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Why is it essential to increase front-end sales? Because of the long-term trends of
  • Eroding Rx margins
  • Increasing expenditures for health/wellness/nutrition.
In addition
  • Front-end margins are not controlled by any government agency
  • Their average gross margin are ca. 40%-50%
  • There is an increasing reliance on self-care
  • The FDA is continuously approving Rx/OTC switches.
In pharmacy chains the ratio of Rx to front-end sales is about 40/60.

How can the independent pharmacy increase their front-end sales? Essentially by stopping to be a Rx filling station + convenience store and Instead becoming a top health care and wellness destination.

What makes any business successful:
  • Solving the most critical problems
  • Of its specific customers
  • Better than any of its competitors.
You have to ask yourself these questions:
  • Which customer groups am I serving in my specific location?
  • Of these - who are my preferred customers?
  • What are their most important health/wellness related wants/needs?
  • Which of these are presently not answered neither by myself or my competitors?
  • If I don’t have the optimal solutions, which providers do and how can I cooperate with them?
To keep your competitive edge you have to:
  • Keep listening to your most important customers
  • Avoid commoditization of products/services
  • Customize your products/services
  • Focus on your strengths compared to your competitors.
Which product categories should the compounding pharmacy focus on? You have to make the transition from an Rx driven to a front-end driven generation of profits. High potential categories in this respect are skin care, anti-ageing, cosmeceuticals, nutraceuticals, Aromatherapy, fitness, testing devices, DME, Dx and clinical services (e.g. MTM).  

On which services should the compounding pharmacy focus?
According to recent research 2/3 of consumers with an established pharmacist relationship are likely to try a new front-end product based on their pharmacist’s recommendation - so recommend!

Health screenings like blood pressure, cholesterol, blood glucose, bone density, body composition, skin damage, anti-oxidant status, vitamin levels, arterial elasticity set your store apart, help you gain status and open new channels to increase front-end sales.

Then there are educational follow up programs like weight loss, diabetes, hypertension, asthma, hyperlipidemia.

A compounding pharmacy typically attracts customers with a better than average education and higher than average income; therefore there is a huge potential for sales of high margin health care related front-end products. But these have to be actively sold - qualification and motivation of your staff are critical here, and on the shop floor the presence of a competent + proactive front end manager and consultants is a must.

How should a compounding pharmacy compete against the chains in the front-end?
With its strengths: personal relationships, health/wellness related expertise, skin care/nutritional etc. brands unavailable in chains, counseling-intensive products and services.

Successful retailing is about these two commandments:
1. Be different from your competitors
2. Be better than them.

The most effective way to achieve both goals is a new, attractive, state-of-the-art look. E.g. Johnson Compounding and Wellness Center in Waltham, MA within only six months of their redesign increased their Rx and front-end sales by more than 60%; and in less than a year they won away more than 1500 cash customers from their competitors.

Compounding pharmacies don’t have the budget for a market research department. But they can use Department Stores to get vital information; their time proven strategy: offering their customers a unique and always exciting shopping experience.

Therefore the pharmacy should appeal to all senses to create a feel-good or oasis atmosphere. Optimal lighting is crucial to increase sales, and pleasant scents and soft/upbeat background music also help.

The category management should be solution- (not product-) specific, e.g. a diabetes station, a 'senior corner' with all items of use to the elderly etc.

An interesting new trend are med-spas connected to the pharmacy and offering treatments by licensed health care and cosmetic professionals; they allow the merchandising of complementary OTC products, and typically result in respective sales increases of 20%+ already in the first year.

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