JACKIE, a pharmacist, is looking forward to the year-end and new year for a sales boost. “It is during the months of November, December, January and February when sales at our retail pharmacy are robust. This year began on a similar note. Business was brisk in January and February and in fact even better than last year right up to the MCO (Movement Control Order on March 18) and for another three weeks into the MCO.
“And then it went silent. Initially, consumers were stocking up on supplements, masks, hand sanitisers and over-the-counter medication. But from the fourth week of the MCO until the Conditional MCO (CMCO), even if someone walked into our store, they were only able to purchase medication, as the health and beauty segment had to be cordoned off. Business is better now that the Recovery MCO (RMCO) has kicked in, but it is still not quite there yet,” says Jackie, who is now banking on year-end takings to help her business improve.
Already, a number of retail pharmacy outlets have fallen by the wayside, unable to endure the pandemic.
Berjaya Corp Bhd’s Berjaya Pharmacy Sdn Bhd has permanently shut three outlets — in Plaza Berjaya and Taman Tun Dr Ismail in Kuala Lumpur and Suria Sabah in Kota Kinabalu.
Big Pharmacy — 35%-owned by private equity firm Creador — temporarily closed its branches in Jalan Wong Ah Fook and Forest City in Johor because of low footfall but has since reopened.
In an interview with The Edge, Malaysian Pharmaceutical Society (MPS) president Amrahi Buang confirms that a number of retail pharmacies have had to shut down permanently because of Covid-19 and the ensuing MCO. But the casualties are mainly independent pharmacies.
Many of those that continue to operate are suffering significant revenue shrinkage.
According to Amrahi, although retail pharmacies are categorised as essential services, some were not able to operate during the MCO. “Pharmacies [located within] malls, UTCs (urban transformation centres) or departmental stores were unable to open if the mall/store was closed,” he explains.
But even mall-based retail pharmacies that could operate registered a 50% plunge in sales as shopper traffic reduced dramatically, he says, while high-street retail pharmacies saw sales contraction of between 15% and 20%.
Generally, high-street retail pharmacies record a lower sales turnover than those located within shopping centres.
Amrahi says high-street retail pharmacies make RM50,000 to RM80,000 in sales a month, whereas those located within malls can chalk up three times more, or RM150,000 to RM200,000.
He says that during the MCO phase, retail pharmacies saw a temporary rise in sales triggered by the purchase of face masks, sanitisers and medication. However, the profit margin for these items is very small.
“In the CMCO phase, there was a 30%-35% drop in sales due to restrictions in movement and less customer traffic.”
Now that the country has entered the RMCO phase, retail pharmacies have started to see a “slow increase in sales but generally it is still down by 15%-20% compared with the same period last year”.
How will the industry perform this year?
While the estimated value of the community pharmacy market in 2019 was between RM5.1 billion and RM5.9 billion, its performance in 2020 remains unpredictable.
According to data from the Malaysia Retail Industry Report (July 2020) by Retail Group Malaysia released last week, on a quarterly basis, the pharmacy and personal care segment contracted 3.9% in the first quarter of 2020 compared with an 11.8% growth in the previous corresponding period. In the second quarter, this segment is projected to shrink by a bigger 18.4%.
The entire retail industry is projected to contract 8.7% this year.
Amrahi points out that between 2014 and 2019, the compound annual growth rate (CAGR) for the industry was an estimated 7%-10%. Prior to the Covid-19 pandemic, the MPS’ CAGR projection for 2019-2025 was between 9% and 11%. However, the projection looks likely to be derailed.
“We expect growth in 2021 but still expect the retail portion of community pharmacy to be challenging owing to reduced consumer confidence. Independent pharmacies will find it harder to compete due to market conditions,” he adds.
And as if thin margins and low consumer confidence were not bad enough, consumer shopping habits have also started to change.
MPS honorary treasurer Lim Jack Shen tells The Edge: “Although the number of transactions has increased, the total value of the transactions has been relatively stagnant over the past few years. This shows that the basket size (average value of transactions) is shrinking.
“People used to buy one box (with several strips) of medicine each time for a month’s supply. Now, they are buying one strip at a time. In the outskirts, it is far worse. Consumers who were buying one strip are now buying a few tablets at a time. This is similar to the situation in lower-income countries like Indonesia and the Philippines.” He adds that the recent reclassification of B40, M40 and T20 is more reflective of the reality of the situation.
While many are expecting sales to pick up towards the end of the year, one retail pharmacy operator, who did not want to be named, anticipates “things to get worse once the moratorium is over”.
“The reduction in spending power due to increased commitments and enhanced pressure on job security are causing people to put off purchases, and even at some point, to make choices when it comes to essential items,” she adds.
Many, strapped for cash, have embraced the six-month bank loan moratorium, but most will have to start servicing their loans again come October.
On a more positive note, Amrahi says some chain pharmacies are expanding, but declined to name the players.
The Edge, however, has learnt that Caring Pharmacy and Alpro Pharmacy are in expansion mode.
Malaysia has around 2,600 community pharmacies, half of which are based in Kuala Lumpur and Selangor.