How to Start A Chemist(Pharmacy) Business in Kenya

Download Kenya Chemist (Phamacy) Retail Business Guide PDF➥

Overview

Even before we go into the actual figures, a casual look will show that in the last ten years the number of retail chemists have increased both in the rural and urban areas. In the last three years Chemists, it seems, are almost becoming like normal grocery shops in terms of being at every corner of the neighborhood.

The growth can not exactly be tied to increased demand for medicine, but more to an entrepreneur spirit. Among the reasons for the explosion is one there are now more casual conversations about how enticing the margins in the pharmaceutical industry are. This has attracted more people to the business.

Secondly is that entrepreneurs have become crafty and found ways to go round the major barrier that previously prevented many from getting into the business: professional qualifications and certifications. It used to be, and is still by law that for one to start a chemist they need to be registered with the Pharmacy and Poisons Board. This as we will see below is no longer a barrier per se. Related to this is the growth of colleges and universities in the last 13 years which have churned out more professionals in the ‘health industry’, not necessarily pharmacy. This has resulted in an increased pull of knowledge, more professionals seeking jobs and opportunities and eventually more chemists.

Despite all the talk about how attractive the margins in the business are, the boom, if you look in the daily newspapers and online classifieds you will find a relatively high number of chemists for sale. In the Daily Nation for instance there is an average of two chemists up for sale every week. Sometimes, as high as five. This means just like any other business margins are not everything; you can still fail because of a variety of reasons which will gradually become clear as you read this guide.

Licenses

By law everybody dispensing medicine and supervising any pharmaceutical business is supposed to be a qualified and registered pharmacist or enrolled pharmaceutical technologist.

The very specific law is the Pharmacy and Poisons Act 244 of the laws of Kenya, which also establishes the Pharmacy and Poisons Board (PPB). PPB examines and registers pharmacists and enrolls pharmacist technologists. (Pharmacists are registered while Pharmaceutical Technologists are enrolled). It also falls on the board to register businesses involved in the manufacture, importation, distribution, wholesale and retail of medicines.

A pharmacist holds a Degree in pharmacy holder from a recognized university in Kenya or any other part of world. A pharmaceutical technologist holds a Diploma in Pharmacy from a recognized Kenyan institution. Diplomas from other countries are not accepted .Whereas a pharmacist can start operating a retail chemist immediately after registration, a pharmaceutical technologist is required to work under the supervision of a pharmacist or enrolled pharmacist technologist for at least six years after obtaining their diploma. However this is rarely adhered

to. The technical term as used by the PPB is to “superintend over registered premises.”. This means the registered person will be the one in charge of the chemist.

PPB Licenses

From the PPB you will require two licenses

a)License to operate (superintend) a retail chemist. The applicant of this license needs to be a pharmacists or pharmaceutical technologist.

b)Premises registration. The PPB inspects and registers the premises from which you will run the pharmacy.

So what to do if you are not a pharmacist or pharmaceutical technologist but you would still like to start a chemist? You can decide to do away with the registration and technically operate an illegal pharmacy, use fake documents or as is common nowadays partner with a pharmacist.

In the former case it means you will be playing cat and mouse games with the PPB. Living on the edge and praying they don’t conduct their dramatic (and sometimes) televised raids, or just their usual inspection.

If it could comfort you is that the PPB does not have the capacity to carry regular inspections all over. There are about 80 inspectors covering the whole country, with most of them being pharmaceutical technologists. Sometimes they even have problems securing transport vehicles to go do the inspection.

Inspectors work on a regional basis rather than county by county. This further strains them. So months could pass before they come to your location. And you will be in good company too. : There are hundreds of chemists operating without licenses. Though the statistics of the exact number of chemists operating illegally are not exact, one estimate puts it at slightly over 50 % of all the chemists in the country. Others estimate the registered chemists to be 4000, while the unregistered are 5000. We were not able to get the exact figures from the PPB. Without the PPB licenses you will be gambling and depending on your location the odds could be on your side. But beyond PPB officials from the ministry of health inspectorate or even county public health officials could carry out inspections too. And the PPB is trying to expand its capacity.

What happens when you are caught? You reason as some unregistered chemists do that PPB inspectors are human beings, and they are Kenyans, and so you can work something out. This means you can bribe them, let go and live to make money another day. But this is not always the case. The PPB can impound your entire stock, have you arrested and arraigned in court.

Your employee will be in trouble too.

By law the penalty for operating illegally are not so harsh “A person who contravenes the provisions of this section (meaning operating without being registered. The brackets are

ours) shall be guilty of an offence and liable to a fine not exceeding twenty thousand shillings, or to imprisonment for a term not exceeding one year, or to both.

While a person who operates in an unregistered premises liable to a fine not exceeding thirty thousand shillings or to imprisonment for a term not exceeding three years or to both. But there are other laws that could come haunting you like anti-counterfeit laws or even be accused of endangering lives.

Operating without a license also means that you will never go mainstream. You will remain ‘small, growing cautiously and even afraid to operate in central business districts of towns. If you do then you will be crossing your fingers hoping you are not arrested. Certainly there are unregistered chemists even in places such as Nairobi Central Business District (CBD), and they calculate their risk by saying the logic that PPB would never carry out inspections in the CBD because they will argue no one can be daring enough to operate an illegal chemist in the CBD, where they can easily be found. This is not necessarily the case. Beyond licenses the PPB also does inspections checking on quality and fake medicines. There is always a chance that you could be caught.

It is a fact that most of the unregistered chemists are in the estates, rising to a high level in low income, high population areas. Visit an estate like Kayole and you will see the number of chemists there, and those with PPB licenses. In such areas the chemist’s owners and staff have developed a code whereby they are always on the lookout, and if PPB staff are sighted word spreads around fast, and the chemists hurriedly close their doors. But the PPB outwits them once in a while. In a way chemists in such areas want the raid to happen because they know after such a msako it will take a long time before they are back to the area again, meanwhile they will continue making money.

You can survive without registering, and even actually make good profits but it limits you in terms of growth. The larger the chemist the more visible it is to regulators.

The other alternative is to use the fake documents, where you display fake registration certificates hoping when PPB inspect they won’t discover the documents are fake. Fake documents can be acquired in various juakali ways the specifics of which are beyond this guide. Though this could seem a little better version to being totally unregistered the risks and drawbacks are the same as if discovered and the consequences probably worse.

The last alternative is to “rent a license”: partner with a registered pharmacist or qualified pharmacist technologist so that he acquires the licenses on your behalf. The modalities of such agreements are not cast in stone and could take many forms. The basis of it is that the pharmacist or pharmaceutical technologist is qualified and registered, he can acquire the requested licenses on your behalf from the PPB, and you will compensate him or her for it. You are essentially hiring the licenses.

The form of compensation will depend on you and the pharmacist. The most common of these agreements is that once you have the license and your business is running you agree to pay the pharmacist a monthly fee. The amount of which you negotiate and agree. Often it ranges

between Kshs.15, 000 and Kshs.30, 000. Others request for a lump annual sum of between Kshs.100, 000 and Kshs.200, 000.

In a way you are employing this person. He is taking a risk of his own in a way. His or her name is the one that is on the license, and if the chemist finds itself on the wrong side of the law then he too will be responsible.

Still it could be lower or higher depending on the location, size and potential revenue for the business.

Other common arrangements the pharmacist becomes a shareholder of the chemist and gets a part of the revenue. In some cases the pharmacist gets a one off payment, but this is usually tricky since the licenses need to be renewed annually, and with a one off payment there might not be motivation to continue renewing the license. There are also pharmaceutical technologists who actively look for partnerships; they have the qualifications but lack the capitals.

There are no formal rules about this. Negotiate a deal that is good for you. One of the challenges of these arrangements is what happens if the pharmacist or pharmaceutical technologist decides to quit. You need have a plan for that, if you opt for the monthly payment try and ask for a grace period of a few months before you start making payments.

It is a fact that there are many successful chemists run by people who are not pharmacists or more appropriate registered by PPB. So the bureaucracy should not discourage you. Definitely you will have to employ pharmaceutical technologists or people with related skills to help you run the business. Actually it is a requirement that every chemist should have a resident pharmacist or pharmacist’s technologist running the chemist. Medicine has to be dispensed by skilled people.

Some of the most successful chemists have been started by entrepreneurs with no pharmacy or even health background.

Though the pharmacist is registering the company on your behalf you will pay the actual PPB license fees. The PPB has set some condition for you to meet before you register the premises. Among these is the chemist should have tiles, a sink, a toilet, mirrors, proper lighting and other such to do with ensuring the environment is healthy for handling medicine. The PPB inspector in the region comes to inspect the premises before issuance of the license. Licenses are sometimes issued without meeting all these conditions

Among some of the notable, though not always adhered to aspects of licensing as laid out by the board are:

One person shall only be eligible to superintend over one registered premise. (There are pharmacists and technologists registered to superintend more than one premise)

A reasonable distance shall be maintained between any two registered premises to discourage unfair competitive trade practices. (Looking at the shoulder to shoulder locations of chemists in some areas this rule is often disregarded)

A body corporate/ limited liability company may apply to operate more than one premise (as branches). However the requirements stipulated under section 21 of the Pharmacy And Poisons Act must be adhered to including that in each set of premises there shall be a different superintendent .. “

Registration of premises is valid until 31st of December, irrespective of when you acquired the licenses, and you have to renew them.

So where do you get a pharmacist or pharmaceutical technologist to help you register? There is no laid down formula for this. You have to use your networks. One of the best places to start is to ask the attendants at the local chemist whether they know someone who can help. If you can get someone to let us know and we will assist you find one.

The PPB is located along Lenana Road, (Between the Egyptian Embassy and Lenana Conference Centre) Nairobi

Company Registration

You can run a chemist as a registered sole proprietorship, partnership or company. By the PPB guidelines a pharmaceutical technical technologist can only run a sole proprietorship or partnership but not a company. And where he is running a partnership then he must be the major shareholder. Again this rule is sometimes not followed so strictly.

In a registered company a pharmacist has to be involved company in the sense that he has to be the superintendent and part of the board. A company has the advantage in that you can use it to open branches using the original pharmacist license, though you will need to register each new premise and have a pharmacist or pharmacist technologist in charge.

To quote the law verbatim:

(a)a copy of the certificate of incorporation of the body corporate is lodged with the Board;

(b)the business is under the management of a superintendent who is a registered pharmacist and a member of the board of directors of the body corporate, and who is not acting in a similar capacity for any other body corporate;

(c)in each set of premises where the business is carried on, the business, so far as concerns the retail sale

of drugs, is carried on by the superintendent, or, subject to the directions of the superintendent, by a manager or assistant who is a registered pharmacist;

(d)in each set of premises where the business is carried on, the name and certificate of registration of the person in control of the business is conspicuously displayed.

Registration of companies happens at the attorney general chambers. Although you can do it yourself it’s better to use a company registration lawyer to make sure you are doing it right and there are no loopholes. Lawyers will charge Kshs. 20,000 to Kshs. 30,000 for the registration process.

Single User Business Permit

This is issued by the county government to any business operating within the county. The cost will depend on the size of the premises, the county and location within the county. Budget at least Kshs.20, 000 for this.

Download Kenya Chemist (Phamacy) Retail Business Guide PDF➥

Key Bodies in The Pharmaceutical Business

 

Institution/ Organization/ Body

Description

 

 

Pharmacy and Poisons Board (PPB)

“PPB is a semi-independent regulatory

 

 

 

 

institution set up through the Pharmacy and

 

 

 

 

Poisons Act of 1957 (Chapter 244 of the

 

 

 

 

Kenyan Laws). It has the mandate of

 

 

 

 

controlling the manufacture, sale,

 

 

 

 

advertisement and possession of medicines,

 

 

 

 

developing provisions for trading,

 

 

 

 

compounding, labeling and recording of the

 

 

 

 

medicine sales, and determining fees

 

 

 

 

chargeable for various licenses. PPB is a

 

 

 

 

semi-autonomous agency capable of

 

 

 

 

instituting or facing lawsuits, borrowing and

 

 

 

 

lending money, and acquiring and disposing

 

 

 

 

property” www.pharmacyboardkenya.org

 

 

National Quality Control Laboratory (NQCL)

This is an arm of PPB whose role is to test

 

 

 

 

drugs to ensure quality. Before drugs are

 

 

 

 

registered they have to be tested by the NQCL

 

 

Pharmaceutical Society of Kenya (PSK)

This is the body representing the interests of

 

 

 

 

pharmaceutical technologists. It has also tried

 

 

 

 

to promote ethics and standards among its

 

 

 

 

members. This is sometimes tricky because it

 

 

 

 

has no legal backing, and depends on cajoling

 

 

 

 

, goodwill and the occasional ‘arm-twisting

 

 

Kenya Pharmaceutical Association (KPA)

This is the body representing the interests of

 

 

 

 

pharmaceutical technologists.

 

 

Ministry of Health

This is the overall overseer of the health of the

 

 

 

 

country. The PPB falls under the ministry of

 

 

 

 

health. Public health officials from the ministry

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

are at times involved in the inspection of chemists.

County GovernmentThis regulates all the business within a county. And even if you get all the requisite license from the PPB you still need a license from the county government to trade. County government health officials also inspect chemists occasionally.

Major Legislations Which in one Way Regulate the Chemist Business:

Public Health Act

Food, Drugs and Chemical Substances Act

Narcotic Drugs and Psychotropic Substances Act

Pharmacy and Poisons Act

Wholesalers and Suppliers

Before we get into details of particular wholesalers it’s good to understand the medicine supply chain in Kenya. Though there are local manufacturers, most of the medicine, about 80%, in Kenya is imported. The manufacturers in Kenya, about 40, are rarely involved in research and innovation. Thus what they often do is to import active ingredients, formulate, brand and sell. Or import ready ingredients and formulas, and then mix locally.

The local drug manufacture market is thus dominated by a handful of companies who produce a limited range of over the counter and prescription medicine. These include Cosmos, Dawa Pharmaceuticals, Regal, Glaxosmithkline, Betahealth Care, Elys and Universal. Research to come up with new medicine takes years and millions of shillings that is possibly why Kenyan companies don’t produce a lot of original medicine. There is also shortage of qualified research personnel and costs of production are relatively high. Of these manufactures, GlaxoSmithKline which is a multinational is dominating. It mostly sells antibiotics, antifungals, antibacterial and antivirals.

The other channel that medicine gets into the country is through importers. Most of the medicine that is imported in Kenya comes from India; other sources are Europe, countries like Belgium, Switzerland, and Netherlands. China is also emerging as a big source of both legal and illegal imports. India accounts for about half of the total imports in the country.

Medicines are zero rated, and this has partially contributed to the flood of drugs from all over. Legally to become an importer a company has to meet some conditions in order to get license from the PPB. The basic of which is that the holder of the license must be a qualified

pharmacist. Pharmaceutical technologists are by law not allowed to import or distribute medicines though they do.

In a nutshell once an importer identifies the medicine he wants to import then he brings in samples and the supporting documentation to the PPB. The PPB takes the sample to its other arm, The National Quality Control Laboratory which tests and examines the medicine as per the required guidelines. PPB inspectors are also supposed to visit the factory where the imported medicines are manufactured but this does not always happen again due to capacity, lack of resources and even proper procedures.

If the medicine passes the test then it’s registered, and the importer can now bring in large quantities and distribute. On the face the importation and registration process looks complex and bureaucratic but is more lax than it appears, partly the reason there are many counterfeit and substandard medicine in the market. There are also many importers who are not licensed, with no pharmaceutical background of any kind and whose medicines are not registered. Medicine importation is subject of another guide.

(As an aside there are companies and individuals who help in providing support for importation, testing, registration of drugs. One of the well known is Sai Pharmaceuticals - 0733 741 911 www.saipharm.com)

Some medicine importers get into agreements with manufacturers to have exclusive rights to import and distribute their medicine. For instance Pfizer could give ABC importers the exclusive right to distribute Viagra in Kenya. That means that no one else should import and distribute Viagra in Kenya, and if anyone does ABC Company has the right to sue them to stop. But it doesn’t always work like that. The owner of XYZ Company will see that Viagra is selling very well, and seek to import it from other sources, other than Pfizer, and more often distribute it at a price lower than ABC is selling. This is what more or less is called parallel imports in the business. (More technically parallel imports also imply the importation of medicine still on patent and whose distribution is regulated.)

Related to this the owner of company IJK could see that Viagra is in demand but the price is relatively high for lower income groups and some middle consumers, so he looks for substitutes say a drug called Betterman , registers it and starts importing.

Still on the same company LMN could also see the opportunity in the enhancement drugs, and so goes out there and finds a different drug by another company which is popular worldwide or in some countries. He brings samples but is denied registration by PPB for a reason or another. Nevertheless because he knows the drug is effective, relatively cheaper, with good margins and demand for sex enhancement drugs high, then he goes ahead and imports the drug even though it’s not registered. Of course he will be selling the drug illegally.

At the same time company OPQ could see the demand of Viagra is high but knows that in a certain country he can find a drug which calls itself Viagra, but is a fake and only mildly effective, if effective at all. He imports the fake Viagra, and distributes it illegally passing it as the original Viagra to consumers, or uninformed retailers. There are others who bring medicines

from Uganda, or ‘stolen from government agencies and county hospitals, offered in what is known as ‘cargo’. There are many such scenarios.

When importers bring in the drugs they distribute themselves or use wholesalers. Wholesalers also require special licenses from the PPB. Ideally wholesaler should just sell in bulk and not engage in retail. But that is not strictly adhered to and many are wholesalers who are also retailers. The medicine market in Kenya is messed up in a way. Not anything near what is legally envisaged.

Local manufactures will distribute through recognized wholesalers and for the over the counter medicines like pain killers distribute through traders in the fast moving consumer products business.

Looking at the market one could say there are what can be called proper wholesalers, the one with the licenses and buying from manufacturers, distributors, importers or such other agent. But there are also other retailers who have become wholesalers by virtue of price differences within a locality. For instance if retailer A has better prices than B, then B could purchase from A and sell to his consumers.

The medicines market is such that though there is the official licensed system of distribution which exists hand in hand with a parallel system that is only legal only to a certain minimum extent. Sometimes both of these systems ‘cooperate’, and feed into each other. Thus a licensed wholesaler could be having something ‘illegal’ on the side.

In urban centers there are chemists which are recognized as the main wholesalers. Most of these will have a retail and wholesale section. It used to be that the more formal of wholesalers used to ask retailers purchasing from them for PPB licenses so as to make sure they were not selling to quacks, but as the market became more competitive then the requirement stopped being enforced so strictly. Some will still ask a new retailer for registration documents but it’s becoming less and less so.

A related good habit is for retailers to require invoices from the wholesalers. This protects the retailer in case PPB inspectors find him selling unregistered medicines, counterfeits and substandard. PPB can then trace the medicine to the wholesaler. This is applied but not so strictly either. The way it works at times a retailer goes to a wholesaler, says I want medicine A, he pays and the wholesaler simply gives it to him, some don’t even issue proper receipts. Some wholesalers prefer the casual documentation so that to prevent any comebacks in case of counterfeits, unregistered medicine and fakes

Then how you will know for certain medicine is registered or not. The PPB website has a list of registered medicines but the reality is that there are hundreds of medicines (over 15,000 from over 1400 manufactures) and it’s not possible to know each and every medicine that is registered. On average the PPB receives about 50 requests for new drug registrations every week. However with experience, interacting with your staff and other people in the business then you get to almost instinctively know which medicines are registered or not and of the unregistered ones which are a high risk.

Ideally you should buy medicines from the official legal and registered channel. Nevertheless this is not always possible and businesswise prudent. You have to go into the business with an open mind. Registration medicine should be the first consideration. Then when possible avoid fakes, otherwise you can buy from anyone who offers the best deal.

Honestly you may never know if the medicine is in the country legally or not, whether it’s a fake, counterfeit or substandard. No one will tell you forthright, but you get to know from price differences and other subtle hints. Consumers also don’t get to know medicine is sub standard or counterfeit. They will only get a hint after they have used the medicine and are not getting better. And then they may not blame the medicine rather the doctor or the ‘disease’. There are retailers who will avoid stocking brands of medicines of which there is extreme counterfeiting. An example is the ‘morning after pill’ Postinor 2 in a green pack.

Unregistered medicines and counterfeits pose a high risk if you are caught. Likewise you may never be 100% sure. If say a reputable and major wholesaler is selling fakes then how will you a small time retailer realize their they are counterfeits? That’s why it’s important to have some traceability which partially shifts the responsibility to the wholesaler. Again once you start running your chemist all manner of wholesalers, genuine, counterfeits, smugglers will start approaching you with all manner of offers. With time you will be able to weed out the good and the bad.

Some wholesalers give credit to chemists they have built a relationship with. This comes in handy when you are low on capital and can’t stock as many of the medicines in demand as possible. There are also wholesalers who will approach you and sell on consignments, whereby they leave with you with the medicine then come for the money later say after two weeks when possibly you will have sold them. The bigger wholesalers sell only on cash unless you have become a significant customer by virtue of turnover.

You can never get enough advice about wholesalers and suppliers; you will learn the real inside and out as you spend time in the market. Like in any other business if you buy in bulk you enjoy better discounts than if you are purchasing one by one or small quantities. But buy in bulk those drugs that are fast moving.

So after all is said and done as a new chemist start with the established and better known wholesalers. It’s a safe bet. Compare prices between the different wholesalers. No one wholesaler sells all things cheaply or the other expensively, they tend to have differences. Initially you may not have all this information at your fingertips and end up buying from one or two wholesalers. A few months in the business you will naturally know all the notable wholesalers in your location.

Every major town tends to be a wholesaler, with the bigger the town the more wholesalers it has. And in very town there tends to be two to three dominant wholesales who are well known. The highest concentration of wholesalers is in Nairobi. We are not able to list each and every major wholesaler but here are a few to jump start you.

Transchem

1st Floor, Uchumi Super Stall, Temple Lane

 

 

Haripharm - Opposite TSS, River Road

0720 812271. Drug House next to Kobil Petrol

 

Station, River Rd.

Pan Pharma, opposite Consolota Shrine

House of Vanguard, Fuji Plaza Chiromo Road,

 

opposite Consolota Shrine, Westlands

Transworld

Mfangano Street, Nairobi

Omaera

First floor of Paramount Plaza, at the junction

 

of Murang’a and Kipande Roads. 0728 970

 

777,0717 381 822

Oceanview

Coast Region Wholesaler : Gusii Street off

 

Digo Rd. Behind No Maneno, Mombasa, 729

 

267699 / 0735 772908, [email protected]

 

http://www.oceanview.co.ke

Pentapharm Ltd

Corner House, Kimathi St, Nairobi, Kenya

 

Phone:+254 735 786149

 

 

Njimia Pharmaceuticals

Address: Landhies Rd, Nairobi, Kenya

 

Phone:+254 20 313189

 

 

Weirschem pharmaceuticals ltd

0716019269 / 0725787448

 

 

Area near junction of Accra Road and River

 

Road Nairobi has a number of wholesalers

 

Stocking

Now that you have the premises and licenses ready then next thing is to decide what to stock. One of the easiest ways for a novice to jump start is to use the Kenya Essential Medicines List. This is produced periodically by the government, World Health Organization, doctors, pharmacists and other players in the health sector. It captures the most essential medicines by priority considering ailments, need and demand in the country. The medicine is classified as Vital, Essential and Non Essential depending on how crucial they are.

The list, which we have attached and which can also be downloaded from the most of health websites, is good as only as a guide. Some of the medicines in the list are not applicable for chemists and are used in hospitals say for surgeries. It might not be possible and or even necessary to stock all the medicines on the list. Use it as an intelligent guide, to educate yourself and jog your mind on what to stock.

A more practical way to know what to stock is to go to a wholesaler in your locality, say you are starting a chemist, and request guidance on what to buy and stock. A good wholesaler will guide you.

However there are wholesalers who are not friendly enough to provide you with all the information. Some are understaffed, feel it’s too much work or doubt your commitment. Some are just rude, and tend to think you should have done your homework before getting into the business.

They want you to show a real commitment to buy before giving their prices. Also if you seem not to have any clue at all then some wholesalers will take advantage of you to sell medicine at a price higher than they usually do.

If you are a novice, at the start it’s not advisable for you to go buy the medicine alone without some professional, say pharmaceutical technologist, to assist you. And although some wholesales could act there are many good ones who can help you. A good wholesaler will guide not only the common essential medicine but those that are in demand in the area.

Then as you will see in the Wholesalers section below, it’s not always wise to buy all items from one wholesaler. A wholesaler could be having item A cheaper but item B more expensive. The reason it’s wise to shop from different wholesalers.

Yet there are tens and tens of medicines, and you can’t know all of them. So what to do; there are drugs which are applicable everywhere. You start with these, and then depending on your location you add the extras. Location is in terms of geography, income and lifestyle. There are diseases which tend to be more prevalent depending on the location and demographics.

And once you start requests from customers will help you fine tune what to stock.

Among the very basic medicines are various forms of painkillers both for adults and children, antibiotics both for children and adults, anti-allergies, antibacterials, antififungals, antiprotozoals, ulcers medicine, skin creams, disinfectants, antifungal, migraine medicines, disinfectants, contraceptives. In a chemist about 40% of sales will be over the counter medicine, with the rest being prescriptions.

There is also the issue of whether to buy generics or brand names commonly known as originals. Generics contain the same active ingredients as the brand name but could contain different inactive ingredients. Usually generics are produced after the patent of the original brand name drug expires. They tend to be cheaper because unlike the brand name which is produced just by one company during the period when the patent is active, generics are produced by several companies. This competition drives the prices down. Then the generic manufactures do not have to invest in years of expensive research to produce the drugs, there cost of production are thus lower implying they can afford to sell at lower prices than that of the original medicine.

The norm, and which makes business sense is to have a mix of both but a bias depending on the demographics. Relatively lower income consumers, even those falling in the middle class

will have no problem with generics; most can’t even differentiate between generic and brand

names. Price is also a major consideration among these groups. Still some of the middle class will at times insist on originals. Sometimes they want to know if there are significant price differences between the original and generics.

If you are targeting well exposed high income consumers it’s okay to have brand names and generics in almost equal measure. These consumers are more wary of generics which at times they associate with counterfeits.

This is more so for consumers with long term illnesses which requires the use of medicine every day, say high blood pressure and diabetes. For these it’s advisable to have sufficient amounts of both generics and brand names.

For such illness’ there are who customers prefer branded medicine as opposed to generics irrespective of the price differences. They are also more likely to stick with one brand of medicine, the brand that was prescribed the first time, and will be wary to change to another generic or otherwise. Also medicines for such diseases also tend to be well branded and marketed to, and customers are more loyal to the brand names. Medicines used for one-off short term treatment don’t have such brand loyalties.

Keep in mind that medicine for long term illness are do not move as fast unless you are in a high foot traffic urban center. You should stock them intelligently otherwise you will end up with lots of dead stock.

In some places where chemists are in good relationship with each other they borrow medicines from each other and ‘refund’ when they buy theirs. Say a customer comes and says he wants medicine A, which you don’t have but the chemist next door has you go ask the retailer to give you, then you sell to your customer. And when you buy yours you give back to the chemist who had ‘lent’ to you.

When stocking do also remember that medicines expire. Don’t trust the wholesalers 100% and take time to check the expiry date and if there is sufficient remaining shelf life. When starting and depending on your location it might not be wise to have stocks of drugs with a very short life, which have the possibility of expiring even before you have sold them. Small retailers sometimes stock medicines with short life, but slow moving, on order only.

If you are not skilled in the business you can hire a pharmaceutical technologist with practical experience in a retail chemist to help you stock. He should be able to help you identify the basic medicine and any that would be tied to the location. And since he has experience he will also hint to you on whether the prices you are offered are fair. For the first timer with no experience, pharmacy or health background, it’s very tricky and not advisable to make purchases on your own.

Capital

Item

 

Breakdown

 

Total

 

 

 

 

(Kshs.)

 

Licenses

 

 

 

 

 

 

PPB Retail Licenses

 

1

 

15,000

Public Health License

 

1

 

3,000

Signboard License

 

1

 

2,000

Single User Business Permit

1

 

 

10,000

Company Registration

1

 

 

20,000

Sub Total

 

 

 

50000

 

 

 

 

 

Equipment

 

 

 

 

 

 

 

 

Chairs (Plastic)

3

@ Kshs.800

 

2,400

Tables

1

@ Kshs.3000

 

3,000

Computer and Point of Sale

1

 

 

80,000

Water Dispenser

1

 

 

9,000

Glasses

12

 

1,200

Signboard

 

 

 

10,000

Sub Total

 

 

 

105,600

 

 

 

 

 

Stock and Related

 

 

 

Stock

All

 

200,000

Sub Total

 

 

 

200,000

 

 

 

 

 

Premises

 

 

 

 

 

 

 

Rent

2 months deposit + 1

 

45,000

 

month rent. Will depend

 

 

 

on location. (@

 

 

 

Kshs.15,000 per month)

 

 

Renovation and Remodeling

Repainting and any

 

20,000

 

branding

 

 

Counter & Shelves

1

 

 

30,000

Sub Total

 

 

 

95,000

 

 

 

 

Working Capital

 

 

 

 

 

 

Salary

1

Employee - 3 months

 

51,000

 

@ Kshs.17,000 per

 

 

 

month ( 1 employee)

 

 

Monthly Pay to Registration Pharmacist Technologist

3 Months @

 

45,000

 

Kshs.15,000 per month

 

 

Electricity

3 months @ Kshs.1,500

 

4,500

 

per month

 

 

Water

3 months @ Kshs.300

 

900

 

per month

 

 

Sub Total

 

 

 

101,400

 

 

 

 

 

 

 

 

Grand Total ( Adding all the above sub totals)

 

 

 

552,000

The above is just an estimate based on some case studies. There are chemists who have started with less stock or more stock. If you are in a busy area like parts of Nairobi CBD, a stock of Kshs.200, 000 will not be sufficient. Where the foot traffic is high not only do you need a wide variety of medicine but also sufficient quantities. If you are located in places like high end malls where you are likely to get customers in need of very specialized medicines then you might need stock of as much as Kshs.800,000.

Other chemists don’t register as companies, and start as simple sole proprietorship. If you are a pharmacist or pharmacist technologist you don't need to pay someone to register the business on your behalf. Items like rent and county business license will also vary with the location.

Shelves and renovation could cost more depending on size and in what state the room is.

Revenue

The Bigger Picture

The chemist business is one with big price differences and thus margins variations at both the wholesale and retail level. At the retail level it’s not uncommon to find price differences of between Kshs.5 all the way to Kshs.300 for the same medicine. The differences at the wholesale level are at times equally significant.

An absolute rule of the thumb was that a manufacture was to get about 10% margins, a wholesaler 15%, and a retailer would get 33%. The rule has become absolute largely because of competition and the many suppliers of medicine. Retailers sometimes get 10% or even as high as 200%.

You can go to a chemist and find a dose of Amoxil going for Kshs. 50, and at another retailer, the same dose; the same brand and content going for Kshs. 70. The market is such. And why would one sell at Kshs. 50 and another Kshs. 70? One retailer could have sourced expensively. But more often the retailer is taking advantage on the lack of proper market information among consumers as to what amounts to fair prices. The consumer who buys at Kshs.50 and the other who buys at Kshs. 70 both think that is the right price.

Again if the chemist is located at a strategic place say where the competition is less, or in an institution such as college, supermarket or hospital then the prices could be higher. Eventually what happens is that consumers in a location consciously or subconsciously shops from different chemists until he forms an opinion on which is the cheapest and trusted. This information is gradually shared until it forms a general community opinion of which is the ‘best’ prices in the location. This is the reason that you will find one chemist dominating in an area. Sometimes there is no chemist that can be said to be wholly dominating, and in such areas, especially low income areas competition is stiff and often price based.

Sample Wholesale and Trade Prices

To give you an idea of the margins in the business below are some sample random wholesale and retail prices based on one wholesaler. The retail prices are what are referred are recommended trade prices; the prices with which a retailer should sell to consumers. They are just recommendations by the wholesaler, and not laws. Thus you will find some retailers selling at higher or lower prices.

 

Item

Quantity

Wholesale Price

Trade Price

 

 

ZYNCET

200’s

600

2000

 

 

CETRIZINE

500’s

500

5000

 

 

NORMAX

100’s

800

1500

 

 

DICROMOL SR

100’s

340

1000

 

 

BECLOMIN OINT

15mg

90

170

 

 

RANFERON CAPS

30’s

250

600

 

 

TAGERA FORTE

20’s

550

800

 

 

DOMADOL

100’s

650

1500

 

 

OCID(omeprazole 20mg)

100’s

230

1000

 

 

NIFERAT

100’s

140

500

 

 

LOSARTAS HT

30’s

650

1000

 

 

LOSARTAS HT

150’s

2500

4000

 

 

LOSARTAS 50mg

28’s

550

1200

 

 

LOSARTAS 50mg

150’s

2000

4500

 

 

AZTOR 20mg

50’s

1700

4000

 

 

AZTOR 10 mg

50’s

1400

3500

 

 

MUVERA 15mg

100’s

1600

4500

 

 

MUVERA 7.5mg

100’s

1300

3000

 

 

PANTOCID

50’s

1600

2800

 

 

REPACE H

30’s

900

2100

 

 

REPACE 5O

30’s

850

1500

 

 

IROVEL H

30’s

1600

3400

 

 

IROVEL 150

30’s

1400

2500

 

 

DAZIT TABS

100’s

900

2500

 

 

CONTUS 650

150’s

600

1500

 

 

FASTUM GEL

50mg

500

1000

 

 

FASTUM GEL

30mg

400

750

 

 

SYLATE 500

28’s

850

1200

 

 

LAN 30

50’s

300

800

 

 

GLUCOMET 500mg

28’s

85

140

 

 

GLUCOMET 500mg

56’s

170

280

 

 

BRUSTAN

10’s

85

150

 

 

CARCA 3.125mg

150’s

1200

2000

 

 

CARCA 6.25mg

150’s

1400

2750

 

 

CARCA 12.5mg

100’s

1600

3500

 

 

CARCA 25mg

50’s

1000

2000

 

 

CANDID V6

6’s

210

400

 

 

ZECUF LOZENGES

20’s

100

200

 

 

ZECUF SYRUP

100ml

110

180

 

 

VEGA 50mg

4’s

35

200

 

 

OMEZ

100’s

900

2000

 

 

Neurobion

600’s

1600

3000

 

 

NILOL

100’s

1600

2500

 

 

CIPRO T

100’s

600

1500

 

 

CIPROBID

100’s

500

1000

 

 

NULIDE

16’s

300

560

 

 

DERIFYLYN 300mg

 

400

700

 

 

MANIX

 

500

1100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AEROCORT

200 inhalers

450

1000

TRINERVE

 

1800

2500

LOSARA

 

1700

3000

SPARCIP/SPAX

 

1600

3000

PREGNILOC/ E-PILL

 

30

100

PT STRIP

1’s

7

50

ANGIOPRIL

 

350

800

FLAGYL

 

1200

3000

KAMAGARA 50mg

4’S

120

400

KAMAGARA 100mg

 

150

600

EVION

 

1200

3100

ASHTON

 

400

1000

CETRIZINE

700’s

650

7000

DEPO

24 INJ

450

2400

METAKELFIN

30’s

750

1800

GYNACOSED

 

70

500

STANCORT

 

85

300

FORCAN/FLUCONAZOLE

 

500

1500

200mg

 

 

 

RANITIDIN 150mg

 

350

1000

ATECARD D

 

2600

5000

LONART

12’s

240

500

VIDALISTA/TADALAFIL

100’s

2500

5000

TABS

 

 

 

GLUCORED FORTE

50’s

1400

3000

ORLEANZ 10mg

 

1400

3000

ORLEANZ 5mg

 

1350

2500

PREGNIDOXIN

 

30

100

ZERODOL

 

500

1000

AMNOSUN

 

1200

2500

OLFEN SR 100mg

 

500

1200

ENART CAPS

 

350

800

NOGLUC

 

70

300

NOSIC

 

400

1000

ASCARD 75 MG

 

75

150

Notes on Revenue

The wholesaler above buys from various importers and appointed distributors. Prices could be vary from wholesaler to wholesaler

The retail prices are also just recommendations. Some wholesalers will give attractive trade prices to entice you with the seemingly high margins.

Depending on the competition the retail prices could be way much below the recommended trade prices shown above thus reducing the margins significantly.

It’s a fact that the margins in the medicine business in Kenya are high. Sometimes obscenely high. But average margins are about 30%. However this does not always translate to success in business. For as in every business if you don’t sell you don’t make money irrespective of how attractive the margins are.

Another reality check is that the margins are not accrued in a single day. If 200 tablets of medicine A make a profit of Kshs. 1000, then it’s unlikely that you will sell all of them in a single day. Depending on location, it can take a week, five days, a month or even two. So the margins are not necessarily one off. Of course if you are in a very busy location you sell relatively more quantities compared to your competitor in a nondescript location.

Pricing

With margins sometimes big then how to price could become a problem for the newcomer. There are no fast hand rules but if you have no proper idea then go with the trade price. Then if you are operating in location with a few number of chemists, and where its relatively easy for the consumer to move from shop to another then you need to find the common prices, or the price range for the most commonly used medicines. Consumers use the prices of the common medicines to form an impression whether a chemist is cheaper than the other.

There are chemists which also allow customers to negotiate. Rather than just let the customer walk away because of price when you know you can still make reasonable margins then you agree to lower prices to within a range you are comfortable with. This is more so in rural and low income areas where consumers are price sensitive and most likely to negotiate. When serving consumers with high income then price is not their major consideration when purchasing rather than quality and reliability. There are many chemists who have no fixed prices and judge each consumer on his own. If they think the consumer by appearance , talk or body language can afford to pay more than they charge a high price and vice versa.

Consumers purchasing medicine for long-term treatment are more sensitive to prices. They are likely to move around seeking the best prices. Though such consumers will first go around seeking the best prices, and when they do consider other factors such as trust and service. Such customers are good to keep.

Margins of 30% are standard and good enough. You can make more, and you should aim to make more. Be careful not to be blinded by greed or self doubt, and price yourself out of business. Competition in the business is increasing, and with it a lot of price based competition. But as you will see below, you should not over focus on competing on price only. ; There are other factors that can give you leeway to attract more customers at average or above average prices. Pure price based competition only works to some extent. As income raises consumers are less sensitive to price and consider other factors too.

Rural consumers are more sensitive to price. On average consumers in rural areas trust chemists more than their urban counterparts. Not that consumers in urban areas are insensitive to prices but they tamper that with other considerations.

Factors Influencing Revenue

a)Suppliers

b)Pricing

c)Management

d)Location

e)Variety

f)Trust

Trust

Price is not the only consideration when consumers are purchasing medicine. Consumers ask a lot of questions and want to trust the chemist as being as knowledgeable as a doctor. This is more so now that a big number of consumers go to chemists for diagnosis and self medication as a first measure.

A consumer will go say I have been having this pain in my stomach for the last two days, what could be the problem? And the chemist attendant will ask a couple of questions then suggest some medicine to cure. This moment when the consumer is interacting with the chemist attendant is the point of losing or building trust. Whereas the consumer could take the medicine she will be left with an impression of whether the attendant is knowledgeable enough or not. It’s the same even when dealing with prescription drugs, the presentation or alternatives that the chemist attendant gives builds or kills trust. Any hint of indecisiveness or doubt and the consumer might think the chemist owner is not sure of what he is doing. Trying to push a sale more than necessary also affects trust negatively.

Trust also comes with the presentation of the attendants; how they talk, how they dress, how sober, friendly and confident they look. Cleanliness, arrangement, branding, you know and the general look of the chemist is enough to signal professionalism.

Trust also has to do with whether the consumer believes what you are selling is genuine and not fake or substandard. And that you won’t sell expired medicine. The consumer may not immediately realize whether the medicine is genuine or not, but eventually they do and even if not 100% sure, suspect it. And when they do they avoid the chemist and tell family and friends of their suspicions.

If consumers trust your chemist then it becomes the preferred choice and could others to your shop. And you have a chance to charge an above average price. Don’t underestimate the need to build trust. It will boost your sales and margins especially in smaller markets where consumers know all the chemists within.

Location

When deciding where to set up a chemist, consider the population and demographics .The higher the population the higher the possibility of getting more customers. But you have to look at the income and education of the population too. Lower income consumers will tend to bargain more and will be more price sensitive. On the other extremes higher income consumers will be more concerned with the quality of the drugs than the price. In between are the mid income level consumers. Price and stock appropriately considering the demographics in the area you locate.

Some of the relatively well known brands have been very focused in the way they have targeted their customers and thus the locations.

For instance Mimosa Pharmacy went for the high end market and thus located in malls, where the target customer clientele could easily be found. Haltons Pharmacy, owned by a group of investors and pharmacists have been going for high populated mid class areas, thus they have been location in areas of Nairobi Eastland’s like Doonholm, Pipeline, Buruburu, Kasarani and, and growing towns with a high of the mid class population like Kiambu. To help access more of their target customers Haltons has partnered with Shell to open branches at their 150 petrol stations.

Other chemists have been locating at new apartments and flats; they go for the ground floor building of such flats or gated communities. If you decide to locate in a certain area then aim to appropriately serve the consumer there. If you decide target consumers of certain demographics then look for a location that will fit them. The key things are to have a location- consumer fit. Then there must be enough of the right kind of consumers.

Location is also about accessibility and visibility. Can consumers see your chemist and easily access it? Shopping for medicine is also about convenience. Keeping everything constant consumers don’t want to move from street to back street looking for chemists. And so you will be at a disadvantage if your chemist is not easy to locate and access. It doesn’t have to be at a very prime location but easy to see and reach.

You can’t also ignore competition in whatever location you are going to set up. Be wary of locations, especially small towns, where there are one or two dominant players. Not that you cannot penetrate in such a market but have a proper strategy on how to do it. Dominance is often a based on strategic location, price, variety and trust. Such dominance does not mean that you won't make profit, but you might end up just surviving. Yet even the dominant players can only be dominant to an extent, they don’t control 100% of the market. Don’t join such a market hoping to dislodge them immediately but find a way to look different. Trust takes time to build. Consumers also take some time to form impressions about price.

Suppliers

As noted in the preceding sections there are significant differences in prices between different wholesalers. A chemist who sources in the best way possible will have bigger margins per sale. He will also have more room to play around with prices.

Sourcing at higher costs means that you will have lesser margins per sale, irrespective of how many sales you make in a day. So when there is an offer for genuine but cheaper medicines say through parallel imports and cargo should you use it? There are some risks, but you can take advantage of it. If your competition is buying cheap and you expensive then you will definitely be at a disadvantage. . Keeping everything constant you will make less profit and grow at a slower rate. Even when using the major legal wholesalers you will at one time or another be buying parallel or illegal imports. The things to keep off are counterfeits, not only because of the reputation you put your business but the danger you put your customers in.

Variety

If you have a wide variety of medicines then you will make more sales, since no customer will come to your shop and leave because there is no such and such medicine. This does not mean that you should stock each and every medicine but have as many of the crucial ones as possible. Look at the local demand and demographics. Then with most of the medicines there are a variety and equivalents of each at different pain points and composition.

Having a wide variety also gives you a reputation as a reliable chemist. A few chemists in midsized towns try to differentiate by stocking the more expensive and rare of the medicine say for diseases like diabetes and hypertension.

Related Items

To expand their revenue streams some chemists stock related items that could be needed by their customers. These include such items as cosmetics, baby items such as diapers and powders and even soft drinks. This helps. It’s a chance for an extra revenue stream and could eventually contribute significantly to your income. If a customer trusts you with medicine then they are likely to trust you with related items like cosmetics.

Management

It’s a well known fact that without there is a lot of potential and actual employee theft in the business. Without stock management systems your position as the owner becomes weaker. But beyond the software you need to be keen on how the chemist is running. It’s not the kind of business you leave to employees and only do monthly visits. This is more so if you don’t have a health background. If you can, visit the chemist daily. Medicine is such that as few as 8 small tablets could be worth thousands of shillings. Dishonest staff will run you to the ground. You might not be able to 100% prevent theft but you can try fight it.

But management is not just about theft but also the day to day running of the chemists from simple things like making sure staff are professional, restocking is done as need be, records are kept, opening and closing hours adhered to and so forth .

Poor management will lead to a lot of revenue leakages which could eventually make the business to close down. There are a number of chemists which have closed because of poor management.

Revenue Summary

From our sample standard chemists in urban centers, as opposed to big well established pharmacies, reported monthly gross profits of between Kshs.15, 000 and Kshs.200, 000 with an average of Kshs. 60,000. There were some which were making losses despite being in business for over one year. Daily sales range from Kshs. 1,000 to Kshs.20,000 a day, with an average of Kshs.6,000. Lower level of revenues was reported among small chemists in very low income estates. Chemists in downtown Nairobi reported some of the highest revenues, and also those dominating in peri urban towns

Reasons for Failure In The Chemist Business:

So with the attractive margins and the pedestrian reasoning “people always get sick” why do chemists fail?

Lack of enough capital to sustain until breakeven point: Like any other business a chemist will not start making money on day one. It could take up to one year to get enough customers and understand the market proper to start making profits. If you don’t have enough money to keep the business going- pay salaries and rent then you will likely close down or sell your business.

Location – Poor location means customers cannot see or access your chemist, there are not enough customers, there is so much cut throat competition resulting in downward price pressure or a big dominating player who attracts most of the customers, or customers don’t have enough purchasing power. For instance in very low income areas customers buy medicines sparingly; they negotiate hard and only go for the most common of medicine which might not be as profitable. This is coupled with the fact that there tends to be very many small chemists in such areas could make you struggle if you don’t have a proper strategy. On the other hand if you are targeting the high end customers in the more prestigious of malls and you don’t have enough variety and your quality is doubtful then it’s a recipe for failure.

Poor Stocking – This could mean having the wrong type of medicine for the demographics in your location, not having the most essential of medicine, not having enough variety, under stocking vis a vis the location and immediate competition, having slow moving fast expiring medicines. The latter leads to direct losses and some low capitalized chemists are not able to recover from it.

Poor Sourcing – If you buy medicine at high prices relative to your competitors then your margins will be less, your prices probably higher and you will grow slowly. If you are

tricked to buying counterfeits , medicine which is about to expire or substandard then it might backfire on you. You need to be very intelligent in sourcing otherwise errors could eventually cost you your business.

Poor management – This includes not having honest stuff resulting to theft and revenue leakages, staff stocking and selling their own medicine , poor recording keeping, staff who don’t inspire confidence in the customers, staff who don’t have the basic customer service skills, a casual attitude which affects things like opening and closing hours and even cleanliness of the chemist. All the above factors are enough to drive a chemist out of business.

Operating without the requisite licenses – If you don’t have the required licenses and PPB catches and impounds your stock, and perhaps takes you to court then you might never recover from that to reopen.

Break Even

The average breakeven point of standard chemists is 9 months. This was a from a sample of chemists in estates in Nairobi, Embu, Nakuru and Mombasa. Of course the duration could be slightly longer or less depending on other factors like location, competition and even management.

Competition and Survival

Competition Pointers

Like we mentioned at the start competition in the chemist retail business has been increasing for the last 15 years, and this can be attributed to a number of factors:

-Increase in the number of pharmaceutical personnel which means that there are now more professionals registered with the PPB, who can then engage in the business

-Competition at the wholesale level which then means that wholesalers are not so strict in ensuring retailers are legally registered. Neither do they have high minimum order quantities. There are also now more informal wholesalers who themselves are not registered or even with permanent premises. Other new retailers will buy from fellow retailers in a much simpler process.

-Entrepreneurs who are not pharmacists by training, but interested in the chemist business have found a way round the biggest barrier to entry which is the licensing. This is through partnerships with registered personnel, paying the registered pharmacists and technologists a retainer so as to acquire licenses on their behalf, faking documents and using other backdoor channels to acquire the license to operate a retail chemist.

-Chemists have grown at a faster rate than that of the capacity of the PPB. And so whereas the PPB will conduct inspections it’s now much easier to escape their attention especially if you are operating in small or rural towns. Also in urban areas better communication and networking among chemist owners has meant it’s easier to know when the inspection is about to be done, and thus close or take appropriate measures. It’s now common to hear a chemist owner say for the last two years they have in business they have not encountered PPB staff. This emboldens would be entrepreneurs in the business who would have shied away because of fear of enforcement.

-Urbanization has also increased the demand for medicine. Hawk eyed entrepreneurs have spotted the opportunities, and thus moved to establish chemists. Related to this is as mentioned that there is relatively more information available on margins in the chemist business, this has made the business more attractive to more people.

Competition in the chemist retail business will continue increasing. The business still remains one of the most attractive. In general there is not much product differentiation between the chemists.

At the national level some of the positive indicators in the last two years are reputable investment companies putting in money in the retail chemist business. Some of the well known are Fanisi Capital purchasing part of Haltons Pharmarcy for $ 3 million. And Catalyst Capital which is associated with Equity Bank buying a stake in Mimosa Capital.

On What Is Competition Based On

Prices – There is already a lot of price based competition, which will continue being intense as the number of chemists increase. With margins being wide, price ranges will be big between the retailers. It will be tough for chemists within a locality to collaborate on price. This is because of lack of trust and each seeking survival. In urban areas price based competition is more intense with a lot of price undercutting. And with it bad mouthing by competition where if you are selling at very low prices then they will tell their customers that the quality of your drugs is suspicious.

Competing on price alone is not a very wise strategy. Price competition will not be of much long- term help if there is no trust then it means price competition is on shaky grounds and collapse at any time.

Trust – This is by trying to give an image of professionalism, such that consumers trust you are selling the right medicine, you are knowledgeable and not a quack and you are pricing fairly. With trust it’s possible to charge consumers a premium price. Trust helps build a loyal customer base rather than one off customers. (See Revenue for more on Trust)

Branding – Now there are efforts among a number of chemists to brand. Branding is by having company colors, a chain and subtle marketing efforts. The purpose of such

branding is to build consumer trust and recognition which will help snatch market share from ‘weaker’ rivals.

Variety – This is by having as a wide variety of medicines as possible. (See Revenue for more)

Location – See Revenue Above

Opening and Closing Hours – Chemists also compete by opening and closing hours. To stand out some chemists open early and close late. Sometimes as early as 7am and close as late as midnight. There are also a few 24 hour chemists.

Consumer Behavior

There are various medicines buying processes

Convenience – This is where a consumer chooses to buy from the most convenient chemist in terms of location. Perhaps the chemist is near where she parks her car, workplace or on the way home. The consumer is looking at convenience before anything else. If the chemist is insufficient in other ways the consumer could still buy but for a few times only before she figures out an alternative in terms of convenience.

On the business side such a chemist though deficient in other ways still gets enough foot traffic by virtue of its location, and will still make profit before a better alternative opens in the same location.

Referral - This is where the consumer is referred to a chemist by a colleague, friend or family member. The referring party has a positive experience with the chemist to an extent that she feels confident referring a friend. The good experience is based on service, price or just trusting the chemist.

Reputation – At times you find that a particular chemist in an area has developed a good reputation. The origin of the reputation is sometimes not clear, but at other times it can be tied to price, medicine availability and genuineness. The reputation becomes part of the community and the reputed chemists become the preferred in the area.

Trust Signals – Consumers are sometimes looking for trust signals. This, depends on the customer, and could mean anything to make the customer trust the chemist. It could be simple things as the size of the chemist, the branding, name, the appearance of the attendants, location and anything that could make her trust the chemist.

Though every consumer is concerned about price, low income consumers are more sensitive to price and is their first consideration. Mid income and high consumers worry about availability, the quality of the medicine, whether they are genuine. The high income consumers bargain less and price is not their number one consideration.

Consumers will have their preferred chemists but no absolute loyalties. If they don’t get better services or prices at another chemist they can shift. Also if they are unwell and need to buy medicine they could opt for the nearest chemist though not their preferred. From our survey among consumers the ideal chemist is one which offer fair prices, well stocked with variety, has genuine medicine and with knowledgeable friendly staff. These consumers want sometimes conflict with the business side of the chemist, and as the owner you have to find a balance that makes the customer happy while still earning you profits.

Manpower

By law a chemist should be manned by qualified staff specifically a pharmacist or pharmacist technologist. A retail chemist should have a supervising pharmacist who should be a qualified pharmacist or pharmaceutical technologist registered by the PPB. . The purpose of all this is to ensure that medicines are dispensed by qualified people, to avoid any fatalities.

However the truth is that small and midsized chemists cannot afford to employ full pharmacists. It’s very difficult to get a pharmacist willing to work for a normal retail shop. They go for more lucrative careers in manufacturing, distribution and as sales representatives of foreign pharmaceutical companies.

Again the smaller and new chemists cannot always afford or even find qualified and registered pharmacist technologists. The technologists are either working for bigger retailers and wholesalers if not running their own chemists. And those who are qualified and experienced will demand a high salary which the smaller pharmacists are afraid they cannot afford. If the technologist used his name and PPB enrollment, and you want him to run the business then he will charge you for the license and attending the chemist. However as you grow it is advisable to employ a pharmaceutical technologist. As more pharmaceutical technologists are trained and join the market it’s becoming comparatively easier to acquire their services at a fair price.

To manage expenses many new, small and medium chemists opt for unlicensed pharmaceutical technologists. Or personnel with related in training like nurse aides, lab tech, applied chemistry, clinical officer, applied biology, nurses and such other courses. The science or health background implies they can learn fast how to dispense medicine.

There are also a few chemists run by people with no pharmacy, science or related training of sorts but who have learned on the job. Most chemists will at least have someone with a health related background.

There are also personnel who have done certificate in pharmacy courses. This course is no longer recognized by the board, but a sizeable number of institutions offered it in the mid 20s. Such people still exist in the market, and are even hired by some chemists. There are also those who have done Diplomas in Pharmacy but from colleges not recognized by the board. Such people cannot be registered. Still they are employed to work in chemists, however illegal it is.

The number of staff you should have will depend on how busy the chemist is. The idea is to manage costs without keeping customers waiting for so long. Chemists in town centers tend to have higher foot traffic and thus have more employees.

If you can’t afford pharmaceutical technologists then you can opt for staff with related skills but PPB occasionally carries inspections to check the qualifications of the employees. The pharmacist superintendent, or basically the pharmacist in charge of a shop should be able to produce the papers of those that are employed in the chemist. Failure to prove qualifications leads to arrest of workers and closing of the chemist. It is usual for people to fake papers. Like we stated the PPB often lacks capacity to conduct these inspections but have a plan of what to do if and when they appear.

For those who have qualified pharmacy technologists as assistants turnover is relatively high. This is because most of the pharmacist technologists have their eyes set on opening new their own chemists. The salary ranges from Kshs, 15,000 to Kshs.50, 000 for the standard chemist. For those who are not pharmaceutical technologists pay tends to be lower. The reasoning is that they are not fully qualified and in a way they are putting the business is at risk.

You should aim to pay a reasonable salary to keep the attendants working for you, deter theft and still make profit. Salary should be pegged on qualifications. Pharmacist technologies are usually paid more relative to others related professionals. Not that there are first hand rules about this but just judge case by case.

Honesty is also key part when hiring. You cannot be 100% sure of the honesty of the staff but you can try making as good judgment as possible.

A Note on Operations

Basically in a chemist a customer will come ask for a particular medicine or give a prescription, you retrieve the medicine and she makes payment. The exacts however depend on the particular chemist; the systems in place, the size in terms of turnover of the chemist. The key things considered are keeping track of stocks, keeping truck of sales, fiscal obligations like tax, preventing theft and being accountable.

Some small and medium size chemists manage everything manually and almost casually. When the customer buys they hand over the medicine from the shelves and that’s it. No records are kept. They will restock when they look at the shelves and see that a certain medicine is depleted. Just like most grocery shops they know they are making money but they have no clear what their profits or loss for that matter is.

Others have a slightly advanced version of this in that they keep records of sales, though they don’t issue receipts. Others will periodically take stock; say monthly or after two months. They keep records and are able to calculate profit and loss.

Chemists using slightly advanced systems will have a simple point of sale system which only issue receipts but is not linked to the stock, while others have a fully fledged point of sale system which keeps track of sales and stock.

In such chemists there is only one cashier, the customer is given the price, pays then medicine is fetched from the ‘store’. The store is managed by one or two people so there is accountability. This reduces the chances of staff theft by monitoring the flow of medicine. Sometimes in such chemists there are several computers all connected to the stock, so that customers can check what is available and prices, and are able to advice accordingly.

A point of sale system, though not a must for a start up chemist, is important and makes the management easier especially if you are not there to manage the chemist full time. ..

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