Carving a Niche for Success
In this profile, we will take a glimpse inside one successful independent pharmacy and explore how they are carving a unique niche and using technology as tool to improve their end results.
Lloyd’s Pharmacy is an independently-owned pharmacy that has served the Saint Paul, MN community since 1975. Lloyd’s offers small town personalized service in a big city. Understanding the challenges that independent pharmacies face in today’s highly competitive marketplace, Owner Ron Johnson realized that to build lasting success he would have find a niche that set his business apart. Part of creating this niche included finding the right technology suite enabling him to meet his goals and maximize resources. In November 2008, the ECRS CATAPULT® POS system was installed at Lloyd’s Pharmacy to help him streamline tasks, meet government regulations, manage inventory, and provide the excellent customer service that sets him apart from national-chain competitors.
Lloyd’s Pharmacy is reliant on prescription sales for the bulk of their business. Prescription sales account for about 80% of their business while front-end sales account for about 20 percent. For Lloyd’s, this means they need to focus more resources on prescriptions and compounding while maintaining the front-end as to not lose valuable OTC sales. Even though the front-end accounts for a much smaller percentage of their overall sales volume, the merchandise yields a higher margin than a typical prescription sale. So, every over-the-counter (OTC) item sold is important to their bottom-line. In order to effectively manage their front-end, without sacrificing resources needed to manage the catalyst of their business (prescriptions), Johnson chose to implement the ECRS retail automation system.
Automated Inventory Management
The system [ECRS Gateway™] keeps out-of-stocks down, and it’s a big help in keeping prices and margins correct. It is so much easier and faster; you just scan an item when the customer checks out, and it’s there in the system with the correct price.
In addition to CATAPULT POS, ECRS provides a bi-directional electronic interface to Lloyd’s main front-end supplier, Cardinal Health. This piece, ECRS Gateway™, allows them to easily populate Purchase Orders with all front-end items sold through the POS system, and with one click, electronically submit the order to Cardinal. The ordered items will arrive in his store, usually, in about 1-2 days. With ECRS Gateway, the store also receives autogenerated price updates, Cardinal shipping notifications, and updated invoices. Inventory received is automatically entered into the CATAPULT database once the updated invoice has been electronically accepted. A Price and Cost change worksheet is also created, alerting them to any price changes from the original PO to the final Invoice. Changed prices and adjusted margins (pre-set) will be automatically updated in the system once the worksheet is accepted by the user. This provides accurate pricing and margin controls, assuring profits are not being lost due to human error or inaccurate, “old” data.
ECRS Gateway technology also ensures that inventory is on the shelf, ready for consumer purchase. This prevents Lloyd’s from losing sales to a competitor because an item is out of stock. It provides complete front-to-back inventory management without the resource expenditure of someone walking the floor looking for “product holes”. CATAPULT analytics easily detect dead or slow moving stock, or when there is a “run” on a certain item. This ensures extra stock is not being ordered and that additional items needed are ordered. As every successful independent pharmacy owner understands, resource maximization is more important than ever. Resources should be focused where most needed, not wasted on doing manual tasks such as inventory counts.
Our OTC inventory is automatically ordered based on what we sell, so we don’t have issues with human error in inventory counts.
Providing Excellent Customer Service
We offer personalized customer service that our competitor’s do not. Things like being able to easily accept a customer’s FSA card make all the difference in our business.
In carving out Lloyd’s niche, Johnson focused on providing excellent customer service, providing compounding services, and offering home delivery. Focus on these three key points allows Lloyd’s to separate its self from big-box, less personal chains. Not only does implementation of a retail system such as CATAPULT help provide more time to focus on these key areas, but it drastically improves customer service by providing faster and more streamlined checkouts, enabling customers to use health benefit debit cards without hassle, and allowing employee time to be focused less on manual tasks and more on direct customer interaction.
Customers do not want to spend time waiting in lines or waiting for slow POS terminals and payment transactions. With CATAPULT POS, Lloyd’s is able to provide customers with a fast and accurate checkout experience, leaving them with a good last impression as they leave the store. Electronics payments, HIPAA signatures, prescriptions, and OTC purchases are all automated in one checkout process and require one terminal and one signature capture pad. Prices are in the system and accurate. Customer receipts can even be customized to fit the store’s brand or advertise specials.
Meeting Compliance: IIAS & PCI DSS
ECRS is very good at keeping up-to-date on current issues and regulations such as PCI and IIAS. This is one of the main reasons that I chose this system.
One of the major reasons Johnson chose to install a POS system was because of new IRS regulations requiring IIAS-compliant systems for pharmacies wishing to accept health benefit debit cards (FSA/ HRA/HSA). Processing these cards without being IIAS compliant could result in declined customer transactions and/or IRS imposed fines. There was a 90% loophole that smaller pharmacies could apply for, but this meant that customers would have to manually keep track of their own health benefit transactions and submit receipts to the insurance company. In many cases, insurance companies openly discouraged participants from shopping at locations not running IIAS compliant POS. For pharmacies such as Lloyd’s, this would mean a significant drop in business.
ECRS’ IIAS-ready POS system allowed Lloyd’s to seamlessly transition into the new regulation. Customers never noticed anything and cards processed without issue. CATAPULT automatically separates the customer’s purchase into eligible and non-eligible items and makes split tenders simple. This further provides the level of customer service that Lloyd’s strives to achieve.
ECRS CATAPULT has been certified as PA-DSS and PABP compliant by the PCI Security council. This certification provides an easier path for merchants, such as Lloyd’s, to gain PCI DSS compliance. PCI DSS compliance is critical to a business in the event of a credit card security breach.
Back Office Management & Reporting
We use the system to keep track of all of our business data. It’s so much easier than doing it by hand like we did before.
Lloyd’s uses the back office management functionality in CATAPULT to automate formally manual processes. This allows employees time to do the things that really make their pharmacy a success. CATAPULT makes available hundreds of detailed electronic reports, enabling easier business management, added transaction security, and easier audit processes. System users can pull detailed transaction data, including electronic signatures, in seconds. Financial information is also easily accessible, allowing Johnson to make more informed business decisions.
We have been through several audits since installing CATAPULT. An audit used to take a ton of time, now we just punch in what we need and print it out. It’s wonderful. The information is also more accurate and legible than hand-written data.
The Independent Pharmacy & Retail Automation
POS systems are an important tool for pharmacies. It seems like nobody has enough time anymore to do everything that needs to be done. Customer service and business management are very important, and our system allows us to focus on these things.
Independent pharmacies today are faced with mounting challenges that threaten the industry as a whole. As Johnson expressed, there is a large up-front investment to implement a retail automation system, but the correct system can pay for itself in a very short time period by enabling work-flow efficiencies, inventory accuracy, and regulatory compliance. An unstable economy, insurance companies, Medicare changes, limited help, government and credit card regulations, and increased competition have greatly affected the industry. The National Community Pharmacists Association estimates that the number of independent pharmacies has dropped from 24,345 in 2005 to 22,728 in 2009. Previously, the type of automation now offered was only available to large chains with huge technology budgets or in-house developers, but this is no longer the case. Retail automation is vital and available to everyone, helping to bring back the success of the community-focused, independent pharmacy.