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44 BUSINESS THROUGH INNOVATION RETAIL MANAGEMENT THE SLOW ROAD TO RECOVERY he Australian economy is beginning to rise from the depths of the pandemic crisis with restrictions being eased in the wider community, but the recovery process will be slow, putting both retailers and landlords under pressure in the coming months. With the federal government encouraging businesses and workers to cooperate on reviving productivity growth, a post-COVID-19 world presents the opportunity for pharmacy owners to make some positive changes to their operations. Reserve Bank Governor Dr Philip Lowe has recently revealed that both unemployment and the economic shutdown have not been as severe as anticipated, and suggested the government should keep hold of the $60 billion ‘savings’ on the original estimate of costs for the JobKeeper wage subsidy program, to perhaps finance more tailored spending in a few months. Surveys from some of the larger shopping centre landlords, such as the Scentre Group, indicated that visits to their complexes returned in late May to about 80 per cent of the numbers for the same period last year, with more than 80 per cent of stores being reopened. Customers are feeling reassured by the overt and practical safety and hygiene measures in shopping centres, including signage, public announcements, availability of hand sanitisers and more frequent cleaning. This is good news for pharmacies in these locations, which have been the hardest hit outlets within the pharmacy industry, being heavily dependent on shopping centre foot traffic. However, recovery will be a particularly slow process for these businesses, affected by the struggles of other shopping centre retailers, some of which have been mortally wounded. Pharmacies in business districts or those with a large number of patients who are office or city-based workers, and pharmacies in medical centres (with doctors who have strongly transitioned into telehealth consultations) have reported substantial reductions in their overall business. The larger shopping centre groups face their own challenges, especially following Wesfarmers’ decision to take the axe to discount chain Target. Wesfarmers CEO Rob Scott says international retailers such as H&M, Uniqlo and Zara have made it increasingly difficult to run a profitable department store, prompting his move to shut up to 75 Target stores and convert another 92 to the Kmart chain as part of a major restructure of its discount department store operations. The Target businesses of the size of those operating 10 years ago are now just not sustainable in this more competitive world. Wesfarmers had accelerated a review of the chain prompted by a sharp plunge in sales due to the pandemic. Opportunity to reform the economy Dr Lowe warns that increasing regulation over the past 20 years in the Australian economy has threatened to smother its dynamic nature. He welcomes the recent announcement of a new accord-style compact between business and unions. The government in collaboration with the states and territories is considering changes to systems covering industrial relations, skills and education. The existing industrial relations system needs to be more flexible to be more relevant to the modern economy. Students and the workforce need to ensure they have the appropriate skills for the modern Australian economy. How can pharmacists improve their businesses? Community pharmacy in a post COVID-19 world will emerge stronger. It’s widely acknowledged in the community and among landlords that pharmacies have played a vital role in the healthcare system despite the risks posed by the virus. The pandemic has helped pharmacies to forge stronger links with their customers. Landlords, on the other hand, have been weakened by the whole pandemic experience. An opportunity now exists for pharmacies to make some hard decisions. Those in shopping centres need to be in a convenient position, not a remote location that suits the needs of a landlord. For too long many pharmacies have been in locations where they’ve generated customer traffic for the landlord and surrounding retailers. We can see that pharmacies in more convenient strip locations have done relatively well in recent months. With the demise of many retail businesses in shopping centres, opportunities will present themselves for pharmacies to relocate to more convenient sites. Carry out a retail audit of your pharmacy business to determine if you can downsize your current operation, to effect better terms. All pharmacies must focus on the main game in a post-pandemic world: securing a new lease on reduced commercial terms now in the best sized tenancy to suit your individual business requirements, even if it is in a different part of your shopping centre or building. Resources 1. Cranston M. ‘Lowe’s fears on red tape’. Australian Financial Review, 29/5/20. 2. LaFrenz C. ‘The gloss can’t hide David Jones’ decline’. Australian Financial Review, 29/5/20. 3. Powell D. ‘Smaller Target puts Big W in crosshairs’. Sydney Morning Herald, 26/5/20. 4. Powell D. ‘Wesfarmers boss blames rivals for Target rejjg’. Sydney Morning Herald, 23/5/20. By Bruce Engeman. Professional Property Advocate Engeman Retail Bruce Engeman is an independent, professional property advocate who works exclusively for pharmacy operators. He started Engeman Retail in 2008 and has handled pharmacy negotiations hundreds of times over the past six years. Inquiries: bmengeman@bigpond.com or 0418 470 175. RETAIL PHARMACY • JUL 2020