James Dudley Management

James Dudley Management

Multi-channel Shopping Experience coming to a Pharmacy near You – New Developments in Europe?

Linking mail order Internet technology with traditional ‘bricks and mortar’ pharmacies into a multi-channel experience will emerge as a game changer in progressive European States and suppliers and competitors will need to respond to compete.

With the merging of mail order and Internet technologies with traditional ‘bricks and mortar’ pharmacies multi-channel retailing will emerge as a game changer in a number of progressive European States over the next few years. Yet the absence of effective marketing structures and a reluctance to follow other retail sectors that have embraced new technologies will leave a number of European States lagging behind and missing out on the growing segment of multi-channel shoppers. So says a 17 country pharmacy study written by James W Dudley one of Europe’s leading Healthcare marketing consultants.

“The arrival of multi-channel retailing into the healthcare sector presents new challenges to both suppliers and competing pharmacies which need to be addressed”, says James Dudley author of the report.

The report, Mail Order and Internet Pharmacy in Europe - the 2012 edition, draws heavily on case studies and developments in the USA to describe the evolution new pharmacy channels in Europe. According to the report fourteen out of the seventeen countries in the study permit Internet and mail order transactions for non-prescription medicines under domestic law, while only seven allow prescription only medicines to use the channel. These are: Denmark, Germany, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom. Finland is expected to be included on the list in 2013 when e-prescribing is introduced.

In three European States: Austria, France and Italy mail order pharmaceutical transactions are still technically illegal but are permitted under EU law but for non-prescription medicines only.

The Dudley report explains the difference between so called ‘pureplay’ Internet driven mail order pharmacies and an evolving new multi-channel concept being developed by American pharmacy channel leaders including Walgreens.

‘Internet driven ‘pureplay’ retailers fit the perceptions of mail order pharmacies held by the European healthcare industry, pharmacy owners and above all lawmakers. These are small to medium sized retailers and include Zur Rose covering Austria, Germany and Switzerland, DocMorris and Sanicare serving Germany and Pharmacy 2U In the United Kingdom. These retailers are basically Internet enabled mail order discount pharmacies that deliver medicines and other related pharmacy products directly to their customers by post or courier. They offer shoppers convenience, confidentiality and above all discounts. Hence, mail order pharmacies are popular in the USA among patients on repeat prescriptions and represent nearly a quarter of non-institutional healthcare turnover.

Patients get their medication at lower prices than at a traditional pharmacy and are actively encouraged to shop mail order by their medical insurers and PBMs (Pharmacy Benefit Managers). As a result mail order pharmacies in the USA are prescription based. This is in contrast to the European model which is still very much led by demand for non-prescription medicines and personal care.

However, ‘pureplay’ retail enterprises now have to compete with retail pharmacy chains which can integrate online services and mobile applications into their traditional pharmacy offer to provide shoppers with a multi-channel experience. This according to the Dudley report is where the future lies and cites examples including innovative developments in Walgreen’s and Sam’s Cabin in the USA. According to Walgreens multi-channel shoppers are estimated to be three times more valuable than a single-channel shopper hence the drive to go after them.

This philosophy is soon to spread to Europe and to the United Kingdom in particular following Walgreens pending acquisition of a 45% stake in Alliance Boots which owns Europe’s largest pharmacy chain, Boots the Chemists.

Walgreens informed investors and analysts in June that among a number of global opportunities were global e-commerce capabilities uniquely linking ‘clicks with bricks’ to become the multi-channel leader in health and wellbeing. This combined with the new group’s global purchasing potential has the makings of a real game changer for retail pharmacy in Europe.

Celesio said it was quitting the ‘pureplay’ online pharmacy channel earlier this year with the announcement it was selling its ‘pureplay’ DocMorris mail order business in a gesture to placate independent pharmacy owners in Germany. Even so the company has strengthened its multi-channel offer through Lloydspharmacy in the United Kingdom, with the acquisition of Britain’s leading online doctor service, Dr Thom, in March 2011.

Boots and the Co-operative Pharmacy have also set up similar doctor services for patients which provide prescriptions where necessary for emergency and oral contraception, erectile dysfunction, hair loss, and cystitis among a variety of embarrassing patient needs. At the end of May Lloydspharmacy launched a service which allows women to renew their hormone replacement therapy (HRT) prescriptions without the need to visit their GP.

In Poland Pelion’s Apteki dbam zdrowie (I care for my Health) chain integrates the online pharmacy Doz.pl. into its retail offer through over 2,000 pharmacies bearing its brand.

Germany is the leading market in Europe for ‘pureplay’ mail order and Internet pharmacies with sales of €1.2 billion. This represents some 3.5% of the total German pharmacy sales and around 12% of non-prescription healthcare business. But ‘pureplay’ mail order pharmacies thrive in Germany because of the absence of wholly owned retail chains. This said the major online pharmacy players have aligned to the main non-pharmacy druggist chains in Germany such as dm. These provide an in-store pharmacy ‘pick up’ service for outlets otherwise barred from selling prescription and non-prescription medicines.

The future of mail order and Internet pharmacy is likely to see the ‘pureplay’ model gradually merging into the retail offer of pharmacy chains. This will occur more rapidly where wholly owned and franchise concept chains exist and this is simply because brand owners are in a position to exploit the advantages of creating a multi-channel shopping experience.

Suppliers and competitors will need to respond to the challenges and opportunities presented by this new multi-channel pharmacy environment especially with the introduction of new mobile applications into point of sale merchandising and shopper loyalty programmes.

In those markets where wholly owned chains do not exist there is the opportunity for ‘virtual chains and voluntary groups to introduce online elements into their retail offerings. The example of the relatively benign online network involving all the voluntary groups in Denmark, Apoteket.dk is a case in point. “But the ‘pureplay’ model will remain dominant in Germany”, says James Dudley.

Mail order and Internet Pharmacy in Europe the 2012 edition - New Emerging Multi-channel Structures is published by James Dudley Management summer 2012 see details.

About James W Dudley

James W Dudley is one of Europe's leading strategic marketing thinkers and an influential contributor to a number of ground breaking marketing initiatives in Europe’s consumer health markets. He is a well known speaker and is the author of a number of highly important, strategic marketing studies including his best-selling work “OTC Distribution in Europe now in its eighth edition”.

He is also a marketing strategy consultant to a number of the leading international consumer health companies in Europe. James Dudley began his marketing career with Nabisco in fmcg marketing, before entering the consumer healthcare industry with Boots where he served as Director for Northern Europe. Find out more about James Dudley

For further information Contact James Dudley ++44 (0) 1562 747705.

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