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NONFOODS: Breaking into pharmacy

When an independent pharmacy in Nappanee, Ind. sold out to drug store giant CVS in December 2003, South Bend, Ind.-based Martin's Super Markets stepped in to prevent Nappanee from becoming a one-drug-store town. In a mere six weeks Martin's hired the defunct pharmacy's staff, collected the necessary licensing requirements, and began the construction of a pharmacy inside its nearby East Market Street store.

While such a quick turnaround isn't usually the case in the supermarket pharmacy business, for Martin's it came easy. "With each new pharmacy you open, the process becomes more streamlined," says David Adams, director of pharmacy for Martin's. "There's a lot of work that goes into the first few pharmacies -- a lot of contacts that need to be developed, for example. But once you've been doing it for a bit, it becomes easier to open new locations."

Before Adams came on board, Martin's e.v.p. Dan Bailey spent three years researching the pharmacy business, with an eye toward setting up operations in his stores. After performing several surveys with Latrobe, Pa.-based PRS Pharmacy Services, a consulting firm that provides turnkey solutions to retailers new to pharmacy operations, he chose five locations from the candidates for development -- and chose to build all five pharmacies at the same time.

"I decided that we were going to do five [at once], rather than doing one, then adding another and another," says Bailey. "PRS wasn't necessarily recommending that, since they hadn't done that before, but we were committed to it and they supported us."

PRS handles all aspects of new pharmacy launches for its customers, including site selection, state and federal licensing requirements, and equipment and supply selection and installation. Once the pharmacy is up and running, the retailer has the option to let PRS stay on and provide guidance during the first year of operation. "It's a complete startup program that handles all the details associated with building a ground-up pharmacy," says Bailey, who worked closely with PRS before the launch.

Once the pharmacies were up and running for a full year, Adams took the reins from PRS as the in-house pharmacy executive charged with leading the pharmacy group and further expanding its operations.

Key ingredients

For the pharmacy business inherited from the independent drug store, Adams already had two of the main ingredients necessary for a successful pharmacy: an ideal location and a strong pharmacy team. "A common mistake that retailers make when getting into the pharmacy business is choosing the wrong location," says PRS Pharmacy president Harry Lattanzio.

Martin's Adams takes a similar view. "As far as site locations go, geographically, I think it's important to evaluate the number of rooftops there are that surround your pharmacy, as well as the competition," he says. "We divide it by the number of residents per [existing] pharmacy, and evaluate whether to open up a pharmacy based on that ratio, as well as customer counts within the existing stores."

Once the right location is found, by far the most important element in a successful pharmacy is the pharmacist.

"It all comes down to patient service," notes Adams. "Most pharmacies are going to carry the same drugs and the same types of products on the shelves. In our markets 85 percent of people who get prescriptions are insured, so they're going to pay the same amount wherever they go. So the factor that really separates the pharmacies is the focus on the patient."

A good pharmacist is customer service incarnate. In annual Gallup polls, pharmacists consistently head the list of most respected professionals. "They are the most easily accessible health care professionals for consumers," observes PRS' Lattanzio.

When scouting for a pharmacist, Adams looks for someone local who's active in the community. "The second qualification we look for is the professionalism and the willingness to go that extra mile for the patient," says Adams. "We expect our pharmacist to make decisions as if [his or her] name is on the outside of the building."

An effective supermarket pharmacist needs to have time to spend with customers, however, and can't be trapped behind the counter dispensing pills. "We do a great job of creating time for the pharmacists to spend with customers," adds Adams. "We have very highly skilled and efficient technician staffs, and having that allows time for our pharmacists to do the verification process as well as the counseling."

Martin's also takes the pressure off pharmacists through an interactive voice response system, which answers the phone and can automatically accept refill requests, patching calls through to the pharmacy only when the customer asks to be put through. The grocer also works with a firm called Load King, which helped Martin's develop efficient workflow systems to create as productive a space as possible behind the pharmacy counter.

Because of this support, pharmacists find Martin's an attractive place to work, and even with a shortage of pharmacists in the market, Adams has no trouble filling slots. "I think they become extremely frustrated when they spend their entire day counting pills, labeling drugs, on the phone with insurance companies, and they don't have time for the face-to-face relationships with their patients," says Adams. "We make sure they have the staff that they need, so that they can get out there and have those interactions."

Rx to OTC, patients to shoppers

During lulls, Martin's pharmacists walk the HBC department, interacting with shoppers on the floor, answering questions, and making suggestions. That's where Adams believes the supermarket pharmacist arguably makes the greatest impact. "It's amazing the amount of questions you receive just by being accessible," says Adams. "When a pharmacist makes a recommendation about an OTC product, the shopper will buy it in 90 percent of the cases."

And those purchases add up: Adams sees a lift in HBC sales of approximately 25 percent in those stores equipped with a pharmacy. "I think it's important that we have a competitive presence in the HBC category, since you're competing against corner drug stores that have aisle after aisle of HBC," he says. "And though it isn't realistic for grocers to compete on a linear-foot basis, they can still have a very good selection, and the pharmacy helps them sell it."

HBC sections in Martin's that have pharmacies often carry more SKUs than the company's other HBC departments, usually including such items as hot water bottles and diabetic and other medical supplies.

But as important as sales are, the brand equity from customer loyalty is far more important when it comes to pharmacy operations, and new supermarket operators should be aware that it's service that drives this loyalty. "When you have a pharmacist in the aisles and they seem approachable and are answering OTC questions, you're building that rapport with that patient, and a certain level of trust with them. This makes it easier to transfer their prescriptions over to Martin's. And with those prescriptions come their shopping trips, as well."

Sending the message

Once the store has the right staff, it's time to get the word out, which for the most part isn't that difficult, because Martin's Pharmacy's primary market -- supermarket shoppers -- visit on a regular basis. "Those are the ones you really want first, because they're in the store regularly and it cuts down on the number of weekly shopping trips they must make."

The location of the pharmacy in the store's physical space is part of the marketing equation. Martin's retrofits its 500- to 700-square-foot pharmacies into the front of the store, with the HBC section immediately adjacent, so the two can't be missed.

Martin's also does a lot of cross-marketing between the pharmacy and other areas of the store. Says Adams: "We do things like hold a cholesterol screening at the pharmacy, and we'll put some Quaker Oatmeal there, too, since it helps reduce cholesterol. We look for combinations like that."

Martin's additionally runs traditional promotions such as its Baker's Dozen program, in which customers who reach their 13th refill receive a $10 coupon for grocery items.

Adams is looking to continue building such cross-department promotions as the pharmacy business grows. And he does plan on its growth: Adams expects a 50 percent rise in business over the next two years. Every new location will have a pharmacy attached to it, and will continue to add services around the pharmacy as customers demand them.

"It's all about service," he says. "As long as you maintain your focus on delivering outstanding service to your pharmacy customers, everything else will follow."
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