We may be fed up with the term "credit crunch", but there is no denying that we are entering a period of economic uncertainty. As consumers tighten the purse strings, all retailers need to be reviewing their business practices to ensure that they survive these tough times. Pharmacy is a unique retailer in that people will always need medicines, however the front of shop could suffer greatly. In flush times, we tend to soften our approach to costs but during these times, it really is all about back to basics. For many of us including the consumer, we have never experienced a recession and hence we are not really sure what to expect. However, common sense should prevail in good and bad times and pharmacy owners and managers need to apply basic business principles.

The Christmas period is an amazingly competitive time, and consumers will look to those retailers providing the best offering. It is no secret that online trading has gained momentum each year and a number of companies have increased their online sales while the bricks and mortar turnover has declined.  However, it is not all doom and gloom, retail analysts have confidence that the marketplace will be able to ride the storm, but warns that those who fall by the wayside will be the weak businesses who not apply common sense to their business practices. Therefore in this feature, we will focus on the retailing basics.

Sales Promotion and Discounting

Becoming a discount retailer does not make sense, unless this is your key business. Simply cutting retail prices will not bring you benefits. In fact, you are just throwing margin away. You must offer value to the consumer. Ensure that your gondolas offer good value. Stay away from unbranded goods. The customer is more likely to buy a promotion on a branded product than an unknown line.  This is due to the fact that for many of us, we have never experienced a credit crunch and we cannot appreciate what it must have been like to not be able to afford branded goods. Hence, it makes better business sense to promote the products that the consumer is used to buying.

Review Purchasing Practices

You tie money up in stock; it makes sense to ensure that you release it as quickly as possible. But this does not mean discounting everything and throwing margin away. Many companies who have taken this approach have found themselves in difficulty this year. However you need to focus in on what you buy, how you manage stock in your pharmacy, how you sell to your customers and what you do with slow sellers.

It is essential that you that your purchasing maximises your gross profit. This should be an obvious starting point. Review your purchasing practices for both the dispensary and front of shop. Ensure you are receiving the best deals that you can get, so this means that you need to speak to your suppliers.

Before you buy in bulk-consider what are the benefits? -Is the extra discount enough to cover the cash that you have just tied up in the stock? Do not let your ego get in the way-sometimes we just like to buy in bulk because it is a power thing-really consider the money you are investing- look at your dispensing figures for these items- you can get this from your dispensary PMR computer. If you have more than one pharmacy and say buy in bulk to re-distribute-look at the costs of storage and re-distribution-is your additional margin gobbled up by the additional costs?

Analysts claim that the biggest retailers or members of buying groups will survive due to the fact that they can buy most economically. If you are not in a buying group, consider speaking to a few colleagues to develop a group. Apply the 80-20 rule, look to agree deals on goods that deliver 80% of your turnover, do not get bogged down in low-margin, low value goods.

Applying category margins will keep you focused in the front of the shop. Review sales for front of shop and divide the shop into sections e.g. over the counter medicines, vitamins and supplements etc. Do not get carried away with categories- eight or nine is sufficient. Now attach the margin that you are achieving in each section. For example if you get 45% in your vitamins –why fill one metre with hair sundries attracting 20% of very little? By doing this you are placing a space limit for less profitable lines and clearly indicating to your employees that you do not want three metres of space taken up with shampoos and conditioners. Obviously the space allocation also depends on your store.

If you are allowing employees to purchase stock- it would be worthwhile finding out –Do they know understand why they buy something? - Do they understand profit margins? – Do they appreciate what a mark-up is? - Do they understand what bonus stock does for profit margins? It is amazing when a pharmacy manager or owner spend a significant time in buying bulk deals of branded generics but spend very little time focusing on what their employees are doing with their money at the front of the store.

It is no secret that online trading has gained momentum each year and a number of companies have increased their online sales while the bricks and mortar turnover has declined.

It is important not to close your mind to new business opportunities. You still need to develop the business. If a new product or service comes along, apply common sense principles. Consumers will still want to see new products and services.

Efficient Stock Management

This is a critical function of any retailer. The money is tied up here, so you need to maximise your sales, whilst minimising any losses.  Some basic principles include

1. Set stock levels to avoid over-stocking.

2. Walk your shop and store-room to identify slow sellers and redundant stock. Get rid of the stock.

3. Minimise losses through damages and out of date stock.

4. Avoid elastic-band items. You know these. You buy a single item for a customer and somehow it makes its way on to shelf. When it sells three months later, it is ordered again. These are real time wasters. It is better to maintain the customer loyalty by ordering the item and contacting the customer when the product arrives at your store. If it is not picked up by customer within an agreed time, send it back to the supplier, but watch out for supplier return times.

5. Minimise sundry items. These are low margin and too many pharmacies devote excessive space to these lines.

6. Chase any outstanding credit claims. Ensure that claims are raised immediately following a discrepancy.

Christmas

Many of you will have bought Christmas stock by now, in fact some of it has already been delivered. If not and you are looking to purchase goods, be very clear about your approach. there are some basic principles;

1. Work out exactly how much space you will give across to Christmas merchandise. This should include the number of sections, shelving and the width of shelves.

2. Set your budget and stick to it.

3. Select the key suppliers and talk discount.

4. Stick to key brands. There is a temptation to stock "cheapy" items, but they will be your Christmas leftovers. This is even obvious in good times. Walk into any pharmacy in Ireland after Christmas and they have shelves of unbranded stock at halve price.

5. Perfumes and aftershaves- stock the key brands. If you do not have an agency, then stock the top 10 female fragrances and up to 4 to 5 male aftershaves. Avoid too many body lotions, shower gels as they always get left after the fragrance is sold. Celebrity fragrances make up to 40% of all sales, so make sure you stock the key lines.

5. Choose items that can be displayed. If something cannot sit on a shelve without falling over, do not buy it. The consumer does not have time to search through your merchandise.

6. Ensure that Christmas stock is in prime selling areas e.g. gondolas, counters.

7. Leftovers must be cleared out of your pharmacy immediately after Christmas. In fact, ensure that your sale commences on the first trading day after the Christmas period. Do not be tempted to keep the merchandise to sell throughout the year. If the latter was the correct approach, do you not think more of the big retailers would be doing it!

Streamline Costs

Critical to any successful business is matching their costs with a seamless customer service. However, cost reduction should never affect the customer. The customer should not feel the affect of your cost reduction. Review all costs to the business. If money is leaking out then you are losing out.  An approach to costs is to streamline, whilst ensuring that you are delivering a bright and attractive package to consumers. The modern customer will get bored with a tired store presentation. When faced with cost reduction, most retailers will look first at salaries as this tends to be their biggest expenditure. You must balance staffing with customer service, so cutting drastically on employees is a sure way to produce a demoralised workforce and ultimate poor service to the end consumer. Focus on costs that can be reduced or streamlined and proactively work to reduce them. When retailers do this, they often wonder why they had not done it before. Focusing on the correct costs should be at the top of the agenda during boom times and downturn. It is senseless to cut back on areas that actually deliver a better customer experience than your competition. 

Promote Your Uniqueness

Pharmacy is unique. You are a key professional on the high street. You are the most accessible and you stock confined medicines. You offer free advice on healthcare and manage consumer's prescriptions. So, make the most out of this. The grocery store cannot compete with you on this level. Too many pharmacists hide this talent and differentiation behind a bushel. Promote yourself!

Manage Your Staff

It would be easy to cut back on staff at this point, but it would be disastrous for your service to lose the good people. This does not mean that you go mad with recruitment, you need to be sensible about what you need in order to deliver a seamless service. Unfortunately, you may be faced with annual pay increases and bonuses. And you need to be careful here, if you indicate in the slightest that there is a chance of a pay increase "We will see..." or "Maybe...", your staff will take this as "Yes". Check first are your employees fairly remunerated, if yes then you need to manage expectations. Some companies increase the variable part of somene's wages, for example set a bonus at €X depending on the pharmacy achieving its targets. In this way you are not increasing the base pay.

During an economic turndown, the smart retailer invests in their staff. Many businesses will choose to reduce or eliminate their training and development costs and this is a huge mistake, especially in a professional service like pharmacy. Customer service is what differentiates you at any time. During a credit crunch, when consumers are looking at prices much more closely, you may find that good customer service will help them decide between retailers.

Remember Your Customer

You still want customers to shop with you and it is even more important now to understand their needs. Delivering what the consumer wants is the very basic principle of any business and should not change depending on the economic climate. It does however mean that you may need to tailor the package differently during an economic turndown, but it is still what the consumer wants.

Watch the Competition

This should not be a surprise. You should always be looking to the competition. You need to know what they are doing! Visit your competition and check out offers. The competition will be equally seeking ways to differentiate them from you!!

And Lastly Be Aware But Do Not Panic!

There is a heavy possibilty that we are facing a recession, but it is critical not to panic. When you are intimidated by the economy, you will make drastic decisions which do not benefit the business. Stick to common sense business principles. A good business should have been doing this anyway during the good times, so they should be better prepared for the economic bust up.