It is evident that survival in the current turbulent times requires a great deal of vigilance on all aspects of your pharmacy business.
Extra care with staff costs, greater discipline in your buying and not entertaining any unnecessary expenses are the start of keeping your pharmacy profitable. The one area that continues to be the greatest source of threat and the number one reason for pharmacy insolvency is unsustainable rent.
The percentage of rent to turnover has been increasing steadily as sales have plateaued and rental increases have steadily compounded. There are no indications that there will be any improvement to these ratios at all. Landlords have become cognisant of this and most are willing to discuss your situation in light of declining pharmacy profitability – which will only be further eroded through April 2013 and onto 2015, and beyond.
Recent landlord discussions that I have been involved in, have indicated that they have an understanding of what is occurring in the pharmacy industry and that they are willing to entertain assistance for genuine cases of rental distress. Obviously there are exceptions to this which means there is a need to further educate some landlords. The issue of rental sustainability within pharmacy should be equally important to landlords as it is their tenants. We are aware of many solid businesses that are now under watch because of poor rental deals.
It is in all landlords’ interest to be fully appraised of the pharmacy landscape so that they are able to factor the downturn in pharmacy into their forward projections. This forward gazing is especially important for large shopping centre landlords who need to review the number of pharmacies that can be sustained in their centre, along with the size and dollar p.s.m. of their pharmacy tenants.
If you would like discuss the current market conditions in more detail or any other topics, please feel free to contact me.
Peter Marshall
Managing Director
Pharmacy Solutions Australia
peterm@pharmacysolutions.com.au
0417 721 203
by Peter Marshall, Managing Director Pharmacy Solutions Australia