Have you given up on your front end? Many pharmacies have, or are thinking about doing so. That’s a mistake. Your front end is a vitally important part of your pharmacy business.
Not convinced? We definitely get it. Over the years the traditional pharmacy model has changed. The pharmacy of the 60’s, 70’s and 80’s is no more. Even the last 5 years has seen some pretty dramatic change for pharmacies.
We all have to change with the times and adapt to what’s happening in the pharmacy world. That’s exactly why we think the front end is worth another look.
Your front-end matters… its size doesn’t! (Or at least not in the way you think it does)
First, it’s important to understand that your front-end is important. No matter the size. Even a small front-end can generate revenue.
Next, we need to examine precisely why the front end can be such a powerful asset. If you think about your prescription business, you really have very little control over most things. It’s a sore point for most pharmacies right now. A source of stress and instability.
You do however have complete control over your front end. Granular control over product mix, merchandising, pricing and appearance. Nobody else dictates to you how you manage the front end of your business.
Data powers your front end
Many people have front end merchandise but never look at the data to help them determine what they should and shouldn’t be selling.
You can look at your most profitable departments, best ROI, items that aren’t selling, inventory turns, inventory holding and more.
For example, you can look at your movement report to find what items aren’t selling. Even if you have something like 500 SKU’s, you still don’t want to stock 500 SKU’s that aren’t selling. You can also find out what products, departments and categories offer you the best return on investment.
You don’t need to do it every day, but we recommend once a month or at least once a quarter
What are the numbers and what do they tell us?
Let’s start simple. Gross profit. This is your total sales minus your cost of goods sold. Simple yes. Also, important to know.
Next up is gross margin. This measures the amount of gross profit generated as products sell. Gross margin is gross profit divided by total sales.
Inventory turns are the number of times you’re turning your inventory during a given period of time. Typically, we look at this number annually. Now, if you’re turning your front-end inventory 12 times a year, or even a bit less, that’s great. However, according to NCPA digest most pharmacies are turning their inventory about 1.7 times a year on the front end. We’ll just come out and say it… that’s a terrible number and sheds some light on why many pharmacies are ditching their front end. If you focus on improving that number through methods like replacing products that aren’t selling with products that are, you’ll see some positive front-end changes.
Finally, let’s talk the magic number. Gross margin return on investment. This is the amount returned on every dollar invested in inventory. It’s the number that tells us what departments and products are really worth putting on the shelf and which are plummeting our front-end profitability.
POS Data is best
We might be biased here, but this really is true. Having a POS system that’s home to all of your product data, complete with product categorizations and fine lines, inventory costs and all your sales history gives you the best, most accurate picture of your pharmacy front end. You can get some of the same data by giving your accountant some base numbers, but you’ll never get as clear of a picture. And it certainly won’t be easy, meaning you’ll likely look at these numbers once a year.
It’s time to get excited
As an independent pharmacy, you get to choose the items you sell. If health and beauty isn’t your jam, replace them with snacks, or vitamins, or whatever works. Listen to your customers. What are they asking for? What will make them come in for more than a prescription refill?
You may be reading this and think that your front-end is a burden that doesn’t provide anything, but it has tremendous potential to add thousands of dollars to your bottom line each month. And who wouldn’t be excited about that?
Take your front-end expertise to the next level
Ready to dive into front end management? There’s a CE Course online at NCPA that talks about data, pricing, merchandising, inventory management and more. You’ll need a free membership to take the course. Click this link and become a pharmacy front end expert today!