CEO says regional chain embraces channel-agnostic approach

BOULDER, Colo. — With solid sales growth in its stores, an expanding e-commerce business and a successful loyalty program, Pharmaca Integrative Pharmacy is well-positioned for continued success as it maintains its plans for steady expansion as an innovative omni­channel retailer in health and beauty.

The 15-year-old pharmacy and natural health chain opened three new stores in 2014, and it has plans to open four new stores in the current year.

“We continue to focus on sales growth, both in the retail and pharmacy sides of the business,” said president and chief executive officer Mark Panzer. “And our e-commerce business is growing exponentially.

“We feel that we’re making good strides toward [the objectives] we set out in our five-year plan.”

Pharmaca currently operates 29 stores — including one nonpharmacy location — and expects to open two additional new stores this year, including a unit in Northern California (Los Altos), which will also follow the nonpharmacy format. A new store opened in Southern California (Laguna Hills) in early March, and the company has plans for a new store opening in the Colorado market “before the end of the calendar year,” Panzer said.

“We’re doing a lot of in-fills,” Panzer said of the company’s store opening plans. “When you look at where the stores are opening, we’re filling in the Pacific Northwest market, the Bay Area and also the San Diego/Los Angeles market.”

In the future, Pharmaca will look to add locations in the Denver area, which Panzer called Pharmaca’s “home court” market. He noted that Pharmaca wants to have a greater presence in the Colorado market, more than just its three stores and headquarters location of Boulder.

The future store openings will include both pharmacy and nonpharmacy units. “We will [open] a mix of formats in the future,” Panzer explained. “Pharmacy is still our primary business,” he said, but when considering expansion opportunities and new markets, the smaller nonpharmacy format gives the company another option for growth.

Mark Panzer

“Our store location process really comes down to population density, demographics, pyschographics and whether it fits into our overall real estate strategy,” Panzer said.

Panzer briefly departed Pharmaca in early 2014 for a three-month period to take on the roles of senior vice president at Sears Holding and president of its Kmart pharmacy business. He rejoined Pharmaca in June 2014 in his previous post as president and CEO.

At Pharmaca, pharmacy continues to be a high priority, Panzer said. “We always need to do more in the pharmacy business,” he remarked. “Because we have such a small [store] footprint within the marketplace, we don’t have the same leverage as the Big Three companies have. And we don’t have enough regional presence to be a strong regional player.”

This requires Pharmaca to put more emphasis on customer service, and product assortment, to drive repeat business and add new customers.

In addition to building its brick-and-mortar business, Pharmaca continues to upgrade its e-commerce platform, Panzer said. This includes further developing site functionality, with the goal of improving search results, merchandising and content integration — ultimately improving the overall customer experience, he said.

Panzer said three of the top 10 states for the company’s e-commerce business are states in which Pharmaca doesn’t operate brick-and-mortar stores.

“Being an omnichannel retailer allows us to reach different audiences across [a wider geographic area],” he said. “With e-commerce, we can talk to people in Canada and we can talk to people in Japan, if we want to. We’re concentrating on the U.S. and Canada for the most part, but expanding internationally is in our future plans. Overall, we’re looking to expand the e-commerce ­footprint.”

In terms of marketing its online business, Pharmaca employs both paid and organic search marketing, and it also benefits from a strong following from its repeat customers. “We also use our WellMail email marketing and Feel Better Rewards loyalty programs to maintain direct contact with our customers, which helps us grow both the brick-and-mortar business and e-commerce,” Panzer said.

“Our loyalty program has been growing rapidly over the past two years,” he added. “It continues to be a great benefit to driving loyalty but, more importantly, to driving basket size and customer transactions.”

He declined to provide specific details on the size of the loyalty card program.

The strong e-commerce leg of the business also provides Pharmaca with a test environment for new products. For example, Panzer noted that with two sales “platforms,” the company can make a decision to “get in and out of a product faster.”

“It takes a little more effort when you place items in a store because of the planogramming process and space planning,” he added. “With e-commerce, you are just adding to the website and distribution center slotting, which takes less effort than remerchandising a store.”

As a result, Pharmaca can be flexible about which product lines are sold solely in its e-commerce business and which products are sold exclusively in stores. “We’re omnichannel and we’re agnostic as far as where the sales come from,” Panzer explained. “So we’re not worried about the ­cannibalization.

“We want to grow total sales and expand profitability across both channels, and e-commerce allows us the flexibility to experiment with new lines that can help us reach that goal.”

The strategy behind this concept is that if a product is successful online, the company can then roll it out to stores — and vice versa. This also allows Pharmaca to experiment with vendors with smaller product lines. “We also can test in the stores and add products to the e-commerce site if they are successful there,” Panzer said. “We can blow it out from there to build total sales across both channels.”

In terms of adding new products, Panzer pointed out that Pharmaca often brings in lines that are so new and innovative that “in some cases we’re bringing people to market. We help suppliers develop the product lines, and we help them with their packaging and marketing too.”

Still, the pharmacy continues to be the company’s core offering, driven by the experienced staff of health advisers who aim to provide superior customer service.

“When you look at Pharmaca’s pharmacy business, ours has to be a higher level of service,” Panzer said. “We make a point of utilizing our compounding expertise and our pharmacists’ contact with the customers.”

He noted that the Pharmaca format has always included health advocates. “We have practitioners and pharmacists who are helping people maintain or improve their health conditions, or get to where they aspire to be.”

He said the practitioners who staff the Pharmaca stores are well educated, many are licensed in their fields, and they work in conjunction with the pharmacists to develop treatment regimens that improve health outcomes for the patients and retail consumers who shop the stores.

“Our goal hasn’t changed,” he said. “We still want to be the place where consumers come for answers to their health questions.

“That is what Pharmaca strives to be: the trusted source for health and wellness solutions. And with our excellent pharmacists and our innovative practitioner staffing model, we have always been way ahead of the game in comparison to our competitors.”

Looking ahead, Panzer said he believes the impact of the Affordable Care Act and the trend toward “empowered” patients and self-care dovetails with the Pharmaca business model.

“People are more empowered now [about their health] because they have to be,” he said. “A lot of health care expenses have been shifted to the consumer, and it comes out of their wallet. When that happens, you pay more attention and you look for ways to save without inhibiting your ability to maintain your health state.”

This also typically means that consumers want to become better informed and more involved with the decision making around their health, he said.

“We’ve moved from health care to self-care, and not just relying on acute need remedies,” Panzer added. “People are looking for ways to stay healthier, more vibrant, younger and more active. And that happens to play to our model very well.”