What are the benefits to customers and the company of having an in-store pharmacy? What plans may food retailers have for increasing their market share of prescription and over the counter medicines?
RETAIL OPERATIONS
QUESTION!
What are the benefits to customers and the company of having an in-store pharmacy? What plans may food retailers have for increasing their market share of prescription and over the counter medicines?
INTRODUCTION
This essay will endeavour to examine the phenomenon of in-door pharmacies within Safeway Stores. Safeway owns and operates some 465 supermarkets, superstores, convenience stores, and one mega store in England. Through the 1980's and 90's food retailing has experienced radical changes. Such changes include out of town superstores, which enables organisations to increase their sales floor area. The average size of a Safeway Store is now 43,000 square feet. Safeway's aim is "to be the first choice retailer for the everyday food and household needs for today's family and the most dynamic and innovative retailer in meeting those needs." (Safeway, 1997) Through the use of surveys in-door pharmacies are highly favoured and are expected to be of high quality with opening hours to suit all customers. This all started in 1981 when Safeway provided a dispensing service for a health centre. By 1993 Safeway managed 56 pharmacy outlets and within a further three years this number increased to 94. Although Safeway managed all their own pharmacies, their competitors such as, Tesco, Sainsbury and Asda owned some of their own, but also had concessions. Generally company owned pharmacies are situated beside toiletries and health care departments within the main store. So what benefits did these in-door pharmacies bring to Safeway and the consumer?
BENEFITS TO CUSTOMER AND COMPANY
After reading an article from BBC online the Superintendent Pharmacist for Safeway Mr Paul Bennett stated, "in-door pharmacies raise extra income and increases customer loyalty". I was unable to find sufficient evidence to back this statement but through my own research believe this to be true, as we will see later in the assignment.
Benefits To the Customer:
Consulting rooms within the Pharmacy
If the pharmacist decided to do a health check or to speak privately with a customer these rooms will be used. In addition they may also be used for promotions, such as, demonstrating to asthma suffers how a particular inhaler works.
Health checks
Checks such as Blood Pressure, Cholesterol, height and weight measurements etc. are provided by Safeway at no extra cost. Therefore, if the patient does need medication they are likely to purchase it in the pharmacy.
Community Service
Safeway offer a number of community services, for e.g., The pharmacy will "free of charge" dispense weekly medicines and pre-pack them in hourly or daily doses, for patients in residential nursing care, instead of dispensing them in separate bottles. Secondly people with bad eyesight, or who has difficulty with the tops of security bottles may also use this service. All Safeway staff associated with pharmacies are members of the College of Pharmacy Practices.
Local Health Board
Safeway Pharmacy supports the local health board in new promotions, for e.g., providing methadone to addicts under supervision. This is so that the addict won't sell his/her weekly dose, or furthermore take it all in one go. The Pharmacy will be paid an extra fee by the health board for this service.
Benefits To the Company:
Customer Loyalty
Services listed above can only increase customer loyalty. Advertising such as, word of mouth would be likely to spread, meaning more customers will become loyal to the pharmacy, therefore generating profitability.
PLANS ...
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Local Health Board
Safeway Pharmacy supports the local health board in new promotions, for e.g., providing methadone to addicts under supervision. This is so that the addict won't sell his/her weekly dose, or furthermore take it all in one go. The Pharmacy will be paid an extra fee by the health board for this service.
Benefits To the Company:
Customer Loyalty
Services listed above can only increase customer loyalty. Advertising such as, word of mouth would be likely to spread, meaning more customers will become loyal to the pharmacy, therefore generating profitability.
PLANS THAT FOOD RETAILERS MAY HAVE FOR INCREASING THEIR MARKET SHARE AND OVER THE COUNTER MEDICINES.
Below is a table showing the number of pharmacy premises owned by Safeway and three main competitors.
Table 1.1
NAME
NO. OF PHARMACY PREMISES
(Correct as of 11/06/2002)
TESCO
213
SAFEWAY
08
SAINSBURY'S
93
ASDA
80
?Source: Royal Pharmaceutical Society. (Information Centre)
From the table above we can see that Tesco is way out in front, but Safeway own more pharmacies than Sainsbury's and Asda. Before opening outlets Safeway and other food retailers must obtain a dispensing licence from local health board. This is usually done in form of new contract or purchasing an existing pharmacy. The outlet must also be registered with the Royal Pharmaceutical Society.
The grocery retailers are extending their sales year on year, of over the counter (OTC) products and are estimated to have 26 per cent share of the market compared with the dedicated chemist such as, Boots, which still take the largest share with 67 per cent. (Mintel, 1997)
OVER THE COUNTER SALES
Firstly I want to distinguish between (over the counter sales) and the other three sources of income.
> (OTC) products are those that may be purchased without
a doctor's or dentist's prescription, although some restrictions
may apply.
> (Dispensing Sales) these vary between 25% and 80% of total sales and the balance is made up of (OTC) sales.
> An allowance paid by the health board for providing the service.
> Fees paid by pharmaceutical companies for promoting their products.
The OTC pharmaceutical market represents 18-20% of global pharmaceutical sales and is expected to grow to 25% of the market by this year. At present the European drug market is approximately worth £ 57.9 billion, making the European OTC market worth an unbelievable £13.7 billion. OTC sales in the UK increased by 4.7 per cent last year to £1241 million of which a sixth was spent on oral analgesics. (Church, 1996)
Furthermore, Pharmacy lines are divided into three categories. These are:
* POM. Prescription only medicines dispensed by a pharmacist from a doctor or dentist's prescription.
* P. Pharmacy medicines or potent medicines that do not need a prescription but can only be sold under pharmacist supervision. These are often larger packs of medicines such as aspirins.
* GSL. This stands for General Sales List. Products under this heading can normally be sold without a prescription and without pharmacist supervision. Therefore these products can be sold by self-service or open displays.
When the Office of Fair Trading (OFT) won a court case to abolish the concept of (resale price maintenance) the new legislation allowed pharmacies to discount over the counter products which in turn introduced even more competition, instead of charging prices recommended by the manufacturer. The Office of Fair Trading argued that it allowed drug companies to keep branded products artificially high. A good example of (resale price maintenance) was in 1995 when Asda attempted to discount vitamins and minerals. Such items were conditioned by (RPM) of over the counter medicines and discounting is not allowed. Within days Asda had to return to the prices recommended by the manufacturer or suffer the consequences.
On the other-hand The Community Pharmacy Action Group (CPAG) had campaigned to keep RPM. It argued that some 12,000 High Street Pharmacies would lose business and be forced to close if the supermarkets launched price-cutting wars.
A good example, is a statement from (IMS) which says " Cuts of up to 40 per cent in the prices charged by supermarkets for 12 tablet packs of Nurofen 200mg have generated increased sales of the product. So great are the additional sales that independent community pharmacists have lost 29 per cent of their market share in the first week after the end of resale price maintenance even though the actual volume of sales in pharmacies has remained virtually unchanged"
Source( IMS)
Six months from this, the grocery retailer's average price within pharmacies had risen, probably due to the fact that value was placed on the expertise and advice pharmacist give.
"The supermarkets appear to be giving greater reductions in prices for lines for which they have a lower market share where they can potentially attract the most business from pharmacies." Source: IMS.
As the government struggles to control NHS spending, price controls on prescription drugs and dispensing costs have created difficulties for all trades concerned. The trend towards self-medication has continued and more prescription-only products have been granted either pharmacy-only or general sales licences. This gives consumers a wider choice of OTC medicines.
MARKET SHARE
How do Retailers purpose to increase market share!
One Stop Shopping
Convenience is a major factor within Safeway Stores. Store facilities may include:
* Car park
* Dry cleaning service
* Pharmacy
* Pizza delivery (first retail store to do this)
* Photo Processing
* Post office
* Petrol Station
* ATM
Not all Safeway Stores have these facilities, because situations may differ. These facilities enable the customer to buy all they need under one roof. . Safeway pharmacies have the same opening hours as the main stores to add to the convenience.
Technology
The Internet has made a significant difference in the way we shop. Not only can consumers shop on-line but health advice is also available from the Safeway website concerning diabetes etc.
Refilling of prescriptions can be done over the phone 24 hours a day, 7 days a week. In Appendix 1.0 and 1.1 copies printed from the website are available to help print a clearer picture concerning health advice and refilling prescriptions.
Pharmacist Consultation
Safeway Pharmacists are available to answer medical questions. They make-sure consumers understand how to use medication safely and effectively. Staff can also assist in selecting over the counter products.
Own brands
The overall objective of own branding is to achieve competitive advantage. For e.g.
* Good value enhances store image.
* Good value builds customer loyalty to the store and own brand.
* Own brand may be perceived as equal to or better than manufacturer's brand.
* It is widely assumed that leading manufacturers makes own brands.
* Own brands can give a distinctive corporate image.
* Own brands carry the retailer's name into the consumer's home.
* Retailer advertising can benefit both the stores and the own brand
(Ogenyi Omar)
In April 1997 Safeway upgraded or launched 3200 own range products including OTC pharmacy lines. Own brand developments increased their proportion of sales to 46% in 1996, a trend aided by Safeway Savers range.
These products are usually slightly cheaper than manufacturer's product. Retail organisations want their products to be nationally identified. Advertising campaigns such as, advertising in magazines and to take a step further Tosco's had Dr Hilary Jones commenting on national television on how good their products were. When the public hear this coming from a doctor sales are likely to boost.
Other plans food retailer's may take to increase market share and (OTC)
sales may be:
* Special offers such as buy one get one free.
* Safeway have established care range products such as, face, body herbal mixtures etc. these products are less expensive and a low risk purchase for the customer.
* Store layout will also be vital. If the consumer can't see what he or she wants to purchase clearly revenue is likely to fall.
Although some of these areas are complex, they are generally simple ideas, which these large food retailer's are employing in order for them to increase market share and increase profits.
CONCLUSION
This assignment has examined the phenomenon of in-door pharmacies within Safeway and the plans they might implement in order to gain market share of prescription and over the counter products. I have covered many aspects from benefits to customers to government intervention in deregulating certain medicines and products so that they are available over the counter instead of having to receive a prescription from doctor's or dentist's. As food retailers continue to gain market share multiple chemists such as Boots and Moss the Chemist still take the larger slice of the market. With food retailer's and Multiple Chemists combined in my opinion the ordinary high street chemist (if I can put it in them terms) have virtually no chance of surviving. This is so because these large organisations have the financial backing and they almost dictate to the manufacturer the price in which products should be sold. The ordinary high street chemist cannot enjoy the same benefits of these large organisation such as: cheaper prices when bulk buying. Food Retailer's compete roguishly in many aspects, which is all good news for the customer because as long as the competition is intense the customer will receive cheaper products and better services in my opinion.
BIBLOGRAPHY
Hart, C. and Kirkup, M. and Preston, D. and Walley, P. (1997) Cases in Retailing: Operational Perspectives, Blackwell, Oxford.
Moir, C. (1990) "Competition in the UK Grocery Trades" Competition and Markets, MacMillian, Basing stoke.
Oldfield, B,M. and Schmidt, R. and Clarke, I. and Hart, C. and Kirkup, M. (2000) Contemporary Cases in Retail Operations Management, Macmillan, London.
.
Omar, O. (1999) Retail Marketing, Pitman, London.
Journal Articles
Omar,O. (1997) "Comparative product testing for own brand labels", International Journal of Retail and Distribution Management, Vol. 22, No.6.
OTC Bulletin. (2001) "Loss of RPM leaves stalemate in its wake" Advertising Ideas Supplement.
Web Sites
www.pharm.com
www.corporatewatch.org.uk
news.bbc.co.uk/events/ra2002/exhibition/.htm
www.morningnews.ac.uk
www.stores.org
