The COVID-19 crisis will eventually move past its peak and everyday life will phase into a new normal. When it does, it’s unlikely that customers or businesses will go back to their pre-pandemic ways. As “essential” businesses, retail pharmacies were some of the first to experience and respond to new changes in customer behaviors and expectations, as well as adapt to fast-moving and inconsistent governmental regulations aimed at halting the disease spread. In fact, customers trusted brands and companies more than government authorities or the news when making product decisions during the pandemic, with 30% of customers trusting brands and companies versus only 24% trusting government authorities and 11% trusting the news.
Companies rapidly began exploring new ways of serving customers, providing elevated levels of transparency and communication, and revamping their whole supply chain in the process. As the economy reopens, retail pharmacies have the opportunity to lead the industry in adapting to the post-COVID environment. But to do so successfully, they’ll need to find the right balance of maintaining pandemic standards that are now base-level customer and employee expectations, and addressing long-lasting shifts in customer behavior. Pharmacies will need to continue to use the agility they employed during the crisis to accelerate adoption of innovations.
Those that miss the window may end up driving customers to competitors, including online entrants. However, retail pharmacies that make smart decisions about changes to their business model and investments in innovation now will have the customer’s insights and experience to build a promising future. Examine the changes retail pharmacies have made in the three following areas and consider if they were a temporary need or should become part of the permanent playbook.
• The In-Store Experience
The nature of the COVID-19 crisis pushed retail pharmacies into a highly visible — and vital — role, providing medication, essential items, guidance, and more to customers who were ill or trying to stay well. With that responsibility came a heightened awareness of store cleanliness and policies to ensure safety for customers and employees. Companies revamped their work environments to add flexibility and increased support for sick staff or for those caring for family members. Those that did not make adequate changes to their safety and employee policies were perceived negatively by customers. In an April 2020 survey on customer sentiments related to COVID-19, 36% of customers cited lack of adequate change to these policies as the main reasons driving their negative perception of a company.
The in-store changes happened seemingly (and often literally) overnight. Stores installed clear dividers to separate cashiers from customers, they pasted stickers on the floor to remind people about social distancing, and they asked shoppers to bag their own groceries if they’d brought reusable bags. Beyond the physical adaptations, many pharmacies created dedicated safe shopping hours for vulnerable people and required sick employees or those considered “high risk” to stay home. Big and small chains alike provided their staff with personal protective equipment and reduced operating hours to allow for dedicated time to clean and restock the store.
Employee policies also shifted, with pharmacies providing more generous sick policies and screening employees for wellness before they entered the store. Companies expedited hiring and training to fill in gaps and maintain staffing as the crisis picked up steam.
No Longer Necessary — The changes were necessary at the time, but going forward some of these changes will fade away. Reduced operating hours and limiting customers in the store impedes revenue over the long term. In the same vein, human resources will likely resume their standard hiring procedures unless they face talent shortages.
Permanent Post-Pandemic — Even retail pharmacies that have long taken extra precautions to keep their stores clean will need to maintain their new efforts. Retailers may also consider keeping pandemic procedures such as separating sick patients or offering vulnerable populations additional support such as specific shopping hours. What’s more, pharmacies should continue to provide increased communication about their customer protection initiatives to customers, so that customers are able to recognize the organization’s efforts to play a role in keeping customers healthy.
When it comes to staff, the crisis highlighted the need for employers to provide flexibility and additional benefits. While some, such as bonuses for increased work hours, were crisis specific, others, such as expanded sick leave, may become a permanent benefit and help pharmacies in their quest to attract top talent in the process.
All of these new safety, hygiene and human resource standards post-pandemic help retailers continue to build positive brand awareness. Just as importantly, they ensure that pharmacies are prepared for potential future outbreaks.
• Retail Assortment and Supply Chain Readiness
Customers have not only changed how they shop but also what they’re buying as they aim to prevent illness, limit trips outside and prepare for being at home more than usual. The demand for some products was so immediate that stores faced shortages of everyday items from toilet paper to cleaning products. They also saw sales increases in beauty and self-care products. Shoppers who were now cooking more at home picked up groceries while they were at the pharmacy, looking for ways to maximize the “one-stop-shop.”
The impact of the demand reverberated across retail pharmacy supply chains. At the store level, some limited the number of high-demand items customers could purchase, and restricted such products to specific parts of the store. Further up the supply chain, retailers struggled with single-source suppliers and dwindling stockpiles of products. Some companies found alternate sources for high-demand items and drugs, while others lost out on sales opportunities. For companies that were able to get products into stores, the impact on customers was significant. Lack of product availability was cited by 17% customers as the top reason that a brand distinguished itself negatively during the pandemic.
No Longer Necessary — Orders to stay at home and concerns about spreading germs spiked the demand for many products. Some of that demand will likely decline as the economy reopens — people will go to their offices, eat at restaurants, shop at multiple places and go to their salons. In addition, customers will be less inclined to accept their second or third choice for products if their preferred brand isn’t available. Instead, they may simply shop elsewhere to find it.
Permanent Post-Pandemic — That said, other new customer preferences may stick. Just as customers expect the stores to be exceptionally clean, they’re also likely to keep their homes and even hands extra clean — sustaining the demand for cleaning products, sanitizer, masks and even gloves. Customers may stock up on these items and create another spike in demand in anticipation of another pandemic-like event or even just the next flu season.
Additionally, the inevitable economic impact of the crisis will increase the importance of appealing to the value shopper. Adjusting assortments to allow for value pricing (by reducing SKUs and/or increasing private label offerings) should be combined with loyalty discount offerings that appeal to price-sensitive customers and encourage brand loyalty. Over 65% of customers cited availability and price as the most important qualities in shopping for products post-pandemic.
To keep their shelves adequately stocked, companies need to address their product sources proactively and build more agile supply chains. If they diversified their suppliers during the crisis, then maintaining that diversification now is essential. For retailers that were caught off guard and unable to pivot suppliers, establishing new relationships in different geographies will be crucial.
The crisis also highlighted the strength and weaknesses of existing relationships with suppliers. Looking forward, retail pharmacies may want to double down on suppliers that out-performed during the crisis and exit partnerships that proved unhelpful. Finally, there will likely be increased scrutiny on the ability of retail pharmacies to provide employees with PPE, and customers with essential items going forward. Stocking these items for the workforce and customer base and having suppliers at the ready when demand increases should also be top of mind.
• Opportunities Outside Store Walls
During the pandemic, retail pharmacies have provided new shopping alternatives to help limit customers’ physical trips to the stores. Innovations included drive-through COVID-19 testing, curbside/on-site locker pickup, and free home delivery. In some cases, companies rapidly ramped up online channels and the related distribution center capacity to handle the increase in e-commerce orders. Communication to customers (digitally and in-store) about these offerings increased to drive customer awareness of their options.
The emergency also highlighted the need for virtual pharmacy services. Retail chains empowered customers to connect with a centralized pharmacist via phone or use virtual pharmacist services available in stores via kiosks or tablets. Both reduced in-person contact and allowed stores to operate with fewer staff.
No Longer Necessary — Pharmacies won’t need to rely on modified operating models that force purchasing (both prescription and retail) through curbside pickup or drive-through only.
Permanent Post-Pandemic — Customers will undoubtedly want to continue some of the innovative conveniences they discovered during the crisis. People quickly adopted tele-pharmacy, medication delivery and limited contact opportunities to pick up products. And they’ll likely expect these offerings going forward. Pharmacies should maintain increased engagement with customers via digital communication as well to remind customers of their offerings and heighten brand awareness. If they don’t, customers may very well find another pharmacy that meets their needs.
Now is the time for retailers to review operational implementations, availability, quality, cost and pricing of new services to ensure their viability. They may also consider connecting such services into rewards programs to increase their usage and value further. Retail pharmacies can use this window to validate new offerings and ensure that payers see their value (and reimburse for it).
Lastly, in a post-pandemic world, pharmacies have the chance to increase the scope of their role within the health care system. After they were allowed to test for COVID-19 during the pandemic, pharmacies can argue for permanent regulatory changes that permit pharmacists to test for certain disease states in addition to their well-established role in delivering vaccinations. Additionally, increasing the availability of centralized telepharmacy services can reduce labor costs and protect pharmacists from potentially sick patients, so that they can stay well and continue to dispense medication.
By pushing such innovations forward, retail pharmacies can increase their influence and lead the industry into this new economy.
Retail pharmacy next steps
The COVID-19 crisis changed many aspects of everyday life. As retailers resume operations in this brave new world, they need to identify the changes that will stick and innovations that their customers will demand.
By prioritizing initiatives of greatest value to their customers and acting now to refine their offerings or expand implementation, retail pharmacies can build on the advantages they gained during the crisis. They can also continue to reinforce their important role in the health care ecosystem. And those that do so? They’ll forge a new path to success for their customers, employees, business and industry.
Rodey Wing is a partner in the Health practice at Kearney, a global strategy and management consulting firm. He can be reached at Rodey.Wing@kearney.com. Kate Maheu is a principal in Kearney’s Health practice; she can be reached at Kate.Maheu@kearney.com. Laura Bowen is a manager in Kearney’s Health practice; she can be reached at Laura.Bowen@kearney.com.