Large National Internet pharmacies have continued to grow and expand over the last 12 months. We believe that their growth will eventually be checked as their business model will not cope well with more complex customers.
Small pharmacy groups can fight back by adopting the practices of National Internet pharmacies around efficiency while targeting their own local area. In this way, they can improve their businesses and claw back lost customers by becoming Local Internet Pharmacies.
Across England there are 349 Distance Selling Pharmacies which we will refer to as Internet Pharmacies. Most of these are small but a number we could class as National Internet Pharmacies due to their size, resources and ambition.
The best data we have is for England but these key messages cover Wales, Scotland and Northern Ireland.
There is a lot of attention on these National Internet pharmacies and their potential impact on regular community pharmacy. Is this the new model of pharmacy? Will they drive out bricks and mortar pharmacies?
Growth in this sector has been high over the last 4 years in fact on Pharmdata these pharmacies occupy 7 out of the top 10 places for items. This covers less than 3% of the items dispensed by English pharmacies in January 2021.
|4.||Boots Leicester including online||66,919|
|6.||West Elloe Pharmacy||47,968|
|9.||Chemist 4 U||37,679|
We know that millions have been invested in this pharmacy model to support automation, enhancing processes and marketing to find new customers.
Growth in item numbers has been successful and this has have been enhanced during the last year due to CV19. In fact Pharmacy2u increased items by about 40% and Echo 300% between March 20 and Jan 21.
What about sustainability of this business model? We know that Pharmacy2u in its last published accounts made a loss of £16m but they were predicting profits during 2020 so they may have reached volumes consistent with a sustainable business model.
Challenge for National Internet Pharmacies
Pharmacy is not like any other business in the UK, in fact Pharmacy in the UK due to the NHS is not like any Pharmacy in Europe.
At this time National Internet Pharmacies are supporting a small number of customers relatively. These customers are in fact also the least complex of customers that Community Pharmacy looks after.
This is by design, in the same way that Asda holds only best selling books rather than a full range.
It will eventually be more difficult for National Internet Pharmacies to grow. Competition for these simpler customers will grow and the number of complex customers may stall planned growth.
A lot can be learned by looking at Trust Pilot and focusing on negative reviews for National Internet Pharmacies.
National Internet Pharmacies have two specific problems which are very difficult to overcome.
They suit planned repeatable medication. Any changes in medication are challenging to cope with and the negative reviews support that a fully automated process running at high volume will always find this difficult.
Acute medication does not work for these companies. Anyone suffering with an infection requiring antibiotics will not want to wait a few days to obtain medication and there is no good process for a Pharmacy to hand back this prescription.
The other issue is that they do not know their customers and cannot provide a bespoke service.
Pharmacy2u has more than 500k customers it has to prioritise its single process rather than the needs of individuals, it cannot cope with the volume if it provides differences at an individual customer level.
I am certain Pharmacy2u staff care for their customers but differentiation is challenging and potentially impossible and if they try it is likely to go wrong.
Anyone working in Pharmacy will know that individual needs are often met and bespoke service is something needed and wanted by customers.
As an individual you understand that a company cares because it knows you and caters for your specific needs. As a National Internet Pharmacy company grows this becomes harder and harder.
The opportunity for your pharmacy
It is in these two areas where the opportunity for Local Internet Pharmacy exists.
Being local means that you can cover acute and repeat medication using the same process and within a response time demanded by the customer.
Being focused and smaller means that you can bespoke your services meeting specific needs.
Being local means you do know your customers and most importantly they know you. As an example you could be on first name terms.
You do not need 500k customers to be successful and profitable, you just need the right volume and processes.
If you are providing these services already then why are some of your customers choosing online. It might be because National Internet Pharmacies have tapped into a need that Community Pharmacy is not providing.
If you look at TrustPilot positive reviews for Pharmacy2u you can see this is a well regarded and wanted service.
National Internet Pharmacies provide a service that Community Pharmacy does not. This service relates to simple convenience and this supports the increase of Pharmacy2u and Echo over the last 12 months when travel was restricted and we were advised to stay at home.
I order online, its delivered to me at my door, very little hassle and I do not need to think about it. Amazon has taught the UK this is how you obtain items.
Local Internet Pharmacy – the fight back
We believe that Community Pharmacy in all its glorous incarnations needs to take back its customers.
It does this by acting locally as this is where it has strength and a unique advantage.
It also achieves it by adopting the strengths of National Internet Pharmacies by becoming more efficient.
We are calling this Local Internet Pharmacy.
Here is a simple plan
- Improve your processes to reduce time & effort
- Re-organise your space to support your new processes
- Train your team to the new processes
- Implement automation technology to further reduce time
- Review your local area and what attributes make it unique
- Decide on new services to attract new customers or retain existing
- Decide your strengths and make these prominent in any promotion
- Market your services locally through online and offline sources
- Incentivise your team to grow your items
- Regularly review and improve all of the above steps
You might suggest that the reason you cannot do this is that these large companies have invested millions in automation equipment beyond the reach of smaller groups and that you lack the resources to do the same.
You would be wrong as the cost of automation has fallen dramatically over the last 5 years and also increased its efficiency. As an example we sell equipment at £1k per month that supports MDS for up to 500 customers.
It is possible with automation to reduce manual effort by up to 80% with a further increase in accuracy. You have to implement well and choose the right type of automation but the return on investment is there.
Remember what is right for your customers and your local area might not be right in other areas. Your solution could be unique to you.
The key is to understand that some of your customers will come back but only on their terms. You have to adapt and to paraphrase from a famous film “If you build it they will come“.
As always if you need help from us we can be contacted via this website, phone, email or Linkedin.