Alumni Club member Mark Panzer was recently named Chain Drug Review’s Merchant of the Year for 2010. The following article appears in the January 2011 edition of Chain Drug Review.
Mark Panzer, president and chief executive officer of Pharmaca Integrative Pharmacy, has been named Chain Drug Review’s Merchant of the Year for 2010. He is being honored for shaping Pharmaca’s innovative approach to drug store retailing, which brings together a full-service pharmacy with holistic therapies and certified nontraditional practitioners.
Panzer — who joined Pharmaca in 2008 after spending seven years as a senior operations and marketing executive at Rite Aid Corp. and previously enjoyed a varied and productive career at Osco Drug, Sav-on Drugs, American Stores and Albertson’s — has brought many of the methods and disciplines of the chain drug store to his current assignment.
The result is that Pharmaca enjoyed its most successful year in 2010, a 12-month period that saw sales climb 8% to more than $88 million out of its 22 stores, located in California (12); Seattle (four); Colorado (three); New Mexico (two); and Portland, Ore. (one). The company opened its 23rd outlet, in Menlo Park, Calif., in November, and more stores are planned for 2011, with 40 to 60 additional units projected over the next five years.
Panzer has changed very little about Pharmaca’s direction or emphasis. It remains very much what it has been since its founding in 2000, a nontraditional drug chain that draws on the best practices of conventional and natural medicine to produce the best possible outcome for each patient by utilizing the training and expertise of its professional pharmacists and other practitioners.
“Our pharmacists and practitioners are trained to interact with our customers,” remarks Panzer, “and to practice their profession as they were taught to do.”
To that end, Pharmaca pharmacists routinely compound prescriptions and work hand in hand with other practitioners to help their patients achieve the desired health outcomes. This nontraditional approach to treatment and drug therapy has paid off in a big way.
While some 60% of Pharmaca’s sales come from prescription drugs, the remaining 40%, which encompasses 8,500 of the typical store’s 11,000-SKU assortment, is spread throughout the store.
Some 40% of front-end sales come from the store’s extensive selection of vitamins and nutritional supplements, while all-natural cosmetics and other premium beauty care products, many of them high-end, generate about 25%. On the other hand, traditional over-the-counter drugs account for just about 10% of total sales.
“The stores are merchandised in a way that emphasizes our nontraditional categories,” Panzer explains. “That’s why our O-T-C products and consumables are on interior gondolas, while vitamins, supplements, cosmetics, and specialty and nontraditional remedies line the store’s perimeter shelves.”
This approach to merchandising attracts customers who don’t ordinarily spend much time or money in conventional chain drug stores. Pharmaca customers are well educated and affluent, and they come to the chain for ways to maintain optimal health. They’re looking for prevention instead of just treatment.
The typical Pharmaca unit produces more than $4 million in annual volume, out of a space that can range from around 2,200 square feet to just over 7,000. The average ring at the chain is about $26, and the typical customer visits a Pharmaca outlet monthly. Then, too, typical gross margins at the company are some 10 to 12 points higher than average at a conventional chain drug store.
Panzer’s primary contributions have been both strategic and operational, though he has also sharpened the way the retailer merchandises and promotes its product assortment.
“I initially helped raise some key questions here,” he says. “I’ve encouraged us to define both our business model and a niche that is unique.
“I’ve also helped crystallize our merchandise offer to one that is now clearly organized by structure and function rather than by the narrower and more confining way that traditional drug stores seek to highlight and address specific ailments — and specific products and categories.”
Panzer has also led the retailer into such previously ignored areas as category management, while playing an instrumental role in improving Pharmaca’s service level and expanding the retailer’s private label assortment, which now accounts for about 7% of total sales.
The former Rite Aid operations and marketing executive has also been instrumental in developing Pharmaca’s loyalty program, which made its debut in June 2010. And in the past year he directed the launch of a more robust version of Pharmaca’s e-commerce web site, which now features some 5,000 items.
Finally, Panzer has helped provide structure and economies of scale to an organization whose approach to retailing had previously been very loosely coordinated. While Pharmaca, which had previously bought most of its merchandise either directly from suppliers — many of which are small niche marketers of specialized health and beauty products — or Cardinal Health, its primary wholesaler, the chain will open its first distribution center later this year.
Panzer’s skills dovetail neatly with Pharmaca’s unique marketing formula. In addition to monthly circulars, the retailer retains an e-mail list of core customers, who receive weekly communications about health issues, store sales and special offers.
Additionally, Pharmaca’s ongoing educational programs include free in-store lectures and seminars delivered by recognized authorities in the field of integrative health. A recent lecture discussed the science of beautiful skin, while another focused on sinus and immune health.
Panzer has come by his skills and retailing reputation honestly. The 52-year-old executive signed on for his first job in the industry, at the Osco Drug chain in Chicago, shortly after his 15th birthday. He’s been a retailer ever since, having divided his time almost equally between merchandising and operations while working for Jewel Cos., American Stores and Rite Aid. Now Panzer has apparently found a home, perhaps a permanent one, as president and chief executive of Pharmaca. For his part, Panzer is clearly delighted with where he is and what he’s doing.
“At Pharmaca, we’ve replaced the traditional chain drug emphasis on selection and volume with one on innovation and service,” he says in explaining the way that the company goes to market. “We’re not in the price game.
“Many of the items we sell are brands that are not found in the traditional food and drug channels of trade. We work closely with small specialty manufacturers that produce quality natural supplements and beauty care products and, in many cases, help them bring their products to a much broader market.
“We’ve developed a unique niche in terms of drug store marketing, one that is positioned to deliver on the goal of offering consumers a place where they can truly experience integrative health care.”
It’s a formula that Panzer has, in two years, come to understand and embrace. His presence, in turn, has been a catalyst in transforming a promising concept into a truly unique reality, a new, exciting and potentially transformative approach to drug store retailing.