Like the independent corner store that offered personalised service, informal credit and home delivery, the local pharmacy is on the way out in South Africa and being replaced by hard-nosed retail businesses. Indeed, the entire sector is undergoing a sea change, reports the ‘IMM Journal of Strategic Marketing’ in its October 2016-January 2017 issue. Deregulation in 2003 has progressively seen the growth of corporate-owned pharmacies and the once-traditional ‘corner chemist’ is now struggling to survive. Clicks was the first to see the new opportunity and by the end of February this year had 384 in-store pharmacies. It represented an increase of 23 pharmacies over 12 months, and 60 new outlets over 36 months. “We have a leading 19% share of the retail pharmacy market by sales,” says Vikesh Ramsunder, Chief Operating Officer of the Clicks stores division. It is a market share edging up steadily, having grown from 18,5% in 2015 and 16,5% in 2013. Overall, says Ramsunder, corporate pharmacies tied to the major retail and supermarket chains now account for about 46% of total sector sales. Other corporate players include Shoprite with145 in-store Medi-Rite pharmacies, Dis-Chem with 100 big-format drug store-type outlets, and Pick n Pay with 26 in-store and three stand-alone pharmacies. Spar Group has also joined in the fray. But, in keeping with the Spar model, pharmacies remain stand-alone businesses in the hands of their owners. The attraction of the pharmacy ‘superstore’ model is not that dispensing prescriptions makes money, it’s that pharmacies attract customers who will then shop for more general merchandise elsewhere in the store. Clicks, for example, generates about 25% of sales in the pharmacy and 75% in the so-called ‘front shop’.
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In the fiercely competitive world of South African retail, an effective supply chain is imperative. More effective global sourcing, better speed to market, increased onshore manufacturing and improved warehousing efficiency are strategies being used by the big retail groups, reports the ‘IMM Journal of Strategic Marketing’ in its October 2016-January 2017 issue. The Foschini Group (TFG), for example, has worked hard to enhance the efficiency of its procurement processes in China, where much of its clothing is manufactured. One of the first moves was to reduce the number of Chinese ports through which products are shipped – from 20 down to five. Up to 20 containers a day are shipped to TFG from these five harbours. Much work has also been done to optimise container loads, which now often comprise mixed consignments. The result is that TFG has halved shipping costs. But a slick procurement capability in China is not enough. At the fashion end of the apparel market, what counts most is speed to market and flexibility. Spanish retail chain Zara is a leader in this respect and tries to manufacture garments close to its major markets, often at its own factories. TFG is emulating this and, in 2012, acquired Prestige Clothing and its garment factories in Cape Town and Caledon. Both have since been revamped into state-of-the-art production facilities that can take garments from concept to production in 2-4 weeks. Other fashion retailers including Woolworths, Truworths and Mr Price have also upped their local procurement markedly. “Higher up the value chain, where-speed-to-market counts, upwards of 80% of clothing is today locally produced,” says Johann Baard of Apparel Manufacturers of SA, which represents garment sector employers. Published by the Institute of Marketing Management, the ‘IMM Journal of Strategic Marketing’ is read by professional marketers and those working in related fields, as well as business executives and IMM students. The print edition sold in selected CNA and Exclusive Books outlets, or is available via subscription. Copies are also distributed through a targeted mailing list and through selected airline lounges and IMM Graduate School student support centres.
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