Pharmacy is headed for a “terror zone” in its lifetime business cycle, according to IbisWorld.
IbisWorld examined the life cycle behaviour of various industries, broken into 509 classes, shining the spotlight on several including pharmacy.
“At the industry class level, where individual enterprises can call one (or more) of the 509 classes home, cyclical behaviour is not only present, but also reasonably predictable,” the report states.
“This cyclical behaviour is critical to strategic planning, structuring and operations.”
The report says industries usually have a life cycle length of 40 to 45 years, with considerable variation: these may be as short as 28 to 30 years. For a small number of industries, life cycles can run for 100 to 125 years.
“The first cycle in almost all industries is usually very short (17 to 19 years), followed by an inflexion rather than a pronounced dip.
“Industries then settle down to a series of cycles, some with a greater or lesser share of the economy than the previous cycle.”
Each cycle has five phases and two “severe shake-out zones” called the Horror Zone (rationalisation of participants and products) and the Terror Zone (“Rationalisation – the last shoot-out at the O.K.Corral”).
It’s this last phase, after which a new life cycle begins, that pharmacy is now facing, IbisWorld says.
“Each new life cycle brings gradual changes to the industry. It takes until the top of the new cycle for 60% of the industry’s revenue to reflect these changes, and the end of the life cycle for 80% to reflect the new changes.
“So it is a slow process. The five-way changes are:
- Geographic location.
- Systems and technology.
- Ownership (industry enterprises).
“The pharmacies industry is now in a very competitive part of its down-cycle, heading for a terror zone in the early 2020s as super-chemists and discount chemists lay waste to smaller outlets in many suburbs,” the report notes.
“The chart notes some of the salient features of the past, current and next life cycle.”