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a columnist has suggested 5 fundamentals of the CW story

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Focus on what matters

The Gance brothers and Verrocchi grew up working in their families’ milk bars. Not only was this experience formative as they moved into the pharmacy business in the 1970s, but it guides the approach today. “We learned that the only person important in a transaction is the customer,” Sam Gance says of his milk bar days. “And we always focused on what the customer wanted, and if we could provide it, we knew we’re going to be successful. What does the customer want? Can we provide it to him? And if we can, guess what? We’ll keep him.”

Challenge convention

When the trio started running chemist shops, the model was that about 60 per cent of revenue was generated from dispensing prescriptions, while the other 40 per cent came from the front of the store. The Chemist Warehouse model was an assault to that convention, with the majority of revenue driven from the vast range of healthcare, beauty and wellness products that dominate each shop. The model was also set up to defy the strict (and protectionist) rules set up to restrict pharmacy expansion.

But Jack Gance says the biggest challenge to pharmacy sector convention was an economic one. Most chemists were operating on a margin of about 40 per cent, so the trio started with a big, crazy idea: what if we offered a 25 per cent discount on everything? Chemist Warehouse then worked backwards from there, figuring out how it could drive down costs like rent and labour, how it could extract rebates and advertising subsidies from suppliers, and how to get the balance right between volume and profit. Bold, brave thinking.

Stand out

Everybody who shops at Chemist Warehouse knows it’s an assault on the senses – and that’s very deliberate. “We overwhelm our customers with great value and surprises, and it’s an enjoyable experience,” Jack Gance. “They walk through our store and they see things that they didn’t come in to buy, but they’re well priced, good products that are well promoted. And so as a result of that, we actually grab the market.” Verrocchi says the lessons learnt back at the milk bar – “the higher the stack of boxes, the more you sold” – helped inform the in-store approach. “You don’t put two items on the shelf, you put 24. You don’t put a little ticket, put a big yellow sticker on it. A lot of the original traits are still there,” Verrocchi says.

Clarity of decision-making

Verrocchi and the Gance brothers are larger-than-life characters and after decades in business, it’s not hard to imagine a few lively boardroom discussions along the way. But there’s one rule that has kept them on track: there’s no voting on big decisions, the call has to be unanimous. “If I feel that something’s wrong, I’ll argue the case. But ultimately, I’m going to go along with the major consensus, because we all have got to agree,” Jack Gance says.

Nothing beats hard work

Up until very recently, Jack Gance says Verroccchi would help prepare for every new store opening by grabbing a box cutter and opening cartons for hours on end. “I said, ‘Mario, you’ve got more important things to do.’ But it’s important that you show none of us – none of us – are afraid to roll our sleeves up and get our hands dirty.” Verrocchi says this is the real secret sauce: a culture of just smashing through. “It’s the culture of getting things done. It’s the culture of coming in early and working late. It’s the culture of ‘it’s never too hard, it’s not impossible’. If you’re working hard enough, you’ll end up getting there.

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I'd suggest 2 more

- employ lots of entry level pharmacists

- have really narrow aisles, and stack to the ceiling

CW is cheaper than the other chains