On The Other Side Of Christmas

Many pharmacies rely on Christmas trading to fill revenue gaps that may have occurred over the year.
December turnover in pharmacy usually is around 50% above the average of the preceding 11 months and often requires taking high risk.
That risk is getting higher with discount pharmacies continually expanding their market share. Also, Internet retailers (including pharmacies) expanding their market share as well.

This has spurred traditional “bricks and mortar” retailers to become more innovative.
For example, Westfield shopping complex is pioneering connected glass front windows enabling shop windows to be mobile phone connected to a virtual display.
Online ordering and payment facilities thus become available, also delivery or pick up service to complete the transaction.

So it is possible that some degree of nervousness is being felt by all sizes of pharmacies, because even though they may have some of the above bases covered, they may be faced with some disruptive market manoeuvre by a competitor, leaving the first quarter of 2015 with a bleak outlook, involving:

* Excess stock left for liquidation or disposal
* Cash flow reduced because of excess stock
* Forward-charged merchandise falling due in February
* PBS price reductions still impacting bottom lines and cash flows.

March-April is usually the crunch time for depleted cash flows and supplier payment difficulty. If this is likely to impact on your business in a severe way, you need to be planning your strategies now.
These may include:

* Planned stock liquidation, the traditional method of clearing surplus stock.
This impacts on the bottom line and this impact has to be calculated if you have to provide reportage to a bank or any other financial corporate, as it “keeps on keeping on” for a full year.

Space management will also be a component of the decision because lack of space inhibits opportunity merchandising, creating a further impact.

* Additional housekeeping to streamline all departments for any products not providing sufficient turnover.

* Reviewing all overheads and obtaining quotes from competitive service providers.

* Advertising campaigns to stimulate different areas of inventory.

* The use of corporate trade organisations.
These entities employ a system of corporate barter and will typically arrange purchase of surplus stocks and pay for them in another internal dollar format (called Trade Dollars T$).

To get rid of your internal dollars you have to pay for other services, typically marketing services using trade dollars.
These types of transactions are really a sophisticated form of barter, but benefits can be derived in the form of:

* Minimal loss in stock value. Generally your wholesale price is preserved.
* Can bring in new types of customers for the pharmacy.
* Freeing up cash to purchase other items within the barter network.
Advertising is commonly utilised which creates an opportunity to market your business at a time other businesses may not have the cash flow to work with.
This can generate new revenue streams.
* Maintaining optimum formal books of account that have integrity, which overcomes any pressure that may be exerted from financial institutions.

Corporate trades are increasing quite rapidly in the broader retail landscape, with some of these companies even offering interest free loans (of their own Trade Dollars) to stimulate sales between network members.
They are also developing e-wallets that can be integrated with loyalty club systems.
Most importantly, these new currencies can stimulate the uptake of new services (such as pharmacy clinical services) and on that aspect alone, part of your overall business should be devoted to the barter-type economy.
It is suggested that up to 20 percent of turnover can be dedicated to this type of economic activity without being disruptive.

Sometimes we have to investigate the lessons of history to predict and prepare for the future.
Health is fast becoming unaffordable in Australia and appears to be moving towards a user pays environment, similar to the US.
This is matched by corresponding reductions in our universal Medicare health service.
You don’t have to look too far back (pre-20th century) to know that health services, particularly in rural areas, were often paid for in-kind (usually poultry or market garden vegetables).
As the health economy becomes a two tiered version (the haves and the have-nots), bartering will become a more common exchange medium.

If you experiment and set up well in advance of this phenomenon you might find it will double as a wealth building exercise because many of the barter systems involve real estate purchasing.

And one other area that will help pressured pharmacists – the leisure and travel industry also accepts barter currencies so that you can get a much-needed break without disrupting your cash flow.

In our last edition we produced a planning list for 2015 but we had not developed our thinking to include corporate trades on the list.

We now think it prudent and essential that this item be added to the list.

Leave a Reply

Your email address will not be published. Required fields are marked *