize the profitability of your retail pharmacy business.
What is a Retail Pharmacy?
A retail pharmacy is a retail store that sells prescription and non-prescription drugs to the general public. Retail pharmacies are meant to be accessible and close to the public, and so they are available in street locations, malls and communities.
In addition to medication, a retail pharmacy also sells related devices, as well as relevant general merchandise, such as beauty & personal care products, nutritional supplements and some accessories.
How Can I Improve My Retail Pharmacy Business?
Managing a retail pharmacy can come with its limitations, since it is a regulated business, and as a retailer you don’t have the same freedom over the business like other retailers in some aspects like pricing of drugs and running promotions on them.
However; there are a lot of other areas in the business that are under your control, and how you manage them differently is what will set you apart from the competition and improve your retail pharmacy business.
So let’s start reviewing what you can do differently!
1. Change Your Mindset
The first, and most important, step is to have the right mindset. As medical professionals, we often find ourselves thinking from a clinical, rather than a commercial, standpoint.
To become a successful retail pharmacy business owner you need to think commercial
Think like a merchant!
I often say this to even traditional small business owners or entrepreneurs who open a retail or ecommerce store.. to start thinking like a merchant.
Thinking like a merchant means understanding the business aspects of this operation and how all the numbers have to work together to make it a profitable business at the end of the day.
This will take us to the next steps..
2. Review Your Product Mix
Pharmacists who think like merchants start looking deeper into the product mix of their retail pharmacy and how this is reflecting on the retail space allocation & planogram and their inventory buying.
They understand that, while the primary role of a pharmacy is to sell drugs, it’s not the drugs that actually deliver most of the revenue or the profits.
Medicines are regulated and most of them have to be sold through a prescription at a fixed price. So they are not a candidate for exercising all the promotional tactics that retailers use to push products and increase sales.
Instead, a retail pharmacy can take advantage of the traffic it receives from the general public and starts catering to their other needs of relevant product categories. These categories are often easier to sell and have higher margins than medicines.
So in this case you can start reviewing how much each product category is contributing to your sales and how it is displayed on the floor. Then make changes in buying and visual merchandising based on your analysis of the sales reports.
3.Track Financial KPIs
You cannot improve what you do not measure.
Start by calculating the financial KPIs for your retail pharmacy business and compare it to industry benchmarks to see where your business stands and if there is room for improvement.
We have compiled a list of retail benchmarks that you can use.
Common Financial KPIs for a Retail Pharmacy
- Pre-tax Profit: measured through the P&L
- Gross Margin
- Inventory Turnover Ratio
- GMROI: Gross Margin Return on Inventory
Once generated, you can then compare them to the benchmark and start taking corrective actions to reach or exceed the benchmark.
For example, you might find that your inventory turnover is lower than the typical retail pharmacy. This would mean that you have too much inventory for the level of sales you are delivering and that you might need to change your buying strategy.
We explain each KPI and how to analyze it in its respective article (links above)
4. Apply Creative Product Sourcing
We often advise this to fashion & beauty retailers, but the same will apply to you in the beauty category or other general merchandise at the pharmacy.
Start using modern internet tools like Google Trends to track what people are searching for online and use this information to source trending products.
For example, for a while Korean face masks were really trending, and I sourced them and put them on the cash registers at my stores and they served as the perfect add on to the transactions. Such product ideas you can find using these tools.
Read Also: Using Google Trends for Buying
You can keep checking this list from time to time and look deeper into products that are relevant for a retail pharmacy and start sourcing them for your store.
5. Hire The Right People
Just like we said that you, as the pharmacy owner, have to have the right commercial mindset, the same applies to your team.
Hire people who think commercially and know how to attend to customers needs, while at the same time benefiting the business through their exceptional selling skills.
Read also our article on Retail Recruitment
Role of The Pharmacist in Retail Pharmacy
The pharmacist plays a very important role at the retail pharmacy, because he is the expert that customers trust for advice.
While hiring a pharmacist who knows their subject very well can be easy, the challenge is to find a pharmacist with a commercial mindset. Pharmacists are medical practitioners and not sales people, and so many of them might shy away from acting like ones.
Finding and training the right talent with the right skill set though, can make the biggest difference in managing your retail pharmacy business.
In fact, I’ve recently worked on a project of launching an online optical store into brick & mortar retailing in Dubai, and one of the biggest challenges for me was to find an optometrist who would also be an approachable salesperson that customers can trust and buy from.
It took me a while, and too many interviews, to find the right talent. But when we launched, this person proved to be the best salesperson on the floor, because he combined his selling skills with his clinical expertise and was able to suggest solutions & alternatives to customers that the normal sales team would have not been able to come up with.
Our ATV for this particular store was the highest among all the other locations in other countries, thanks to this person and his commercial mindset and skills.
Hire people who think like merchants ! Just like you..
Read Also: Retail Store Operations Management
6. Make Your Retail Pharmacy Look Different
Another takeaway I had from working on this optical store project was how much looking different from the rest can add to the business.
Instead of making stores that look too clinical, with white lighting and walls, this brand focused on making stores that were colorful, felt young and exuded high energy through their design and their staff.
The same concept can apply in managing a retail pharmacy. Instead of looking “like a pharmacy” why not try looking like a trendy, young, beauty store for example. Use all the visual ideas that are used at fashion and beauty retailers and apply the most relevant ones to your store.
It can still look young and trendy while selling drugs, right?
Master Your Numbers!
Access our members area and learn how to create a full financial budget, analyze your P&L and inventory performance and download all the needed templates to start planning.
Retailer & Founder of Retail Dogma, Inc.
Rasha has 14 years of retail & ecommerce experience. She has started an ecommerce business in 2008, and later worked at H&M, Bath & Body Works, Victoria’s Secret and Landmark Group. She’s lived in 4 different countries, speaks 3 different languages and holds a BSc in Pharmaceutical Sciences and an MBA in Strategic Management & Marketing.