Published by Computachem Services

P.O Box 297.
Alstonville. 2477
NSW Australia

Phone:
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The ongoing warfare between public company retailers and pharmacists (represented by the PGA) peaked in activity recently when the Federal Government (in an election year) came out and backed pharmacists as far as ownership was concerned.
And thus a "blip" on the radar screen was observed, as ownership and the total number of pharmacies that can be owned per pharmacist, was again enshrined in protective legislation.

So we will see guerilla tactics evolve, as corporates snipe at the heels of an ever weakening pharmacy and refine their techniques of wresting retail markets from under-resourced pharmacies, down-schedule more sensitive and pharmacy-aligned products, and lure cooperative pharmacists into an integrated corporate model that blurs the distinction of ownership in a consumer's mind.

It is this latter "leakage" that represents the greatest risk for pharmacy.
Coles, Woolworths and others are seeking significant "players" in pharmacy, because they have come to the realisation that the skill set required to successfully run a pharmacy is different to that to run a food supermarket. There is a definite and valuable synergy in running food with pharmacy, but it has to be a store-within-a-store concept to enable consumers to perceive the difference.
This realisation has not just come because of proposed legislation to exclude Woolworths ownership.
Under current (and new) legislation a pharmacy has to be a partitioned separate entity from other businesses, with its own main entrance.
Woolworths realisation has come because they now recognise that consumers want the subtle nuances that distinguish a pharmacy service from all others. This is particularly evident in the rapidly expanding "aging" population sector, a subset that is active, independent and well aware of the importance of health maintenance.
The corporates also now realise that they do not cater well for the aged and currently lack the knowledge skills to run a pharmacy. Supermarkets are not "age-friendly" requiring people to push heavy trolleys and carry heavy parcels as they leave the store through a checkout that is not "service-friendly" - all strengths that are evident in pharmacy.
It is almost as though the corporates have been "caught out" in their forward planning and are taking the necessary steps to acquire this knowledge in a hurry. They have found that their primary strategy in acquiring all additional markets (price cutting) is not working so well for a pharmacy acquisition, and has their traditional strategies in slight disarray.
In the process they are quite happy to trample on the traditions of pharmacy, partly through ignorance, and partly because pharmacists themselves are seen as an impediment to their goal setting.

This is why we have seen Woolworths set up their in-store health and beauty departments as "pharmacies" i.e. all traditional pharmacy lines in a corner near the front of the supermarket - a strategic location that can either be partitioned off (with a pharmacist installed) or as a non-partitioned area which is being given a separate (but integrated) identity and still called a pharmacy.
This strategy allows Woolworths to "pioneer" a pharmacy first, as a health and beauty store-within-a-store, and then jump to leasing the area to a pharmacist, or wait until they can directly employ their own pharmacist after legislative change.

Woolworths staff call these entities pharmacies, and all internal correspondence similarly refers to them as pharmacies.

The strategy will allow for relentless pressure on pharmacy, and will force traditional pharmacy suppliers to line up to position their products in this new pharmacy model.
Suppliers realise that the traditional "cottage industry" version (as promoted by the PGA) will ultimately collapse, and not provide the support required for their specific products.
Traditional pharmacy wholesalers will be in the front line of this transition, for as they look to their bottom line, they will be forced to inflict higher prices on community pharmacy customers, thereby fulfilling the claim made by Roger Corbett that Woolworths can do it cheaper.
The fact that he stumbled after making this statement (a newspaper survey found that Woolworths was up to 56 percent higher on some pharmacy prices), does not mean that long-term he will be unable to deliver.

To reinforce their pharmacy model, Woolworths have registered two trade marks:
* Number 980219 "PHARMACIST @ WOOLWORTHS"
* Number 980218 "Pharmacist at Woolworths"

The sealing of both these trade marks is due on the 29th October, 2004, and it is hoped that the PGA have lodged an objection to the use of the word "pharmacist" as being illegal under current legislation.
The registration of two similar trade marks may not be significant, but I would reckon that one will be applied to an online version of a Woolworths pharmacy offering, while the other will attach to the "bricks and mortar" version.
Sound logical?

So what is really driving this grab for pharmacy by all and sundry?

Have you noticed how little time you have over the week to get things done.
The myriad of chores that mount up each day of each week is being driven by our personal time management budget being stretched to the limit.
We are all expected to do more with less, primarily because our individual capacity for generating wealth (and a bit of freedom) is being diminished by the transfer of wealth to global corporates, leaving a reduced money pool for we mere mortals.
We are literally being forced to do more with less in an attempt to break even.
Thus, to attempt to break-even in time management, we adopt time saving methods to complete our chores (mobile phones, Internet banking, e-mail etc.).
We embrace extended shopping hours, Sunday trading and working lunches as we endeavour to "catch up".

This is a global trend and is summarised in one word - "convenience".

Consumers will support any enhancement to "one-stop" shopping because it is convenient.
The addition of a pharmacy to a "one-stop" shop is seen as a natural evolution (by corporates).
Additionally, pharmacy is seen as a destination point, and a health resource through information services. It is an alternative to visiting the doctor (because we don't have time to visit!).
A visit to a pharmacy to "top up" on health represents 32 percent of Australian consumers, and this has an irresistible appeal to the likes of Woolworths, who are currently stalled on a static sales base.

Further, as Australia has no major health and wellbeing "brand" such as say, Boots the Chemist in the UK, and Coles and Woolworths see no opposition to absorbing the lion's share of the pharmacy market. Basically a $10 billion bonanza for very little cost and outlay.
The icing on the cake is that companies such as Woolworths can capitalise strategically by becoming destination points.

This is where the PGA have missed the point and have literally sold out on community pharmacy.
If they had supported company structure for pharmacy with only pharmacist shareholders, strong regional pharmacy brands could have emerged and made it extremely unattractive (and costly) for Woolworths to even contemplate the moves they are making.
Although these entities would be competitive to the residual "cottage industry" models that wished to stay in that format, there would have still been room for them to survive.
The PGA has not won - it has only bought a little extra time, and with no survival strategy to build a strong and unified brand, pharmacy is left in a more vulnerable state. The fact that new legislation will allow one pharmacist to own five pharmacies is uneconomic, as you need a minimum of ten units to totally absorb the costs of a basic central administration, with economies of scale occurring after ten units.
This is not the stuff of a strong regional brand, but more in tune with inhibiting the number of pharmacies Woolworths can control through one pharmacist.

In summary, from a corporate perspective, pharmacy is seen only as enhancing the convenience factor of an existing supermarket, creating a destination point that in total, could be leveraged to become one of the most important and profitable components of a one-stop-shop.
Left in a cottage industry state, pharmacy will struggle to provide existing services.
Proper investments in required structure, human resources, marketing and brand building, systems development, and professional development, particularly in the delivery of cognitive services, will be unable to be met satisfactorily. Industry support will gradually dissipate for official pharmacy and transfer to the corporate sector, accelerating pharmacy weakness.

Individual pharmacist salary or business investment returns will continue to remain at the bottom of the list, when compared with other professions.
This will make it easier for Woolworths, and other corporates, to lure pharmacists to divulge knowledge and skills to the corporate environment, simply because they will pay better in the short term.
Long term will be a totally different story.

Where is pharmacy's future vision in all this?