Oh, the Places We’ve Been!

May 26, 2017By Future of Retail, Views


by Dave Wendland, as seen in HealthCare Distributor magazine, Out of the Box column, March/April 2017

Among the works of the late, great Dr. Seuss, is his classic book entitled, Oh, the Places You’ll Go!, the story speaks of “soaring to high heights and seeing great sights to being left in a Lurch on a prickle-ly perch.” Seuss’s message is simple: life may be a “Great Balancing Act,” but through it all, “There’s fun to be done.” It is indeed an enduring favorite of many (including me).

It is in this spirit of Seuss that I’ve decided to look back over my 25-year career in the retail health, beauty, and wellness industry and share several views, highlights, and predictions for our future.

In the early 1990s, the prescription department was by far the most profitable for drugstores. Not only were margins hovering in the mid-40s, but competition was contained to neighboring brick-and-mortar stores. Oh, the places we’ve been. Today, margins are in the low teens (or less), and competition exists domestically and internationally in both brick-and-mortar and online settings. Despite growing volumes year after year, remaining focused solely on pharmaceuticals is a precarious path.

Forward-buying inventory to drive pharmaceutical distributor profits became a memory in 2003. Replaced by fee-for-service models and program-rich offerings, these same distributors are no longer only product warehouses and pick-pack-and-shippers (though they continue to be exceedingly good at these aspects), but now are full service partners that provide technology solutions, analytics, and tools to manage just-in-time inventory as well as partners in improving patient outcomes.

The retail healthcare sector has been especially affected by consolidation over the past 25 years. Regional chain drugstores and high-performing independents have been gobbled up by national chains; consumer healthcare brands have changed hands on a regular basis; the number of drug wholesalers declined from nearly 90 to about a dozen; and generics manufacturers galvanized into a handful of powerhouses. Retail and wholesale consolidation has slowed dramatically, but strategic new ventures will continue for years to come. Vertical integration will also accelerate within the industry.

Technology has also evolved quickly. To think — the first supermarket scanner appeared in the U.S. about 40 years ago. Recognizing this technology would be reaching drug stores, HRG first launched a turnkey UPC product description database to support point-of-sale scanning and reporting in 1992. Today, the POS-Source™ database remains the de facto standard for independent and small chain pharmacies embracing inventory management and enhanced reporting and analysis of non-prescription sales data. This same data is now fueling handheld scanning devices and kiosks that make checkout easier — and more accurate.

About 18 years ago HRG had an opportunity to enhance our database with taxonomy (organization and classification of categories and subcategories) and we developed digital product images and more robust item data attributes to power online shopping (e-commerce sites) and distributor ordering systems. This remains one of the fastest-evolving areas of the marketplace and an area that our business proudly helped pioneer.

Remember when planograms were created on physical shelves or with magnetic boards, data was managed on green bar computer printouts, and we actually spoke on the telephone? Oh, the places we’ve been. In the future, data assets, technology solutions, and speed of communication will be more powerful forces than they are today. It is feasible that product samples will be generated on 3D printers within a buyer’s office while a supplier shares product information via a Facetime call.

Another dramatic market shift started more recently as consumers have become increasingly involved with the management of their own health. A mere 25 years ago, physicians and other healthcare professionals guided patient choices —and patients heeded their advice without question. Today, consumers are in control of the health information they are accessing.

This shift to consumer-led decisions also demands refinement in the category management process (a cornerstone of HRG’s history). I foresee adaption of need-based solutions and consumer-driven category arrangements. Further blurring among categories will create greater value for consumers — and larger market baskets for retailers. In addition, the emergence of consumer-managed savings programs and retailer-directed loyalty programs are changing how consumers shop.

Perhaps I haven’t have been lost on a wavificent wave
or found myself stumbling in a contrusivous cave;
but I am certain of this … the future is sure to be one expanipotent experience.”
As Seuss suggested, “There’s fun to be done!”