How can your business avoid suffering a hangover following the sales explosion that coronavirus represents for many community pharmacies? Bruce Annabel & Mal Scrymgeour explain
The Hangover is a trilogy of movies in which the first installment tells the story of a group of four friends who attend a bachelor party in Las Vegas. When they wake the morning after, they have no memory of the events that had happened the night before.
As they pull themselves together, bizarrely, they discover a tiger in the bathroom. A real tiger in your house is not normally a recipe for success. It’s a major headache.
Pharmacy is starting to awake from its very own bachelor party, but as the excitement of the sales explosion of COVID-19 wears off, we’ve discovered our own ‘tiger in the bathroom’. And we are waking up with one heck of a hangover.
The party – Responding to fear driven demand.
The pharmacy party manifest in a huge spike in medicines and relevant retail health sales is tailing down and spiralling down in the case of shopping centre pharmacies. Managing continuity of your business and team in the immediate term to survive all this is critically important requires determining your priorities. There are the four key focus areas:
- Stay well. If you and your team are not well, the business does not function, or perhaps even open. If you are not well, you cannot perform your role in helping the community survive and recover from the health crisis. Staying well is job number one. It must always be the first priority.
- Get product. The wholesalers are working very hard under difficult circumstances to ensure supply, we saw their excellent efforts during the recent bush fires earlier this year. However, wholesalers rely on suppliers who in turn often rely on other suppliers further down the supply chain. The concept of ‘Just in Time’ manufacturing and keeping the lowest levels of stock that you practically can, is suddenly a deeply flawed model. Without doubt, there will be a ‘supply chain bubble’ that we anticipate having in impact in late April and May. This bubble has been created by three things:
- Manufacturers ceasing manufacturing for various periods of time
- Restricted movement of freight, especially air freight where capacity has dropped alarmingly – the ability to fill gaps in supply chain quickly is suddenly reduced
- Panic buying as people try to secure products, which in turn creates gaps
For products made in the US and Europe, this bubble will be months long. Get used to shortages and out of stocks.
Sell/distribute product. That might mean you continue to retail as you are, it might mean you have a ‘restricted access pharmacy’ where you can service customers, but with no contact. Deliveries might be something you find your business having to do in a big way, particularly for older people at home including those supported by the In-Home Care packages. If you have an online store, this might suddenly become a large part of your business. If you don’t have an online store, you might find that you need a team taking phone orders or making outbound calls. The upshot of this is that the potential to keep operating might mean more labour and different ways of working requiring different skills. Telehealth interactions demand will increase. That will change the economics, HR and reinvent the concept of professional service while altering your management approach of the business very quickly.
You need to communicate clearly to five groups:
- Suppliers and wholesalers
- Your bank, accountant and financial advisor
Your team need to know what is happening, management of different scenarios and how to stay well. Your customers need to know how you are operating, what you can and can’t do and most importantly, the rules of engagement including how to deal with fearful customers. Understand what your stretched suppliers and wholesalers can and can’t do. Your financial advisors/accountants will need to understand what changes are taking place and assist you manage the business through this health crisis. Fortunately, pharmacy is an essential service and a critical support resource for consumers.
Beware the hangover
There has been a huge reactionary spike in sales but that is about to slow and it’s reasonable to assert that more stock and your labour costs may increase as detailed above. However, as time progresses sales have slowed and will probably fall below historical levels for a time until latent demand returns. During that time, it’s important to ensure sufficient funds are retained to pay for the purchases made during the spike, i.e.: conserve cash, manage it carefully and manage overheads carefully. It is not a pretty situation and will imperil many pharmacies.
Those with debt should alert their financiers that they may need to take advantage of the loan repayment moratorium offered and interest capitalisation packages. Fortunately, interest rates have fallen to an all-time low that will assist cash flow management. In addition, small business financial support and payroll tax plus other support is available on a state by state basis.
The fifth group must be seriously and immediately considered and that is dealing with state and federal governments to source every support initiative available. Get in touch with your financial advisers for details.
The situation will keep changing and communication with all groups is a must.
After getting through the hangover period it will be time to work on recovery and then develop strategies to thrive as the world will be different and successful pharmacies must be a part of that.
We are in unprecedented times. Rapid adjustment is required. See the spike for what it was and manage the resultant cashflow and overheads very carefully to avoid the hangover headache