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The Future of Pharmacy 2015 Update- Trends - Competitive Success for Suppliers and Retailers
The update to the 2012 presentation, The Future of Pharmacy in Europe, originally prepared for Zukunft Apotheke conference in Frankfurt
KIDDERMINSTER, U.K. - May 24, 2015 - PRLog -- “Retail pharmacies and their suppliers will need to find new strategies for competitive success in a healthcare supply chain increasingly driven by the needs of empowered consumers and impacted on by the challenges of new global players with aggregated buying power, digitally driven multi-channel retail strategies and spreading multi-format European retail pharmacy brands”, says James Dudley in a major presentation "Future of Pharmacy Factors for Success 2015".
In a study of consumer healthcare channels in 22 European countries, 671 million inhabitants shop over 224,000 pharmacies or drugstores and purchase more than €247 billion worth of pharmaceuticals, health and beauty products. This study forms the basis of the “Future of Pharmacy” presentation which identifies six essential factors affecting competitive success and these are: Consumers, Pharmacy Channels, New Entrants, Suppliers, Politics & Regulation and Technology.
Looking at the first factor – Consumers - An important if not obvious observation is changing demographics - with retiring baby boomers creating a surge in older, richer and healthier over 65’s. Nearly a fifth (18.4%) of the population in Europe’s main markets are 65 years or over, up from 15.9% in 2000. 5% are over 80 years, up from 3.6% in 2000.
There is a massive uptake of social media and smart phone apps across all consumer age groups and social segments leading to a rapid growth in tech savvy multi-channel pharmacy shoppers (with female bias), according to the presentation. These represent high value segments buying health related products. They are motivated by discounts and convenience and are driving the emergence of want it now shopper expectations.
Turning to Pharmacy Channels - The most noticeable factor is globalization of retail and wholesaler networks. These are seen as aggregating procurement, distribution and retail brand development on a global scale. There is no better example than Walgreens Boots Alliance AmericansourceBergen, which is probably the biggest generics purchaser in the world. The group has a global footprint with 12,800 wholly owned stores in 11 countries; 340 Distribution centres serving 180,000 customers in 19 countries and 9,000 affiliated partner pharmacies and drugstores in the Europe and North America. Within Walgreens and Boots drugstores IT and digital capabilities have become core competitive advantages producing multi-channel and omni-channel shopping strategies in the USA and Britain.
McKessan is another major corporation pursuing a global presence having recently acquired Celesio – one of Europe’s largest pharmaceutical distributors and retailers. The company has over 12,000 wholly owned and banner stores in 10 countries and 120,000 customers in Europe and the Americas.
Another trend emerging among Europe’s pharmacies is consolidation into retail groupings. Nearly half of Europe’s pharmacies and drugstores are members of groups. While a fifth of pharmacies are members of wholly owned chains (including 5% that are in State Owned Chains) a little under a quarter are members of affiliated groups – so called virtual chains.
Other factors in the presentation include: further consolidation of pharmaceutical wholesale channels and the growing power over suppliers as buyers and distributors. There is also a noticeable trend in promoting profitable front end and OTC medicines.
New entrants competing for a share of the European retail pharmacy market include non-pharmacy competition from mass market retailers many of whom are developing rival pharmacy chains especially in the United Kingdom, Switzerland, Sweden and Poland. Also, there are mass marketers such as DM in Germany and Austria who are creating and multi-channel alliances with online pharmacies. Re-regulation of OTC distribution channels also permits free sale GSL OTC Medicines in mass market, convenience stores and gas stations in a number of European markets.
Another new entrant challenger to traditional pharmacy is the growing significance of ‘pure play‘ mail order and Internet pharmacy. This is especially the case in Germany where the lack of wholly owned retail pharmacy chains has allowed online pharmacies to make incursions into consumer health and beauty sectors.
Factors influencing Suppliers - A critical trend according to the presentation “Future of Pharmacy - Factors for Competitive Success 2015 is the diminishing supplier power over healthcare channel buyers. This along with the commoditization of generics, increasing growth private label and concentrated buyer power of major groups is forcing supplier consolidation. This in turn has encouraged the globalization of consumer health brands by main players with consequent spin off of local and regional brands to niche companies. Suppliers are responding to the competition to win buyer loyalty through new channel focused trade marketing structures. At the same time there is a movement towards direct supply of in-patent pharmacy products and branded services to patients.
Politics & Regulation - Re-regulation of pharmacy establishment has been an ongoing trend in much of Europe over the past 10 years. This has been particularly the case in Sweden. Deregulation of distribution channels for non-prescription products has also been a trend in Northern Europe as well as Poland, Central Europe and the United Kingdom. Furthermore, there has been a number of positive moves within the EU to establish a functioning Europe-wide Rx to OTC regulatory framework.
Another major trend spelled out in the presentation “Future of Pharmacy - Factors for Competitive Success 2015” has been the legal recognition of Internet pharmacy and the introduction of responsive regulation in nearly all European States.
Yet, common to all European States has been the continuing downward pressures on price regulated services and pharmacy contracts this has contributed to lower margins and in many cases higher costs.
Finally technology - Pharmacies and drugstores are embracing the digital revolution along with most other retail sectors. Internet and digital technologies are making a major impact on planning, logistics and marketing. The presentation Future of Pharmacy Factors for Competitive Success 2015, links the rapid growth of Internet access among key consumer segments to the growth of online shopping for healthcare in Europe and North America. The view of the author James Dudley is “The Adoption of digital applications to retailing and logistics should be to create significant competitive advantage. This being essential if traditional pharmacies are to compete with ‘pure play‘ Internet pharmacies for valuable multi-channel shoppers“.
About the Author of Future of Pharmacy Factors for Competitive Success 2015 presentation
Future of Pharmacy Factors for Competitive Success 2015 is the update to the 2012 presentation The Future of Pharmacy in Europe is written by James Dudley and was originally prepared for Zukunft Apotheke conference in Frankfurt.
James Dudley is a well known researcher and writer and is author of the pharmaceutical industry’s biannual channel management report OTC Distribution in Europe which has been regularly updated since 1992.More recently he researched and wrote Mail Order and Internet Pharmacy in Europe - Entering the Digital Battle Ground (2015 edition) and now considered the most authoritative work on the subject.
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