http://www.ecrs.com/Cover Story | Front-end Focus
Community pharmacies are in an unusual position within the spectrum of healthcare providers. They are staffed and often owned by people with clinical degrees and are destinations for health needs. At the same time they are also in a strong position to serve this same customer base as retailers. Becoming a good retailer is good for your customers, as you will be able to offer them more of what they need. And that’s good for your bottom line, as you develop revenue to alleviate the pressure on the prescription business.
But harnessing the power of being a combined retail and health destination is no easy task, particularly within such a competitive environment. Between the vast array of brick-and-mortar retailers and Amazon Dash Buttons backed by same-day delivery, it can be very difficult to find the right retail path for your pharmacy. Once you do find your path, then what about the tools and staff to make retailing work? Putting your focus on the front end is a tricky business indeed, but one that you can master. We’ll hear from four pharmacies that have found different paths to success.
Defining Front-End Goals
| Jaime Cunningham|
Small-town, main-street pharmacy and retail destination.
A primary step toward success is clearly defining what your goals are for your front end. In a smaller community, there’s a good chance to become the main shopping destination, once you understand what your customers need. That’s the case at Topeka Pharmacy, which store manager Jaime Cunningham describes as being four shops under one roof. “We have our prescription business, of course,” she says. “Then we also have gifts, greeting cards, and flowers; a second floor almost completely taken up with fabric and notions, because we’re in the middle of an Amish community where they still make all their own clothing; and a café. We try to be everything the community needs under one roof.”
Similarly, the goal at CarePro Health Services is to provide for all the needs of the pharmacy’s customers, according to Director of Community Pharmacies Zach Schultz. “We want to be able to look at what patients are buying, and then make smart decisions about what other items may be complements to their needs,” explains Schultz.
Majoria Drugs is competing in the New Orleans metro market, which means that it has different goals as a retailer. In this case, Majoria has decided to focus on a specific community of customers, according to Operations Director Mike LaCombe: those who are seeking an integrated pharmacy concept with natural, organic foods and a large selection of premium vitamins, supplements, and homeopathic remedies. “We used to buy the major brands by the truckload to stock our stores,” says LaCombe, “But then we realized that we could no longer compete against the Walmarts of the world and other mass merchandisers. We looked for a way to give our customers a reason to come into the stores.” The answer was this more-focused selection of goods, backed by service and expertise such as specially trained staff dedicated to the vitamin department.
|Take A Look Inside Topeka Pharmacy|
At Lehan Drugs, the front end has come to focus on women’s health, according to VP of Sales and Marketing DJ Larson. This is the result of an evolution that began 10 years ago that’s seen Lehan’s gradually remove the more typical front-end items such as cards and gifts. “We have become a women’s healthcare destination from start to finish,” says Larson. The strategic shift gained momentum three years ago when the Affordable Care Act went into place with a provision that requires insurance to cover breastfeeding supplies. “We saw that this could be a huge opportunity,” says Larson. Lehan’s started including its expertise in maternity products and care into its outreach to physicians, building a referral market that now extends up to 30 miles around the store.
Putting The Pieces In Place
Once the vision is there, it’s time to make sure you have the right technology and people in place for retail success. On the technology side, it’s a good idea to make sure you have a robust point-of-sale (POS) system, and that you are using it to its fullest. For example, Jaime Cunningham reports that POS from Retail Management Solutions is central to making sure that Topeka Pharmacy’s retail business is as strong a contributor to margin as possible. “Our retail face is the first and last connection with the people who walk through the door,” she says. “POS helps us do that, and we know that we need to utilize it the best we can.” At the highest level, this means using tools such as sales history to figure out which products are moving, where Topeka Pharmacy needs to reduce inventory, and where it needs to increase it.
At Majoria Drugs, Mike LaCombe is using POS from ECRS, as well as the pharmacy system from PioneerRx, as the foundation for a complex process that has to manage traditional vendors for pharmacy OTC items; organic and natural grocery suppliers; and a vitamin department served by over 50 vendors and carrying 3,000 different items.
|Take A Look Inside Lehan Drugs|
Working With Facts, Not Assumptions
All these pharmacies are looking to their POS as the hub for managing the complexities of their retail operations. And one thing that’s clear is that getting good at retail means being comfortable managing a wide array of products, not all of which may come from big wholesalers or come ready-labeled for easy management. At Topeka Pharmacy, for example, Jaime Cunningham uses the POS to print barcodes to apply to any products that don’t come already labeled that way. “We put all the data into the Retail Management Solutions product manager module,” she explains. “We’re recording a range of details, like how much an item costs and when we got it. When it has a barcode, we can track it the same way we do any other item in our inventory.”
Marrero and Terrytown, La.
Independent pharmacy in the New Orleans metro area. Large, high-volume stores feature about 6,000 square feet of retail space.
This ability to barcode everything means that Topeka Pharmacy does not have to lump unusual items into a mass general merchandise section. Instead, Cunningham can apply a powerful inventory management tool called fine lining to everything the store carries. “Each item in the store fits into a category,” she explains, “and we are able to make these categories as specific as we need to. For example, we have an eight-foot section of pain relief products, but it’s not all the same item. Within that pain relief category, we have a breakdown of ibuprofen-based, acetaminophen-based, and other categories. We can get down to a level where there may be only a few items in a very specific fine line.” Then these fine lines are all individually trackable for key metrics such as sales and turns.
This level of detail supports a better grasp of financials, too. Cunningham reports feeding fine-line reports into Topeka’s accounting software every day. “Then we can do a comparison of our cost of goods sold in a specific section versus our actual sales,” she says. “We can see when we’re buying way too much inventory or when our margins are not meeting our goals. We can also see when we’re doing very well and think about expanding a section.”
Cunningham can also use this fine-line data to generate a sales history that makes for informed bulk-buying decisions. “You can get these offers that look like great deals from your wholesaler,” she says. “We use the product manager sales history to determine whether or not a deal is really worthwhile for us. If we can see that we only sold three of an item in the last six months, then we know that 12 are going to last us a very long time.” Cunningham also takes other factors into account when assessing bulk buys, such as the cost to borrow money to finance the purchase and the space required for storage.
Mike LaCombe looks to POS to manage inventory effectively as well, placing particular emphasis on turns and inventory costs. In Majoria’s case, a key component is a tool within the ECRS POS called ECRS Gateway. “This is a portal where we can send and track orders to our vendors via EDI [electronic data interchange] or email,” explains LaCombe. “And after those orders are processed, ECRS Gateway then creates worksheets for us to import new items into the POS. It tells us if items have changed UPCs [universal product codes], or they have gone up in price.” LaCombe uses this feature to manage every department, sending multiple orders out to multiple wholesalers every day. “We manage both our stores centrally using ECRS Gateway,” says LaCombe. “We’ve found that this takes a tremendous amount of pressure off of the staff managing our retail, which is very important to us. We want them focused on the customer.”
Topeka Pharmacy found the ability to precisely manage inventory critical when a dollar store moved into town recently. “We knew not to try to compete at the same level,” says Cunningham. “We knew not to try to be a dollar store and knock our prices down across the board to where we wouldn’t make any margins.” Instead, Topeka set the goal of using its POS system to create one or two products in key fine lines that are priced to compete.
|Take A Look Inside Majoria Drugs|
“We found a very inexpensive acetaminophen, for example,” says Cunningham. “And that’s our bargain item for our pain relief category.” Once Topeka sets a price on an item like this, it can then lock it using the product manager module. “Even if our wholesaler ups the retail on it, ours will stay at the lower price we’ve set,” says Cunningham. “We also have safeguards in product manager to prevent sales below cost with this price lock feature.” This ensures that these products continue to play the role that Topeka Pharmacy has assigned to them.
Director of Community Pharmacies
CarePro Health Services
Cedar Rapids, Iowa
Provides pharmacy services, home health nursing, medical equipment, and healthy living programs to patients and clients in eastern Iowa and western Illinois.
When you really understand how your inventory moves, you can also make better decisions about staffing. A prime example offered by Cunningham is Valentine’s Day. Because Topeka has all of its seasonal and holiday items carefully fine-lined, Cunningham can see a precise sales history. “We’ve seen that there’s a pattern that, if Valentine’s Day is on a Friday or Saturday, people don’t make their holiday purchases until a day or two before the holiday, if not the day of,” she says. “So we know in a case like this not to start staffing up too early in the week.” Good data from POS systems also supports good decisions, moving your retail operations away from management by tradition and guesswork. For example, CarePro Health Services decided to use the data from its POS to gain a better understanding of the demographics it serves. “We were able to combine data from our QS/1 POS and pharmacy systems and break down the demographic of who was really being served in one of our pharmacies,” explains Schultz. “We thought we were serving mostly seniors, but we ended up finding out we had a lot of moms who were filling scripts for themselves and for their kids.” These facts led Schultz to think about complementary products like children’s medicine and even toys.
Getting Good Advice
Zach Schultz talks about the key role Good Neighbor Pharmacy‘s business coaching makes, and Mike LaCombe talks about the importance of getting good retailing advice from retail experts.
“When you start looking at real data points, you really start taking away some of the assumptions that you make,” he says. “We assumed we primarily served an older population because these were the people who were coming in and mingling, the people who we had had really good relationships with. The younger demographic was more focused on a quick trip, rather than taking time to chat.” CarePro Health Services has been able to use its data-driven insights to boost its front end by being more dedicated to the younger patient population that had not been as visible before, while maintaining the strong relationships it has built within the senior population.
Mike LaCombe is another big proponent of the powerful knowledge front-end data offers. “It’s all about data mining when it comes to inventory,” he says. “And you can data-mine in ECRS at the touch of a finger. Everything is available to you.” According to LaCombe, Majoria has learned a lot by digging down to the item level. LaCombe runs reports at the item level to set reordering levels and determine how many days’ stock to carry and uses an algorithm called demand fill to track item sales by specific windows and identify seasonal peaks in sales. “Where we really find value in these POS functions is in our vitamin department,” he says. “Our average retail on most of our vitamins is over $10, and we’re carrying some expensive inventory there among 3,000 different items. We need to be able to dive in and say: ‘Hey, we’re not going to carry a $30 vitamin anymore because we’re not getting the return on it that we need compared to lower-priced version.’”
Clearly data and the systems that collect and manage it have to play a central role in your retail decision-making. “I tell everyone that I talk to that data is awesome,” says DJ Larson. “If you can’t get the data out of your systems, then you’ve got to learn how to get it and then learn how to analyze it.” This data has been central, for example, for building Lehan’s marketing plans. “People ask me, ‘How do I get started with real marketing?’” says Larson. “They don’t have a marketer on staff, they don’t have a salesperson. What I tell them is that before they hire somebody or start spending money on Facebook, they really have to analyze the business to understand where they can grow. For example, they should know who their following is and who their top prescribers are. If you don’t know that, then you really can’t start marketing yet. You really need to understand your business and where you’re growing from to understand where you need to go.”
VP of Sales and Marketing
DeKalb and Sycamore, Ill.
Community pharmacy with a focus on women’s health.
Strong data from your systems can help you know when to say yes in circumstances when you might otherwise not. CarePro Health Services was able to make an informed decision to begin carrying specific OTC creams in its oncology and radiology department. “We had certain prescribers ask us to carry these items,” says Schultz, “and we knew from our pharmacy data that they were among our better referral sources. So of course we said yes, and now we are able to meet these patients’ needs for these specialized items. The data helped guide us to build even stronger relationships with these referring doctors and the patients.”
Majoria Drugs offers another example of the surprising things you can learn when you can collect and connect your data in sophisticated ways. According to Mike LaCombe, you might find out that an expensive, slow-moving product is actually a lot more valuable than a simple movement report might indicate, because it goes into the basket of a high-value shopper. “Our POS lets us grade products in a variety of ways,” explains LaCombe. “We can grade by contribution, velocity, revenue, and department. But the best part is grading by basket. A high-cost item can have a velocity grade of F, but a basket grade of A, and that’s a basket put together by a customer we want.” These are customers buying other items that are contributing strongly to revenue, and the insight POS gives LaCombe ensures that Majoria has all the products these customers are looking for, even if some of them aren’t best sellers.
Make Shopping Easier
Mike LaCombe offers another way in which Majoria Drugs is creating a better shopping experience for its customers, who are choosing to shop the stores because they are looking for very specific types of products. “We have this fantastic printer,” says LaCombe. “It’s an Epson C3500 color inkjet, and it’s allowed us to use labels and shelf identifiers to have an impact at the point of purchase.” Majoria has created specific tags to highlight the health attributes of different products, making it easy for shoppers to identify gluten-free, dairy-free, non-GMO, vegan, and organic products easily. “We add a little round color identifier on the bottom of our labels to help shoppers see what’s on the shelf at a glance. We’re also putting a chart up in the store to help customers find what they want as easily as possible.” LaCombe has found that this labeling is especially useful to help people navigate Majoria’s large vitamin section. “We will identify a probiotic, for example, that is a good complement for people experiencing prescription-related depletion,” he says. “It helps us integrate the whole shopping experience. And, of course, we can make more profit recommending a probiotic than we can dispensing an antibiotic a lot of times.” Another way to improve the customer experience is through alerts that support smooth customer interactions. Topeka Pharmacy is using the integration between its Retail Management Solutions POS and Rx30 pharmacy system in this regard in several ways. First, the pharmacy is managing house accounts within the POS more efficiently. “If we get a statement returned to sender,” says Cunningham, “We make a note in the POS that the account is on hold until we get a current address. A manager has to override this message to allow a charge.” This same information is then also available in Rx30. Whether the customer’s next interaction is with the pharmacy or with the front-store staff, everyone is on the same page.
Topeka Pharmacy also uses alerts at the point of sale to prevent a customer from picking up prescriptions for two different people. “I can’t tell you how many people with the last name Miller we have as customers,” Cunningham explains. “The pharmacy system shares enough data with the POS to let us know when we are checking out prescriptions for two different Millers. We can then double-check this and be sure that we don’t have a problem.”
Choosing Your Path
Front-end success doesn’t happen overnight. That’s what Mike LaCombe says. But he knows from experience that there’s a lot of opportunity for pharmacies that have the vision and are willing to put in the work to build revenue and create themselves as a destination. The technology is certainly out there to support these efforts, and LaCombe has seen it get better, faster, and easier to use every year. “It’s a lot quicker and a lot easier to run a successful front end now than it was even five years ago,” he says. LaCombe adds another example to all the data and inventory management tools covered earlier. He points to the advent of mobile technology that has empowered staff to walk the store, check prices and sales, add and subtract inventory, and generally manage some of the key details needed for retail success easily.
Find out more about Lehan Drugs and Women’s Health.
With so much powerful technology, in the end it becomes a matter of deciding on your vision. DJ Larson, for example, is part of the Cardinal Health’s Women and Health Initiative. “There’s been a lot of discussion about what we can do to provide a turnkey solution to help pharmacies get involved in this market,” Larson says. “We are thinking all the way down to the level of saying, ‘Hey, here’s what we would recommend to carry on an end cap.’”
A first step might be to look for what’s trending in your larger market area, or even nationally, and then try to zero in on how those trends may be playing out in your market. “We want to look at the big trends,” says Schultz. “And we want to benchmark ourselves against other stores our patients visit. We want to look at all the data and find out what things our patients are asking for, and even discover what needs they have that maybe they aren’t vocalizing. Then we can offer them products that they may be buying in other places, and in the end we will provide them with the retail experience they want. We are excited for that opportunity.” CT
Will Lockwood is VP and a senior editor at ComputerTalk. He can be reached at email@example.com.
Cover Story Survey