What does the future hold for independent pharmacy? Worried about the threat from online competition?
Not sure if you saw a recent article in Chemist & Druggist entitled 'Pharmacists fear online competiton' but in a poll conducted by C & D over 50% of readers believed internet pharmacy was 'a substantial threat' to their business.
There were quite a few comments left in the comments section but amonst them was a reply by the Pharmacy Centre which I think is worth highlighting and sharing as not only is it a comprehensive and well-thought out piece (well we would say that :)) it reflects the vision we have of where the market is heading for independents and serves as a precis for what we believe in.
Here is is:
Oliver Harris, Non healthcare professional
Posted on 22 January 2014
I can see where the likes of Numark are coming from. If you are an independent pharmacy and the majority of what you do day to day is servicing the repeat medication needs of a growing number of 70-90 year old customers on a growing number of items, most of your business is with people who value regular face to face interaction and who do not use the internet. It's easy not see the wood from the trees. In that context, the "threat" of internet pharmacy is no more than a small local concern of abuse of regulations permitting new entrants into the local collection and delivery market. "National" internet pharmacies such as pharmacy2u aren't much of a threat because they cannot provide local physical access. I would humbly suggest this either / or argument is a bit sterile and missing the point.
Ultimately this is not an internet versus local pharmacy argument. It is about a sector undergoing digitisation and ease of access and, to coin a cliche, it is the "bricks and clicks model" that will win out. The convenience argument of the local pharmacy is overdone. Convenience is not to have a shop open from 9-5 for many people nowadays. Yes, there are sectors where it still holds true - if you are "the only pharmacy in the village" or in a densely populated part of london and virtually all your customers live within walking distance to you, the convenience argument is still a strong one. If your customers drive to you, much less so. If you have local competition, increasingly customers will gravitate to those that offer the convenience of a good online service as well.
For vast swathes of the population convenience is access "when I want, how I want." I might want to order my repeat prescription in store the first time to talk to the pharmacist about the medication and to order online the next. Increasingly, more and more parts of the population find it positively anachronistic they cannot order their prescriptions online and internet usage is growing enormously up the age groups - 67% of 65-74 yr olds have used the internet (ONS stats for Q3 2013 - for those of you interested see http://www.ons.gov.uk/ons/rel/rdit2/internet-access---households-and-individuals/2013/stb-ia-2013.html)
More profoundly, pharmacy is being digitised and that means the impact on the sector will be huge. Think about how many sectors that have been changed irrevocably. Just as a minor example, in 2004, If you were the boss of an electronics chain you were doing very well. You told your investors after the dot com bust, the internet wasn't much of a threat; your customer valued being able to try products out and your staff's advice. Ten years on, there's no more electronics on the high street.
It may not look this way from the context running a pharmacy at the moment but with EPS, the whole business is being digitised. This is both a threat and an opportunity. The internet enables the formation of networks enabling independents to benefit from scale enabling them to provide the same sort of online offerings as the major chains and national internet brands at very low cost individually. Independents can provide a more nimble, personalised and local service. Crucially, independents already have customers, local brands and surgery relationships. Genuine Internet only pharmacies have to build those from scratch and acquire customers.
Change in pharmacy will be both slow and fast. The retail end is moving online very rapidly and with some serious "smart money" being invested and 10 years from now, pretty much the entire non acute / impulse or immediate advice part of the GSL and P retail market will be online.
For the prescription market it will take longer but 10 years goes by quickly. 10 years ago your smart phone or tablet didn't exist. 10 years from now, much of the current 75+ demographic will sadly no longer be with us or in a managed care environment and all those 55-64yrs olds will be your core market. 86% of them already use the internet.
More fundamentally, digitisation enables the value chain to be sliced up. Don't for one moment think there are not siren voices whispering in whitehall .. pharma companies musing how much money could be saved by shipping direct to patient or the chief pharmaceutical officer publicly musing last autumn that there might be too many pharmacies (note, NOT too many pharmacists) and wondering out loud if the NHS was getting the best use out of expensively trained clinicians by making them effectively paid for being purchasing managers.
As scripts are digitised, the low value add parts of the chain - purchase and supply - are easier to hive off and apply economies of scale to. With real time information on future pharmaceutical demand and globalisation of pharma supply there will increasingly be less value for the government in the current purchasing setup. Stock can be managed and scripts picked and packed much more efficiently in higher volume by robots overseen by a pharmacist. Fulfilment costs come down which is what government wants. Multiples are already moving to a hub and spoke model.
How does independent pharmacy compete in this world where the average revenue made per item continues to fall remorselessly? How does independent pharmacy survive if internet based distance providers cream off all the easy business leaving the independent sector with just the difficult stuff? Independent pharmacy needs to be thinking about this and framing the debate. The real value it provides is local face to face access where needed, knowing the customers, medicines management, verifying, involvement in primary care service provision etc and the contract needs to be reformed to reflect the implications of digitisation, to enable more service and clinically minded pharmacies to outsource the process of supply and delivery without losing the revenue rights and medicines management role.
Rather than dismiss "internet pharmacy" as a local market access threat or as of minor relevance in the core NHS business, independent pharmacy needs to be thinking about what convenience actually means for customers today and the longer term implications of digitisation and how independent pharmacy can capitalise on it's closeness to customer, and flourish through adding value by helping the NHS save money and delivering better outcomes in the community. If independent pharmacy doesn't start to think about that and see the internet as an opportunity and frame the debate, others will do so to its detriment.