Future of Pharmacy Business?

With digital development, every industry faces certain transformation. In some cases this transformation is radical and the changes are disruptive, in other cases it is rather mild. How can digital transformation effect such industry as pharmacies? For last several decades major sales channel for pharmaceuticals has been offline retail, therefore one might think that pharmacies don’t face as much disruption as other industries, but in fact, there are at least 3 directions, which are affected by customers turning to digital.

Digital provides choice and multi-screening and multi-selection

By growing their own private label brands, pharmacies implement vertical integration and become their own suppliers

Users get to choose more products from a larger amount of retailers at the same time. How does this impact pharmacy development? Given price comparison possibilities, pharmacies are intrigued to start producing private label drugs, because this allows them to control the product price/quality and end-customers cannot directly compare products which they cannot find in other pharmacies. By growing their own private label brands pharmacies implement vertical integration and become their own suppliers. A great example of this is Walgreens Boots Alliance – health and well-being enterprise, which is led by a pharmacy chain, that has expanded its private label by providing low price vitamins, grocery products, lubricants, ovulation predictors and tons of other health related products. Because of these strategic decisions WBA managed to sustain steady revenue and earnings per share growth in last 10 years and was able to increase the revenue twice from 53 bln. to 117 bln. USD.

At the same time medicine suppliers see this pharmacy activity as hostile and try preventing it. These pharmaceutical brands join e-shops on top of staying offline in the retails. Just on Amazon one can find hundreds of thousands of different health supplement products. All of these products have chosen either online-only presence, or an option, where they are both in retail pharmacies, grocery stores and on Amazon.

Such brands also try growing brand loyalty by promoting health related projects and by associating their brand with healthy living. This enables them to grow and control new online sales channels. Because of that former business partners are becoming direct competitors.

Pricing strategies and product leasing or investment fund

There is no such loyalty as a loyalty for which you have been paying your whole life

By spending only as little as 1-5 Eur per month you might build a fund for your baby right in the pharmacy chain, where you might spend the invested money with interest on the right products with special discounts only for you. Creating such programs would build up true loyalty among pharmacy clients, because there is no such loyalty as a loyalty for which you have been paying your whole life. Another strategy which pharmacies could also implement is product leasing. They can cooperate with the banks to insurance companies to reduce the risk, but in general leasing would allow them sell products in larger volume with 0 interest rate and let clients pay in even parts every month. This would make your personal health-bill similar to phone-bill, where you spend 10 Eur/month to have a worry-free month. And if you paid-up all your health-bills, you can continue paying the money to the pharmacy to fill up your health investment fund and get larger discounts at the pharmacy for the products that are tailored special for you.

Data driven subscription

Remember the Dollar Shave Club? Why can’t there be a Diapers Club?

Pharmacies know your purchasing habits. They hand out you loyalty cards and know which non-prescription products you buy and how often you do that. This opens up new possibilities for pharmacies. They can and should implement subscription based model for the routine purchases. Remember the Dollar Shave Club?

Why can’t there be a Diapers Club? Or Toothpaste Club? Charging 1 or 2 Eur per week for a private label toothpaste is not a hassle. Plus you get to remind your client about your brand 24/7 for Free. Ideally pharmacies should suggest you opting in to the program right at the moment when you realize that you might need the service. Data, used wisely, can help pharmacies come closer to our doorsteps without opening new locations.

These are only a few directions, which future pharmacies can take in order to grow further. All of them require pharmacies to focus less on being a shop-like place and turning more into a banking or insurance-like institution. In the end, they are selling a feeling of security, and this can be turned from a one-time interaction to a regular subscription.

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