Insights

What the Doctor Ordered: Leverage Core Categories to Drive Growth in Pharmacy
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What the Doctor Ordered: Leverage Core Categories to Drive Growth in Pharmacy

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Consumer confidence has been relatively stable in Australia in the past 12 months and has kept retail growth at moderate levels. However, sales for the over-the-counter (OTC) pharmacy sector have performed strongly over the past year. Total pharmacy front-of-shop sales for the year to April 5, 2015 was worth $5.5 billion and grew by more than 10% compared with 12 months prior.

As part of a quest to capture additional sales, we have seen some pharmacies dabble in ranging grocery-oriented categories such as confectionery, batteries and giftware. In reality, these categories account for a very small share of pharmacy front-of-store sales and growth is muted compared with core or traditional pharmacy departments.

Health, beauty and personal care all showed growth in the range of 9-12%. Within health, the vitamins and supplements category accounts for almost one-fifth of total OTC pharmacy sales and continues on a strong upward trajectory – up 20.5% versus last year.

Growth for beauty was driven by cosmetic skin care and cosmetic products, which grew 13.8% and 6.5%, respectively. Baby products were responsible for around one-third of the growth of personal care, with hair care, oral hygiene and toilet soap also making solid contributions to this department’s growth.

Accounting for 50.8% of OTC sales, health categories continue to dominate the pharmacy market and are a key driver of store growth. Beauty is easily the second largest segment, followed by personal care.

The size of the health segment makes perfect sense when you consider the strength that pharmacies have in offering specialised health advice from a qualified professional.

Competition from department stores is more likely to affect the beauty and personal care products, where specialist advice is less of a requirement. The less specialised nature of the products within personal care and the ability that grocery retailers have to offer highly attractive promotions make them a difficult channel to compete against.

Although the promotional strategies grocery retailers have followed over the past couple of years appear attractive, the opportunities for all pharmacists to follow this example on competitive products are limited. Pharmacists should be looking to free up this space for products on which consumers seek professional expertise as part of the decision-making process.