The total value of chemists' retail sales of goods covered by this Market Report was £13.87bn in 2007, according to Key Note estimates, which are based on figures from National Statistics' Annual Business Inquiry. The market showed strong growth over the review period (2003 to 2007), with sales rising by 26.3%. However, the number of outlets is declining, as a result of major grocery chains' increasing penetration of the market. The strong sales growth reflects the overall buoyancy of retail sales, as well as some factors unique to this market, such as the development of new and more sophisticated drugs and a rise in the number of drugs being prescribed.
Retail chemists account for a relatively small proportion of overall retail sales in the UK. Key Note estimates that, in 2007, sales through retail chemists represented 4.9% of total retail sales. In terms of value, the sector is certainly overshadowed by the food stores (worth around £110bn in 2007) and areas such as textiles, clothing, leather and footwear (£44bn) or household goods (£41bn). However, sales via retail chemists rose as a proportion of overall retail sales over the review period (2003 to 2007), reflecting the rising cost of medicine and increased spending on medical goods as the population ages.
The pharmacy market has undergone a dramatic change over the past decade as the companies that once dominated the sector have felt the onslaught of competition from the major grocery retailers. Since the abolition of resale price maintenance (RPM) in 2001, the supermarket chains have been able to boost their presence in the market at the cost of traditional pharmacy chains. The buying power of the grocery majors, such as Tesco, ASDA and Sainsbury's, is leaving even the large pharmacy chains, such as Boots, struggling to compete on price.
In April 2005, a new contract came into effect that further deregulated the market. Internet-only pharmacies can now open in the UK, while rules on the location of new pharmacies have also been eased. The new contract also reflected the Government's desire to boost the role of pharmacists in dispensing medical care in the UK. As a result of the new contract, pharmacies are no longer simply viewed as a channel for dispensing and supplying medicines, but as a means of offering an ever-expanding range of clinical services.
The Department of Health's (DoH's) White Paper on pharmacies, published in April 2008, makes clear that the Government wants to expand the role of pharmacies even further, which is likely to make the sector even more attractive to the major grocery chains.
Key Note forecasts that the market for retail chemists will continue to show strong growth over the next 5 years (to 2012) and will expand at a pace well above inflation over this period. Sales of both prescription and over-the-counter (OTC) products are likely to increase sharply, as new products come onto the market and the population continues to age. The increasing range of services that pharmacists can offer will also support strong sales growth.
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