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How Amazon Could Influence Govt Pharmacy Decisions

On Tuesday, December 5, Amazon, which has for some time operated a digital bookstore and streaming service, began offering physical products from an Australian base in a move which has been carefully watched by the retail sector.

And its arrival could mean trouble down the track for unprepared retailers, including pharmacy, warns CEO of Advantage Pharmacy, Steven Kastrinakis.

“Amazon’s arrival in Australia has the potential to change Australian consumer behaviour by encouraging more online shopping,” he says.

“With reports on Amazon’s success in obtaining pharmacy licenses in over 10 US states and its potential to tap into the prescription supply business, the pharmacy industry should brace itself against massive disruption.”

Steven Kastrinakis

With the current Community Pharmacy Agreement set to wind up in 2020, “what Amazon are doing may have an effect on or influence Government decisions in regard to what happens in the marketplace in the next couple of years.

“I think the Government will look very closely at the interaction Amazon has with consumers.”

He said that the current ownership restrictions, which prevent corporations such as Amazon owning pharmacies, serve the community well and ultimately provide greater choice.

But “if the market did become deregulated, having any of those larger retailers coming in would be very disruptive for the current market because they have so much buying power.

“Ultimately, when you look at some of these larger retailers, they come in, disrupt the market, get market share, push smaller retailers out and become very dictatorial to governments so there’s less choice.”

While it can’t offer medicines yet, Amazon’s launch sees it offer a range of personal care items often found in pharmacy front of shop as well as a beauty and fragrance offer.

Mr Kastrinakis told the AJP that pharmacy would need to consider its service levels if it hoped to compete with this offer.

“Look at your model, and how relevant you are to the consumer,” he says. “You may not be able to match the price, but you could provide a better shopping experience for the consumer in store.”

He says that pharmacies have already been competing with large online retailers such as Strawberrynet, without having a good awareness of these competitors as “you may not have had those sales in your store anyway”.

“If you’re not a specialist in fragrance, consumers won’t look to you for those fragrances,” he says. “You’ve got to pick your market and become the best you can possibly be, so that they see you as a destination.

“Pharmacies need to identify what they’re actually very good at, and become relevant to the consumer, so that the consumer sees them as a specialist in that area – and get back to core competencies, and that’s the provision of medicines.”

In October, digital marketing agency DataSauce warned that Australia’s retail sector was completely unprepared for a full Amazon offer entering the marketplace.

We won’t protect you from competition: ACCC

Meanwhile, ACCC Chairman Rod Sims has delivered a warning to Australian firms: the competition watchdog is not going to protect them from competition.

Last week Mr Sims outlined how recent changes to the Competition and Consumer Act 2010 (CCA), especially Section 46, help the ACCC protect the competitive process by allowing firms, big and small, to compete on their merits.

“What has been fascinating recently is that some of the loudest opponents of the recent s46 changes have suggested that the arrival of Amazon, a new entrant to the Australian market, could be anti-competitive. To me this shows how much of the recent debate about s46 was misplaced,” Mr Sims said.

“Amazon’s entry into Australia will be good for consumers, despite it not being good for some incumbent retailers. Some of these incumbents have even called for ACCC intervention to act against Amazon’s business model.”

Under s46, firms with a substantial degree of market power are prohibited from engaging in conduct that has the purpose, effect or likely effect of substantially lessening competition in a market.

“Protecting the competitive process is about ensuring winners and losers are determined by the quality of the offers firms make to consumers, so firms that offer consumers a better deal should be rewarded irrespective of their size.

“To some this may seem unfair. But it is this process that drives innovation, better business practices and lower prices for all Australians.”

Published on 5 December 2017 on the Australian Journal of Pharmacy: https://ajp.com.au/news/amazon-influence-govt-pharmacy-decisions/