Best of both worlds: Pharmacy growth continues, while online opportunities abound

Best of both worlds: Pharmacy growth continues, while online opportunities abound


Growth in Australian pharmacy continues to outpace the grocery and convenience channels, and this trend could persist with further development of online retailing for health and beauty products.

Australians have increased their dollar spend at the pharmacy counter more than any other retail channel. Over-the-counter (OTC) pharmacy sales increased by 11% annually (52 weeks to 3 April 2016), compared to sales in grocery and convenience – both up by just over 3% in the same period.

Channel innovation and competitive pricing has made pharmacies an increasingly attractive shopping destination. Research from Nielsen’s Homescan Shopper Panel revealed that in 2015, an additional 258,000 households shopped in a pharmacy outlet, compared to the previous year. The vitamins category, due to its size and attractiveness to other markets (Asia in particular), is another key driver behind the solid performance in the pharmacy trade.

And while sales in pharmacies continue to flourish, it is imperative that retailers focus on and leverage the online trade to sustain this upward growth trend. We have already seen strong traction for beauty-related categories online. The 2016 Nielsen Australian Connected Consumers Report showed that in 2015, 21% of online Australians aged over 16 purchased cosmetics, perfume and skincare online over a six-monthly period – up from 16% the prior year.  

Looking outside of Australia, we know that online is already a strong channel for health and beauty categories in neighbouring countries. Nielsen data to June 2015, showed that in China, online accounted for one-third of total category sales for baby-related products – an increase of 40% on the previous year. Similarly, 25% of personal care products moved through the online channel in China – up by 35% on the previous year.

With intense competition for health and beauty products online, the key to success for Australian pharmacies lies in understanding consumers’ motivation to purchase. Factors including convenience, product assortment, product information and reviews, value for money, and useful online features should all come together to provide a winning online shopping space for consumers.

That being said, retailers also need to look for ways to optimise the entire purchase process. Nielsen’s Category Shopping Fundamentals study shows that beauty and personal care categories demonstrate high levels of planning. This represents an opportunity to reach consumers of these categories pre-store with lots of product information and reviews online.

Digital should be viewed as an opportunity for traditional pharmacy outlets. Instead of thinking in terms of online and off, retailers should be taking an integrated approach to drive sales in both; while providing an engaging experience for consumers regardless of whether they buy in-store or online.