Retail pharmaceutical industry and its challenges

Retail pharmaceutical labor and its challengesIn clocks of global economic recession, sellers ordain requisite to be to a greater extent(prenominal) vigilant in concussion consumers demands to remain viable in the ever more competitive grocery store. Retail chemists in Malaysia are faced with unique set of challenges deriving from historical past and cultural practices to consumers lifestyle changes. Therefore there is a need for retail chemists operators to re-evaluate existing market plans by means of understanding menstruum market condition and observing future trend. Then recalib post their marketing plans and strategies to reposition themselves securely in the market.1.1 ObjectiveThe report aims to provide an overview retail pharmacy industry and evaluate factors that propel and restrain the market, government policies, sales trends, potential process and market outlook. Challenges related to the pharmaceutical retail sector allow be out production lined and ass essed, and insights into marketing plans being deployed to tap into available market opportunities in Malaysia lead as well be discussed.1.2 all overview Retailing in MalaysiaMalaysia retailing environment has undergone a continuous and marked change over the years. The nation has been classified by the World Bank as a upper-middle income country with middle-income folk making up more than 50% in 2007. Between 2004 and 2005, according to the Department of Statistics Malaysia, on an just, the urban household spent 1.8 times more than its rural counterparts that is about USD 735 (MYR2,285) monthly and USD 428 (MYR1,301) monthly respectively. By 2015, according to UN data, the urban world is predicted to account for most 76% of the total population (Euromonitor 2010). Retail sales will likely win from this. tally to Q4 BMI Malaysia Retail Report, it projected that retail sales will increase from USD 43.65 zillion (MYR 153.76 billion) in 2010 to USD 71.44 billion (MYR 251.63 billion) by the end of the enter period. The key factors supporting this forecast is referable(p) to low unemployment rate, rising disposable incomes and a strong tourism industry.BMI forecasts Over-the-counter (OTC) pharmaceutical sales to grow from USD 404million in 2010 to USD557million which translates to 38% increase accordingly elicit a validatory effect on retail pharmacy.1.2.1 Retail drugstore in MalaysiaMalaysia total health cope expenditure in 2009 exceeded USD 7 billion ascertain 1.0, and is projected to surpass USD 10 billion by 2020. Malaysia ranks fifth among the Asian nations in terms of healthcare expenditure and is projected to grow approximately 13% yearly (Frost Sullivan 2008).Retail pharmacy sector contri get ones 17% of the total expenditure only due to restrictions pertaining to government policies, profession workforce, and population perception.The retail pharmacy sector can be described using organization size and product/service mix criteria. Sol e units are comprised primarily of independent pharmacies, ordinarily owned by pharmacists. Multiple-unit pharmacy organizations, or chains, can be divided into subtle chain and large chain (e.g. 30 or more units). likewise organization size, the retail pharmacy sector can also be characterized by the product/service mix of the organization. Some traditional categories include, supermarket (e.g. AEON), and, beauty and healthcare stores (e.g. Guardian, Watsons).Pure drug store is virtually non-existent in the Malaysian retail pharmacy sector because pharmaceutical products can be sold and dispensed by medical practitioners as well pharmacists. Consequently, this policy does not encouraged the setting up of pure drug store in Malaysia. Therefore, current retail pharmacies stores normally offer both pharmaceutical and non-pharmaceutical product/ work to maintain viable in the market.The major players in the Malaysian retail pharmacy scene are large multinational corporations much(pr enominal) as GCH Retail (M) Sdn Bhd and Watsons Personal Care Store whereas local companies include Caring Pharmacy and Trustz Pharmacy, and a plethora of small independently operated pharmacies Figure 2.0.In 2009, the multinationals, GCHs Guardian and Watsons collectively dominated 54% of the total market share whilst 46% was divided among local retail pharmacies as shown above (Euromonitor 2010).Generally experienced in dealing with large industries, these multinational corporations compared to the domestic counterparts, book the experties in handling processing, packaging, logistics, inventory counselling etc. In addition, they have the advantages of economies of scale, retailing of in-house brand, increase in market profit and share, and wider discount parameter for retail healthcare products.2.0 Current Market Status2.1 External and intrinsic Factors Influencing Retailers Marketing StrategiesThe spillover from the subprime mortgage crisis has badly affected the global econo mies and Malaysias economy has not been spared too. In 2009, retailing current prise growth (CVG) showed a decreased compared to 2008 still still at a positive pace (Euromonitor 2010). In 2010, real GDP growth is pass judgment at 5.7% supported by stronger exports. Increased spend by private consumers as a result of improving labour market conditions will soon strengthen domestic demand (Euromonitor 2010). GDP forecast was reevaluated in May 2009 from 4% to 5% (Euromonitor 2010). Though consumer confidence dwindled, spend on health care continues to be a priority within the consumers household as seen in Figure 3.0. Consumers are still willing to spend a little bit more during promotional period or sour to cheaper alternatives much(prenominal) as mid-priced/stinting in-house brands or generic medications.Ongoing urbanization trend, higher education levels and better living standards have generated greater interest among consumers regarding self-medication. This further streng thened the importance of retail pharmacy stores as consumers are able to acquire OTC healthcare, nutritional products and prescription drugs from them.Overall trend of the retail pharmacy sector is gearing towards the sales of generics and OTCs. Profit derives from generics is generally higher compared to branded/innovator products (Shafie Hassali 2008). However, sales of non-prescription products such as OTCs, TCMs, vitamins and supplements are still the main indorser to the retail pharmacys revenue at 79%.Having said so, retailers still need to employ different marketing strategies to distinguish themselves from existing competitors and attempt to reposition themselves as market leaders some successful while some struggled. Strategies pertaining to each of the different type of organizations will be further discussed as follow2.2 Strategies industrious by Multinational CorporationThe multinationals such as Guardian and Watsons have taken a broad spectrum approach by attempting to diversify from traditional dispensing services common to the concept of a pharmacy, into a wider market segments such as general health and beauty care.The retailers responded by engaging in fixture promotions and extensive sales period to encourage pass and offering a combination of both pharmaceutical services with beauty care.Rapid expansion strategies undertaken by leading(a) chained retailers resulted in a substantial escalation in the chained store numbers in the nation. 2009 saw a slight improvement in the average selling space per release of beauty and health specialist retailers especially in larger shop malls than standalone establishments. Survey has shown that these are the places where the crowd/consumers prefer. Variety in choices/shops and competitive price products are some of the factors that rends them.Most beauty and health specialist retailers launch their retail chains in Klang Valley. This is largely due to greater purchasing power among urban consumer s.Nonetheless, beauty and health specialist retailers are also expanding outside Klang Valley in order to serve the rising population and growing purchasing power of consumers in East Malaysia and secondary states. Launching of budget in-house brand is to cover a wider clench of consumer segment.2.2.1 Guardian take aim Market, ware operate, and PromotionGCH Retail (M) Sdn Bhd is a wholly-owned subsidiary of a Hong Kong instituted Dairy Farm International Holdings Ltd. It is 78% owned by the Jardine Matheson Group, which is listed on the FTSE Stock telephone exchange and also listed on the Singapore Straits and Bermuda Stock Exchanges (Euromonitor 2010).In Malaysia, the company is involved in the operation of Guardian pharmacy, Cold Storage supermarket and Giant hypermarket outlets. In 2009, as a result of its aggressive expansion, 20 new Guardian outlets were added, and promotions including daily specials has boosted the companys pharmaceutical market share to 35% Figure 2. 0, occupying the largest portion of the retail pharmacy market segment.Guardian retailing format is gradually becoming popular in Malaysia. For instance, Guardian spearheaded the concept ofmodern retail pharmacy by providing professional denotation and service by registered pharmacists, plus holistic health and personal care solution. In response to the Malaysian governments support initiatives designed to thorn small and medium sized enterprises (SMEs) in Malaysia, most of Guardian in-house brands are source and manufactured locally. Therefore, it is able to offer quality products at very inexpensive price targeting at all consumer segments and is expected to continue to source and develop wider products range.Guardian is aggressive in promoting its in-house brand products by advertising and promotions. For instance, Guardian give half a page or full-page advertisements in their in-store brochures or leaflets for their in-house brand products. GCH Retails share of in-house bra nd products has been growing steadily largely due to developing brand recognition as well as the wider range of items available.External and Internal Analysis (Guardian)ExternalInternalThreats scotch slowdownDecentralized marketing function inconsistent brand imageWeaknessesRetracted consumer spendingIncreased rivalry between competitorsOpportunitiesImport/Export Malaysian Ringgit vs Hong Kong DollarGood management able to respond to market change fortissimoChange in consumers spending patternBoth external and internal factors how the company decides to operate. The external factors will be said(prenominal) for all market players.2.2.2 Watsons Target Market, Product Services, and PromotionWatsons Personal Care Stores (WPCS), being the largest beauty and health retail chain in Asia, is a subsidiary of the AS Watson Group based in Hong Kong and wholly owned by Hutchison Whampoa Ltd. WPCS has been in Malaysia since 1994 and is considered one of the most accomplished personal care c hain stores (Euromonitor 2010). Following the successful merger and acquisition of Apex Pharmacy Sdn Bhd in Jun 2005, WPCS has 211 outlets nationwide.In 2009 due to its extensive stores expansion and merger , its pharmaceutical value share managed to increase to 19% Figure 2.0 of the entire pharmaceutical retailing in Malaysia.WPCS still remains the largest community pharmacy retail chain in Malaysia. To support and reinforce its image positioning Watsons employs promotional pricing, selling list prices then running price-off sales periodically, continuous marketing efforts and promotions such as telecasting advertisements, complimentary beauty and health information to consumers, and storewide 20% discount campaign.Moreover, WPCS products are competitively priced and carry quality in-house brand products which are usually cheaper by 20% to 25% below manufacturers brand in the same product range. Its in-house brand lines consist of a large proportion of skin-care products, hair ca re, OTC healthcare products, toiletries, bottled mineral water, electrical items designed to meet the needs of the mass consumers . To further promotes its in-house brands, it has dedicated more shelf space in-store for them. Coupled with growing brand recognition and wider range of products to cater for all segments of consumers, this marketing trend may continue in future.External and Internal Analysis (Watsons)ExternalInternalThreatsEconomic slowdownOver expansion resulting in dissipated consumer servicesWeaknessesRetracted consumer spendingIncreased rivalry between competitorsOpportunitiesImport/Export Malaysian Ringgit vs Hong Kong DollarExtensive outlet coverage nationwideStrengthChange in consumers spending pattern2.3 Strategies Employed by Small Retail PhamacyMarketing model of smaller retail pharmacies focus on establishing good rapport with its customer base by providing individually customized pharmaceutical services for their clients according to their needs and wants, F urthermore, they also provide encompassing after working hour services for the convenience of their customers, to access to pharmaceutical items and advice. Loyalty marketing is also introduced to maintain or expand their customer base in light of even more competitive environment. This model is gaining popularity in Malaysia and is already established in Europe, Australia and Canada. Specialized services exclusive to pharmacy such as pre-packed dosettes medications (to ensure better compliance to medicine), insulin dose adjustments for uncontrolled diabetes management and methadone replacement therapy for heroin dependent patient, targeting a unique consumer segment is gradually incorporated into their marketing plans.2.3.1 Caring Target Market, Product Services, and PromotionCaring Pharmacy Sdn Bhd is a group of pharmacies under one banner collectively shares the same supply and inventory management similar to that of chain stores, however each outlets are independently owned a nd operated by pharmacists.Caring Group currently have 46 registered pharmacists operating 40 outlets in Klang valley. Therefore giving the Group the highest number of pharmacist to outlet ratio among retail pharmacy operators in Malaysia.With market share of 12% in 2009 Figure 2.0, Caring is fast emerging as one of the most established local community retail pharmacy. Providing broaden hour services from the early hours up to midnight proved to be a potent marketing strategy in establishing its market share as it provides time flexibility to consumers. Caring offers professional consultation by registered pharmacists on uncomplicated ailments and medication management solutions such as pre-packed medications for consumers convenience.The group has been actively promoting its pharmacist consultation service. For instance, public awareness talks by pharmacists on health topics such as hypertension, diabetes, weight-management etc. are frequently organized. Launched in 2006, the fir st pharmacy recognise program as a points accumulation and gift redemption card with Malaysias premier multi-party loyalty program BonusLink, enabled Caring to establish closer contact with their regular clients.External and Internal Analysis (Caring)ExternalInternalThreatsEconomic slowdownToo focused on domestic/localization growthWeaknessesRetracted consumer spendingIncreased rivalry between competitorsOpportunitiesChange in consumers spending patternGood corporate core value pharmacist service for all consumer segmentsStrength3.0 Marketing Strategies3.0 Strategic Recommendation For the Retail Pharmacy IndustryGlobal economy remained sluggish in 2009, likewise in Malaysia. Even though consumer spending has retracted in Malaysia, where healthcare is concerned, consumers are still spending. Retail pharmacy registered an increment in sales of 0.2% for 2009 against 2008 Figure 3.0.3.1 Marketing Mix StrategyTarget consumersPromotion mixSales promotion advertizementSales forcePublic relationsDirect online marketingOffer mixProductServicesPricesAdapted from Marketing An Introduction from an Asian Perspective ( Kotler et al. 2006)3.2 Target Consumers Population Demographic Outlook and Lifestyle TrendAccording to United Nations Department of Economic and Social Affairs, in 2007 Malaysias population was just over 27 million and by 2015 it will be more than 30.7 million. In addition, nearly 60% of Malaysian is below the age of 30 in 2007 (Euromonitor 2010).Needs and wants of consumers changes with age. Marketers must use different marketing approaches for different age and life-cycle groups. The mature segment of the population in Malaysia, are usually relatively established in terms of financial, family and home and more aware of their health status. Marketers needs to woo this segment consumer by employing positive images and orisons. This segment will be the key buyers of medical and health-related products and services, including pharmaceuticals and OTC drugs , vitamins and dietary supplements, health drinks and medical equipment.While there will be new speech pattern on products for mature consumers, younger consumers will still remain a potent force since they made up half the population in Malaysia by 2015. They are more savvy, health conscious and more willing to try new products thus exercising significant purchasing power and driving keep demand for the wide range of youth oriented products. Hence, this will spur demand for core healthcare products and influence sales in tangential sectors such as food and beverages, and healthcare services.3.3 Offer Mix Product Portfolio Adjustment and determine Tactic3.3.1 Product Portfolio AdjustmentConsumers remained largely loyal to established brands in general because these brands are trusted names that consumers used to purchase or are just comfortable with its effectiveness. Coupled with strict registration requirements in Malaysia for all medicines, any branded or generics, in-hous e brand is unlikely to perform well in certain healthcare lines such as oral analgesics, cough, cold and allergy but may do well in other health product category. For example, in-house brand such as wound care, vitamin and supplements are projected to grow due to regional disease outbreak and economic slowdown.As living costs, including healthcare costs increases, consumers will be more adventurous to try out economical in-house brand products and self-medicate. Using the pull and push marketing strategy, potential consumers will come to understand the helpfulness of vitamins and dietary supplements as preventative measures against environment, diet, importance of victorious balance nutrition and age-related ailments such as joint and back pain, immune systems, osteoporosis etc.Personal selling and sales promotion will be expected to heightened awareness of in-house brand products. Marketers need to expand their consumer healthcare product ranges in order to maintain competitive in the market. Figure 4.0 shows that in-house brand product line will continue to grow. Therefore, marketers should focus on marketing in-house brand products such as topical analgesics, antipruritics, other wound treatments, vitamins and dietary supplements, that enjoy strong demand.3.3.2 Pricing TacticConsumers will be shopping around for the better(p) deals. It is not necessary for retailers to cut list prices, but may offer more myopic termed price promotions, lower quantity threshold discounts, provide credit to long-standing customers, and more aggressively price smaller pack sizes. In tough times, price cuts attract more consumer support than promotions such as mail in offers and sweepstakes.3.4 Promotion Mix Conventional Advertising and Online Marketing3.4.1 Conventional AdvertisingDespite the growth of electronic communications, printed newsletter and television still play an important role in Malaysians daily life and their pursuit of information and entertainment. As sho wn in Figure 5.0, printed adspend dominated 54% followed by television adspend at 37% of the total adspend respectively for the year 2009. Major newspapers include three English-language dailies, dickens Malay-language dailies, five Chinese-language dailies, and two Tamil-language dailies. The Malaysian has a wide range of magazines covering lifestyle, fashion, business, and special interest topics such as fishing, motoring, health and wellness and childcare. Magazines in Malaysia are usually publish on a fortnight or monthly basis and are available via subscription, at retail outlets, convenience shops and small grocery stores. Although there seems to be a slight plateau Figure 6.0, conventional printed media will still be the medium of choice currently to disseminate promotional information for pharmacy retailers.3.4.2 Online MarketingThe internet has had a significant impact on Malaysia over the past several years. The number of internet users grew from nearly five million use rs in 2000 to more than 12 million users in 2007, reflecting growth of 144%. Just as significantly, the household penetration rate of personal computers in Malaysia increased from 13.5% in 1995 to 34.7% in 2007. Tethered with such growth, online adspend recorded 72% spike growth from 2007-2009, and is expected to continue capturing readership share at the expense of printed media, in-line with household penetration rate of internet enabled computers increases in Malaysia.Mobile advertising will be in vogue as internet handheld devices gains market penetration, particularly among the younger population. Advertising platforms such as Apples iAd is a prime example of cutting-edge mobile advertising where advertisements are not just informative but interactive as well. Advertisements of this kind, can be updated real time by retailers with short-term sales promotion similar to Malaysia Airlines lunch-hour flight deals or provide interactive online shopping experience, will revolutionize conventional concept of promotional advertising.Pharmacy retailers can tap into this market and formulate marketing plans unique to loyal mobile shoppers. Conventional in-store consumers are bombarded with too much product information creating confusion thus delaying purchases. Retailers and manufacturers should collaborate to satisfy consumers needs such as using attractive colors and creating simple product packaging to facilitate consumers search for healthcare products.Hence, online advertising and internet retailing is expected to increase. This will have an impact on how retailers attempt to mountain range Malaysian consumers and, in a less significant but growing way, on how Malaysians shop.4.0 ConclusionConsumers in Malaysia are changing their healthcare shopping deportment in various ways. While many opted for other more economical retailers, there are some who remained loyal to their preferred retailers. They are more comfortable in seeking out deals and using coupons, and will purchase both in-house brands or branded products whichever provides the best value. Definition of value is also changing. Previously, value is lots perceived as quality and options, but now this is synonymous with price, value will mean that consumers get what they want at the best possible price. Pharmacy retailers can capitalize on consumers needs by providing increased personalized marketing and shopping experience. Consumers are also seen shifting towards meaningful and unique shopping experience, particularly in purchasing healthcare items.4.1 Consumer In ChargeConsumers know what they want and many will go the distance in search of the best offers some consumers, due to their lifestyle fluidity simply require products that satisfy their needs. By giving consumers multiple product choices at different price and benefit levels, brands especially in-house brand, can be capitalized by using different marketing strategies to make them to stand out from the crowd. Mobile shopping, will be the next barrier for retailers to venture into as on-the-go consumers will emphasize on shopping convenience and speed of transactions.4.2 Retailers Diversity and Rebrand to Stay RelevantPharmacy retailers diversifying into in-house product line need to factor in consumers shopping preference on established branded healthcare products when formulating in-house product marketing plans. Many consumers maintained loyalty to established brands due to familiarity to a product or confident with its effectiveness. New and improve in-house product lines with convenience in mind such as topical analgesics and sachet digestive remedies, will appeal to consumers particularly the younger customers. Retailers may need to revamp certain product lines with new design, improve in-house brand offers and promote them with a compelling ad-campaign, to appeal to target consumers.4.3 Future of Retail Pharmacy in MalaysiaRetail pharmacy landscape is shifting largely attributed to econ omic changes, the growth of online retailing and more belatedly mobile commerce. With increasing use of smart handheld devices in Malaysia, mobile advertising and commerce is projected to grow substantially. Retailers will have to employ a multi-channel marketing approach. Online retailing will provide a platform for retailers to disseminate unique and targeted product offers for consumers to research, plan their shopping trips and ultimately attract consumers into stores. Consumers will also look for premium service coupled with simplified shopping experience in terms of product availability and ease of locating the products. Now more than ever, consumers are becoming more sophisticated and informed in making choices.They desire to know the origin of the product, what they are made of and how their lives can be amend with them. In general, future consumer wants a simplified, personalized and meaningful shopping experience with a focus on value. In summation, regardless of the org anization size and retail focus, marketers must have the foresight to recognize change and take advantage of it by shifting its resources in line with market trends.