1. Retail customer numbers fall
Customers declined -2% last year and this has occurred steadily for more than a decade even though prescription numbers continue to rise. This trend shows that pharmacy retailing continues to be eroded by competitors (supermarkets, departments stores, health stores and the internet) – and that most pharmacies are not exploiting their #1 point-of-difference (expert service) successfully.
2. Beauty sales continue their rapid decline
Cosmetics sales fell -5% during 2018 and Hair Care sales were down -9%. Fewer and fewer pharmacies are the first choice for these products compared with last century, and the days of community pharmacies dedicating more than a third of their retail space to beauty products are over. Many successful health-focused retail pharmacies no longer carry a range of makeup.
Retail sales data from 120 pharmacies who subscribe to RPM
3. Leading OTC suppliers suffer
A number of the top-ranked suppliers experienced significantly lower retail sales in 2018 – showing that even the big players don’t always get their sales and marketing right. GSK dropped sales -4% last year. Go Healthy sales dropped -3% suggesting that they may have reached market saturation in the natural health category. RB were the biggest loser, down -10% with double-digit declines in their Foot Care, Cough & Cold and Eye Care product sales.
Douglas + Clinicians sales combined = #1 Ranked supplier
Retail sales data from 120 pharmacies who subscribe to RPM
4. Retail pharmacy stock levels are increasing
In a declining market (total retail sales -1%) pharmacies are holding +8% more stock. This shows that pharmacies are not adjusting their inventory in line with consumer demand. Part of this will be due to the growth in Gifts sales of +6% - a non-core category for pharmacy but one where buyers are easily persuaded to try new ranges in their search for sales. However OTC stock levels also grew in most categories – showing that retail staff are “better” at buying than they are at selling.
5. Hot products come and go
The Joint Care category experienced the largest year-on-year drop in sales of -24% due to the rapid decline of Arthrem sales since early 2018. Arthrem was a blockbuster product for pharmacies and contributed hundreds of thousands of dollars of sales over its two year run in the Top 10 best sellers list. The current “hot product” which smart pharmacies are cashing in on is Livon Lypospheric C sachets. While this product has plenty of imitators, the original brand is sought after by savvy consumers who will happily part with more than $50 for their monthly supply.
6. Seasonal trends matter
While it shouldn’t really be news that pharmacy retailing is dependent on the prevalence and severity of the cold and flu virus – the winter of 2018 followed a higher than usual peak of seasonal infections in 2017. So in spite of a late burst at the end of 2018, overall sales in this category fell by -5% Vs last year. The current summer weather has arrived late and the delayed start means that Skin Care, Sun Care and Foot Care sales won’t match last year’s.
7. Health Supplements is the new Cosmetics
Even though its growth slowed compared with previous years, the Health Supplements Category is now the largest contributor to pharmacy retail sales. Health Supplements sales grew +2% in 2018 and Digestive Care Sales grew +4%. This growth will continue but the increases are unevenly distributed – with some leading pharmacies experiencing double-digit sales growth due to their ability to provide specialist advice from trained sales consultants. Go Healthy maintained it’s clear #1 position in this segment in pharmacy, while strong sales of Good Health Turmeric saw Brandfolio (+7%) take the #2 position ahead of Vitaco (-8%) and Clinicians (+0%).
John Saywell is a retail consultant with 30 years’ experience analysing retail best practice. His company developed the RPM business intelligence software which provides benchmarking and smarter ordering for retail groups throughout NZ. He writes a monthly business advice column for The Pharmacy Guild of NZ and John’s Weekly Tips newsletter for The Pharmacy Co-op group.