It’s a new year with lots of resolution-making, creating our vision board, planning, and thinking about how to improve our lives and businesses to get to that next level. Just before you conclude on your plans for the year, I would like to share an idea with you.
Do you know most community pharmacy owners unintentionally put a cap on the growth of their Pharmacy?
Let me show you how.
The average pharmacy owner believes the only way they can grow their business is by selling more to their immediate community and opening more stores.
This worked for decades, and lots of Pharmacy owners used this to expand their frontiers, serve more people and make some wealth for themselves.
However, I will attempt to show you something better, using the terms Local and Global maxima as an analogy.
Local maxima and Global maxima as a concept for Pharmacies.
An average pharmacy in a good location with astute owners would probably start with average revenue of 100,000Naira a day.
With great staff, amazing customer service, optimal drug availability, this pharmacy can grow to 500,000 daily revenues. Then the pharmacy owners realize that growth/sales stalls after a certain point.
This might mean the pharmacy has reached the Maxima. The Local maxima.
So what is Local maxima?
In English, A local maximum is the largest value of the function(function is revenue), respectively, within a given range (where the given range is your immediate community).
A global maximum is the largest value of the function, respectively, on the entire domain (the entire domain is the pharmacy value chain).
The biggest remarkable difference between Local and Global maxima is that there is a high value attached to the Local maxima, whereas the Global maxima are infinite.
Back to the pharmacy, after getting to 500,000Naira (Put in a figure based on location), no matter what the pharmacy does, they will keep hovering around that figure.
To increase the business, The business will need to invest in opening another store and the cycle continues.
However, by opening new stores, the business incurs fresh startup costs, same startup risks, to get to the maxima. Those are just hitting a series of local maxima.
The Good news, the ability to serve customers right, scale the business shows a great understanding of business fundamentals.
The Bad news is, local maxima always make sure gains are capped at a certain level.
To go from local to Global maxima requires a change of thinking about business models, business processes, and fundamentals.
You will need to invest in Global maxima games. These are games with unlimited upside, and *potentially* unbounded revenue.
How do we start the journey to global maxima?
Ask these questions. How can my store at Ikeja serve Enugu, Africa? What can you provide for a patient in Accra, that they will pay you for?
In fact, the brand Apetamin used a mixed strategy of Instagram, Facebook Ads to create demand, and sell millions of Naira worth of products Nationwide before introducing it to Pharmacies.
A few friends and I made millions of Naira selling COVID-19 kits, without seeing a single face shield. All we had was a website, a phone, and dispatch riders.
To play the global maxima games, start thinking about tools, skills, knowledge, and techniques that will allow you to serve people all over Africa.
These tools, business models are remarkably different from what is used to serve your local environment.
Some examples of global maxima games,
- Adding a personal product line to your business, e.g Pharmacies producing antiseptic and selling them all over Nigeria.
- Community Pharmacies coming together to move into the importation and distribution of medicines.
And for more recent and scalable examples,
- Alto Pharmacy in the US, Providing white-labeled insurance for their customers, same-day delivery, and online consultation. (Nobody said we can’t have Pharmacy-centric insurance).
- A Pharmacist selling Supplements through Instagram and Jiji.
- Partner with healthcare influencers like Pharmradio, to build a following on IG, Facebook and provide paid consultation.
Understanding Social media, SEOs, Logistics, and Payment infrastructure are some of the toolbox needed to play Global maxima games.
These wouldn’t have been possible like 15,20 years ago, but Logistics services (Gokada, Uber), Payment services (Paystack), and free online e-commerce sites like Shopify.
Install shopify, Gokada, and Paystack here.
And guess what? You can start this today and for free.
A mentor once said, Play games with limited downsides and unlimited upsides, Global maxima games are one of those.
2021 will be a great year!
Jeremiah Babasanmi is a Pharmacist but currently works as a Head of Product at a fintech startup, while taking courses in Blockchain development.
Thank you. This was very insightful.
Happy you found value. Thanks
Great article. I believe the top tier pharmacies in Nigeria are already playing the online retail global maxima game (reference: health plus, Med plus and asset pharmacy). While playing in the global market may present more opportunities I believe it comes with some drawbacks;
1. Delivery cost in addition to cost plus pricing would make the consumers landing cost unbearable as compared with sourcing from a local rx.
2. We might have a repeat of the dwindle and seeming stutter of e-commerce platforms like Jumia and konga as the business models are similar and such present similar challenges.
3. The sector becomes less lucrative when too many players begin to adopt the model.
However, I believe the other recommendation you made about pharmacy insurance is very much open for innovation and a possible disruption in Nigeria. Also, starting pharmaceutical importation is a futuristic investment that is likely to generate exponential ROI’s. For instance Life back pharmacy raking in extra revenue with the introduction of their product lines.
Hmm! Quite a number of pharmacies are playing in this space already, and it will only get bigger.
Sure, playing in the global space will come with setbacks, that’s why the blogpost says, there will be a need for a different kind of skillset that’s remarkably different from the current skills.
To expand on some of your points.
1. Delivery cost is still expensive for now, but it has increasingly been on a decline and will continue to drop as more infrastructure gets built.
2. Jumia’s stock price has gone up more than 400% percent since IPO, I’ll argue that even though, they didn’t reach the heights they expected. It’s been a phenomenal success and mire successes will come from niches.
3. Expanding the pie is always good for the customer, more value gets created and captured.
Yea, there’s a lot of things to be done. Pharmacy insurance, Importation, and embedded finance are still green fields with unlimited upside if done well.
Thanks for reading and engaging! Super apppreciated
Quite an elucidative write-up.
We hope government policy we not adversely affect ability of pharmacies to tap from the global spheres. The Nigerian ecosystem is highly unpredictable so proper analysis of the markets are necessary like you have pointed in order not to tip of political landmines…