For many, Jack Gance is a name that has become synonymous with the pharmacy industry. Jack opened his first Pharmacy in 1972 but it was when he co-founded pharmaceutical giant Chemist Warehouse in 2000 in Melbourne, Australia, that the business really took off. He has parlayed his entrepreneurial vision and drive to shape the success of the international chain. It now boasts 600+ locations across four countries alongside a healthy online business. Last year, the company brought in more than $8 billion in sales.
The secret to his success is fairly simple. He caters to what his consumers want: convenient access to affordable prescriptions and health and beauty products.
Chemist Warehouse stores are bright, information-rich, in-your-face destinations where you can find a dupe for your favorite designer foundation in one aisle and a high-tech water flosser cheaper than you’ll find anywhere else in another, before picking up your monthly prescription at a cost that doesn’t break the bank.
The stores are category killers with high fully stocked shelves and a huge assortment of Health and Beauty products. Each store carries more than $1.5 Millon stock. They have positioned themselves as the authority for health and beauty, and a destination for customers seeking affordable pharmacy lines and as a result, have ushered in increased sales and bigger basket sizes.
“Traditional pharmacy has been slowly losing the health and beauty business to other retailers,” says Gance, pointing to Target, Costco and especially online giants such as Amazon as examples. “Our model is quite different from a traditional pharmacy. When you go to our stores you are just bombarded with products, and you have so much choice and variety. We’ve created a shopping environment with a lot more visual excitement and a lot more sales. We’re a category killer.”
A customer-first vision
Gance opened his first pharmacy with his brother Sam in 1972. Developing a distribution business, he created household brands: Le Specs sunglasses, Le Tan suntan lotion, Australis fragrances, and Colours of Australia cosmetics. Through his operation, Gance created the largest pharmacy distributor business in Australia. When he sold the business in 1991, he wasn’t ready to simply enjoy retirement. Instead, he completed an MBA at Monash University and NYU Stern School of Business, before setting his sights on pharmaceuticals once more.
By 1993, Gance’s newest venture, the My Chemist Pharmacy chain, had 35 stores across Australia, growing to 50 by the year 2000. That’s when Gance decided to get really disruptive, drawing inspiration from My Chemist’s rotating basket of specials and discounts.
“I thought, ‘what would happen if we actually had everything on special all the time?’ We would need a dramatic increase in sales, so we had to have a larger footprint and people would need to come out and buy a lot more. So that’s how we brought health and beauty back to pharmacy.”
With this mindset, he co-founded Chemist Warehouse with Mario Verrocchi. It grew into a multibillion-dollar chain, commanding more than 50% market share for the front of store (like that foundation and water flosser) and around 20% of all prescriptions.
Built on better relationships
One thing that has contributed to Gance’s success is his focus on strong relationships, especially with manufacturers and suppliers.
“We believe in a cooperative relationship because if you don’t have one, what happens when there are problems like shortages? Who are they going to look after?” Gance says.
In Australia, he continues, the typical grocery retailers tend to have an adversarial relationship with their suppliers, fighting them rather than collaborating to build up the market together. Often, buyers are moved around to avoid close relationships with suppliers.
But with Chemist Warehouse, Gance took the opposite approach. Their buyers have often worked in the same category for years so they have that much more specialized knowledge and experience.
Chemist Warehouse took things a step further, creating strategic partnerships with about a dozen suppliers with whom they now have equity (typically about 10%). These partnerships lead to developing new products where everyone wins.
“If we are working to maximize mutual sales, it’s a much bigger thing. We say, ‘look, if you don’t believe that us having equity in your company is a win-win for everybody, then we shouldn’t do it, because it has to be something you believe in,’” he says.
Culture fit across borders
It’s not just Australians who appreciate a good deal and a convenient shopping experience. In the past decade, Chemist Warehouse has been opening locations in New Zealand (now 47 stores), Ireland, and China (where they have five brick-and-mortar stores and are the No. 1 online health and beauty retailer on Alibaba). Gance says governments in Israel and Indonesia have approached him to open locations in their respective countries, and he has eyes on North America.
“The model works in any country where people want a better shopping experience, which is pretty well every country in the world,” says Gance. “But every country is different and you can’t just cookie-cut what you’ve got in Australia – you have to pay attention to the differences in the markets.”
When Gance brings Chemist Warehouse to a new country, he’ll typically open up one or two stores, wait about six months and see what works and what doesn’t and then gradually grow from there. And as they’ve expanded, they’ve witnessed a ripple effect of market expansion overall.
“When we went to Ireland, we explained what we did in Australia and New Zealand, and they realized that if they support us, we’d help them grow their market, which historically is rather sleepy. We went in there and shook it up and now not only do our sales increase, but everyone else’s do too. All of the sudden they say, ‘Hey, maybe I should promote this, carry a better range, reduce my prices, sell more products,’” says Gance. “So, I want to be remembered as someone who helped manufacturers increase their market shares, but mostly as someone who disrupted the market for the good of consumers.”
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