Not your typical pharmacy chain

National PharmaciesIn the retail area, being successful as a not-for-profit mutual organisation for over 100 years requires a streamlined business model.

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Established in 1911 in Adelaide, the Friendly Society Medical Association (FSMA) today trades as National Pharmacies. And with $285 million in annual turnover, it is the largest single owner of pharmacies in Australia and competes with banner groups such as Chemist Warehouse, Amcal and Terry White – all of which are franchised networks.

There are no franchisees or shareholders at National Pharmacies – everyone is an employee. As a member-based mutual society, the organisation is owned by the membership.

In addition to 54 pharmacies, National Pharmacies has 20 optical stores, a distribution centre and national office in Adelaide, and trades predominately in South Australia and Victoria, while retaining the right to own and operate pharmacies in most states across Australia.

The core values of the business have remained consistent over time, National Pharmacies managing director, Tony Wojciechowski, told Inside Retail Weekly.

“This is respect of the member and the employee,” he explained. “Profit – while not a dirty word – is not a key driver. We don’t do everything for the sake of profit at all costs.

“We’re custodians of a business that has to be around for another 100 years, so that’s the mindset that is in the business. It’s not short-term grab for the buck, or trade-offs. We take a much longer-term view that retailers don’t in general have. The mantra in the business is the pace of affordable change, so we will grow organically very slowly.”

Targeted eDMs driving sales
Currently there are around National Pharmacies’ 306,000 members, sales initiatives for the business are increasingly being driven by eDMs. “Because we sit on all member transactional data, we can have a one-to-one conversation with each member,” Wojciechowski said, “So we don’t advertise a lot above the line.”

The group is health focused and sensitive to seasonal product demands. For example, weather patterns are monitored, and as soon as there’s a string of days on which the temperature is forecast to rise above 20° in late Spring, a sunscreen offer will be communicated. “We find we have a great sales uplift and our competitors don’t even know we’ve done it,” Wojciechowski said of this subtle yet strategic marketing tact.

This is all part of National Pharmacies’ embracement of the digital age as a major initiative. Soon, its membership card will transform into an app, which will provide links to the company website and online store, as well as social media platforms, while also linking into National Pharmacies’ CRM system.

At present, the app is being trialed by 500 members and a major launch to all members is being planned prior to Christmas. This will encompass a number of features, including membership management and a store locator, as well as unique offers driven by GPS, improving the service to make it more seamless.

“So, when you walk into a particular store, and we know your purchase behaviour, your phone might vibrate and you’ll be able to see a special offer given in that store after you just walked in the front door,” Wojciechowski said.

Better staff ratios
The National Pharmacies business model revolves around a better service offer. National Pharmacies has around 1200 employees and, though a typical pharmacy may effectively have 1.5 pharmacists, National Pharmacies will have two to three at any one time.

“As there isn’t a profit imperative in the business, that culminates in a better service level,” Wojciechowski explained. “So our staff ratios to customers are higher than a typical pharmacy. We are actually improving that even further by putting more pharmacist hours into our stores. Research tells us that customers want more contact with pharmacists.”

This is part of National Pharmacies’ aim of presenting a better professional image.

“Whilst it’s still a retail pharmacy environment, we’ve decluttered our stores. We don’t stock them up with side stacks and we don’t sell toilet paper and dishwashing liquid. It’s purely a professional environment.” Wojciechowski said National Pharmacies’ preferred store layout focuses on functionality, with no obstructions in the line of sight in the stores, from the front door across the whole store.

“There are no big mass merchandise displays, bright lights or theatre, such as balloons,” he said. “More importantly, it makes the staff visible. So if you stand at the front door, it’s an unobstructed view to the dispensary,” he said.

“That’s counter-intuitive to a lot of store planners that say you have to walk past cosmetics, fragrances and high margin categories to get to the dispensary. We take a diametrically opposed view … because if you’re a mother with a sick child and want immediate relief, you just want to get straight to the pharmacist, not have to walk past that week’s specials and have to do a 180° pirouette around something to get somewhere. It’s service focused.”

The store size National Pharmacies aims for is around 250sqm, with 35sqm-50sqm of floorspace needed for the dispensary business. Generally, a typical pharmacy sales mix is 70 per cent dispensary and 30 per cent front of shop, whereas National Pharmacies is closer to 50:50.

“We typically find when we acquire a pharmacy, we can get a lot more drive out of the front of the shop than the previous owner was able to,” Wojciechowski revealed.

An annual subscription fee means members look to get value by obtaining benefits at point of sale, as each time the member shops there’s an increased return. “We find that a member spends 2.7 times more than a non-member,” he said.

Members obtain a benefit (where permissible under law) of up to 20 per cent off the retail price, while non-members (customers) pay full retail price. Some 85 per cent of total sales are to members.

“Though National Pharmacies looks like any other pharmacy chain, it’s not,” Wojciechowski argued. “We’re really an enigma. We have some nuances, and it’s all around respect for our members and our employees.”

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