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David vs. Goliath: How do small pharmacies compete?

Big chains eagerly expanding reach in region

POSTED: November 14, 2007 5:05 a.m.

A customer has been given a liquid prescription that must be taken in precise doses and pharmacist Jennifer Stowe is concerned about the customer’s ability to measure the amount.

She divides the medicine into exact doses and puts each one in a syringe.

Stowe, a pharmacist at Riverside Pharmacy in Gainesville, says knowing her customers is what separates the independent pharmacy from the big chains.

"We have some families who have done business with us for three generations," Stowe said.

Competing against the big chains on price is tough for small pharmacies, but a Georgia economist said independents can carve out their own market.

"The big chains have some pricing power that gives them a competitive advantage," said Roger Tutterow, a Mercer University economist. "But I think it’s important for the independents to recognize they have to distinguish their product, whether it’s superior service or having that long-term relationship with their clientele."

Tutterow said that chains, including those associated with grocery and discount stores, control the market.

"A couple of decades ago, you had a lot more free-standing, independent, pharmacist-owned operations. Now you’re seeing a shift where the national chains that employ the pharmacists are the dominant players."

CVS, which has opened two new stores in Hall County in recent months, is in an expansion mode, said company spokesman Mike DeAngelis.

"We will have opened 275 new stores by the end of 2007," DeAngelis said. "Overall, pharmacies are growing as the population ages."

Tutterow said pharmacies are following the growing number of baby boomers who are reaching the age at which daily medication is routine.

"You’re likely to see pharmacies moving into areas, like Hall County, where they see large population growth," Tutterow said. "As you get the graying of the population in a neighborhood, that raises the demand for medical care and pharmaceuticals."

Some customers opt for price over service.

"Customers look at many things and price is one of them, especially if they don’t have prescription coverage and they are paying cash," DeAngelis said. But he adds that other factors, such as convenience, location and service are also important.

Earlier this year, the Publix supermarket chain announced that it would offer a short-term supply of selected prescription antibiotics free of charge. That announcement followed Wal-Mart’s decision to offer a 30-day prescription on a list of 400 drugs for $4.

But for the chains, the marketing concept revolves around getting the customer to visit the retail areas of the store to make other purchases.

Rite Aid, the Pennsylvania-based chain, entered the Gainesville market this year with its acquisition of Eckerd Drugs.

"We have been present in Georgia, but nothing like we are now," said Ashley Flower, a company spokeswoman. "Prior to the acquisition, we had 45 stores in Georgia and now we have almost 200."

She said that convenience is a major factor identified by focus groups which were interviewed to determine design elements of Rite Aid’s newest stores.

"Customers want to be able to stop by and pick up a prescription, and while they’re in the store grab a gallon or milk, buy a birthday card or have their pictures developed," Flower said.



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