Building a healthier life

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Chan Kam Tat, Manager of Healthy Life Pharmacy (Macau)

How did you start your business?
Healthy Life Pharmacy was founded in 2011 by myself and my wife. We started our business with MOP700,000 in capital, a combination of our savings and the amount we obtained from selling our property. Up until now we have already accumulated around MOP10 million in net assets.
In the beginning, we depended mainly on our strong cash flow. Cash flow and human resources are the key factors in determining whether a company is successful or not. For instance, someone with MOP5 million on hand can easily manage a company that needs MOP1 million for operations, but a successful company is able to use an amount that is less than the required amount.

What led you into the pharmacy business?
My wife was a pharmacist and she had been working in the industry for years. We were thinking of trying it out ourselves. For us, making a large amount of money was not the incentive for opening a pharmacy. We just wanted to do our very best, so customers could buy good quality products at the lowest price.

What is the current scale of your business?

We started our business as one pharmacy and now we already have over 70 employees. Within these, we have pharmacists and technical assistants, as well as others. Most of our employees are fresh graduates, university students and housewives.
So the overall age of our entire team is 35 years old. We require our employees to have at least literary and computing skills. We know this makes hiring more difficult. We offer a salary of MOP50 per hour with commission, and it is very rare for a part-timer to receive this amount of salary.
Our business philosophy is quite similar to Uniqlo, McDonald’s, KFC and Muji. Half of our employees are in fact part-timers, many of whom have stayed and turned into full-timers. Recently, we also invited two professors from Mainland China to deliver training courses to our workers. Moreover, I believe that employees should be informed of two things: they have to be well aware of the company’s core ideology, and that the company that they are working for is making profit.
We now have four stores and two distribution centres. One of our distribution centres is 8,000 square feet. It is in fact a rare case for a pharmaceutical company with only four branches to have such a large distribution centre.
Our customer volume is very high and, as such, this helps us to maintain strong cash and goods flow. With a strong goods flow, suppliers rebate our orders. As a result, the price of our goods is comparatively lower. Moreover, our latest store is much larger than the other three and we would like to make it into a flagship store to build up our brand image.

What is your customer base?

The majority of our customers are local residents. We have less than 3 per cent that are tourists. Most of our stores are located in Areia Preta and Iao Hon and tourists tend not to visit these areas. Since our target is local residents, the city’s economic recession did not have great impact on our business.

What are the main products that Healthy Life Pharmacy is selling?
We basically started our business as a pharmacy, but in 2013, we decided to put most of our resources into daily commodities, because we realised that within the residential areas, the demand for daily commodities is high. After years of operations, over 50 per cent of our products are daily commodities.
Also, we only stock products that will be liked by customers. Since Macau has very limited suppliers, we stock products that do not normally appear in pharmacies – such as Japanese cup noodles. We sold 500 cup noodles in the past three days. We will keep on trying to search for new products that are rare in the city.

How do you run your business and how do you get supplies?

Since cash flow is very important to our business, we need to know well about the flow of our sales. After we recognize strong sales, we will then approach the suppliers and discuss the rebate that they can offer.
In our initial stage, there were a number of social institutions, including major ones, that would procure products from us. Normally, most of these institutions would purchase either from suppliers or, more often than not, at supermarkets. What they need is convenience.
They usually make purchases a day prior to holding an event. And we can provide enough products in a short period of time, plus we can offer a price that is lower than suppliers and supermarkets. We simply take less percentage from the rebate so as to offer a much lower price. And slowly we have transformed into a social enterprise that benefits the entire society.
We also manage our business electronically. For instance, we only have three goods distributors for four stores. But with electronic operations and management, our efficiency is boosted and the need for labour is reduced.
In terms of seeking suppliers, the important thing is to let suppliers know the value of the company. During the recession, we actually gained more from suppliers. Most suppliers have difficulty selling their products during a slump and many of them offer high rebates.

What do you have in mind when choosing the location for your pharmacies?
We choose places that are close to a bus stop and/or on the corner. For business, location is a vital criterion, and all our stores are located on corners and near bus stops.
There are two advantages with this arrangement: first is that each of these stores have their own storage and this reduces the pressure of storing as well as the cost; the second is the creation of the image of our company. In addition, our distribution centres are also located very close to our stores, making our response to shortages prompt.
For the time being, we are not considering extending our business into the central part of Macau. Our business needs time to develop and, most importantly, our business beliefs or ideas could be altered if we served more tourists by setting up shop in the busy zones. Also, the sales method would also be adjusted to serve tourists, such as selling higher-end products to earn more, in order to pay the higher rents. With higher rents, we might need to forgo our business philosophy in order to survive.

Is rent one of the important factors that affect your earnings?
I believe expenditure relating to property certainly has impacts on all kinds of businesses and we are no exception. Most of our stores have been rented in the past few years and at times our rent has doubled. But we would not expect the expenditure on property to reach 30 per cent of our net profit.

Are there any difficulties in hiring pharmacists?
Yes, and it is the biggest challenge for us. Pharmacists in Hong Kong generally receive MOP35,000 per month, whereas pharmacists in Macau receive MOP40,000. The reason for the difference is the medical system in Macau is exceptional. As one can see, there are many public health centres in the city, thus leading to the great demand for professionals. I think the salary growth rate for pharmacists in Macau is the highest among other occupations. Therefore we do encounter difficulties in employing pharmacists. But we will let interested parties know our company’s ideas and philosophy. Pharmacists are responsible for the safe consumption of drugs and we can provide the platform for performing this responsibility. Most pharmacies do not provide any prescription dispensing, and many are only selling supplements or other products such as milk powder and nappies.

There are already many pharmacies in the city. How do you compete against the others?

Many people think that pharmacies are always hard selling – recommending products other than the ones you are looking for. But for us, customers are self-helped. We provide self-helping services as much as we can, because some products require consultancy by a pharmacist – so we will put them in places out of reach of customers. Moreover, staff sometimes get a bit annoyed by the large number of customers and self-help services resolve this problem. And it requires less demand for labour too.
In terms of setting the prices, our products are generally 15 per cent cheaper than those of supermarkets.
We also reference Mannings (a chain of personal health and beauty retailers offering a range of pharmacy, healthcare, personal care, skin care and baby care products) to give out stamps, so as to attract customers to revisit out stores.
Like Royal supermarket and New Yaohan, we also have our own VIP day to attract customers as well as suppliers. We have already held four VIP days, and on one of our VIP day we earned MOP3 million in sales over three days. We also hold special festivals such as the powered milk festival.
On the other hand, we print out prescription labels, since more often prescriptions are hand-written. After we started using this method many others followed it, but we welcome competition. With competition, we will then improve.

How do you promote your business?

Recently we have established our own official WeChat account. Customers can earn points via subscribing to our account, and with enough points customers can redeem gifts. The account also allows customers to check their purchasing records.
Also, we have been using Facebook to promote since 2012 and we have accumulated a number of likes for our page. We create humorous advertisements by making videos to attract customers. Also, in most of our advertisements, we always include a person’s face. According to some studies, advertisements with a person’s face are much more likely to be welcomed and accepted by the audience.
In Hong Kong, companies use Facebook and Twitter to promote, while companies in Mainland China use Sina and WeChat. For us, we use Facebook and WeChat. In my own experience, WeChat provides stronger penetration, and customers who are WeChat users tend to have stronger loyalty in terms of purchasing.
Our business has grown at a much faster rate since we set up the account on WeChat.
At the moment, we have gathered over 20,000 subscribers on both Facebook and WeChat.
Moreover, we also take part in national trade fairs to promote our brand.

Recently a number of Japanese-based stores have opened in the city. Has that affected your sales of Japanese-brand products?
We do sell a lot of Japanese-brand products, since the Japanese yen is at a low rate, and so products from Japan sometimes would be even cheaper than products from Hong Kong. Obviously Japanese products are not our main income stream, but if I am not mistaken our stores have the largest procurement and sales of Japanese products. And also, we only purchase certain Japanese products that are popular.
We can see that there are more Japanese-based stores opening in Macau, but I think this phenomenon is very similar to stores selling bubble tea. Many of these are opened because investors think they will make a large profit, but the profit will get smaller as time passes, and the number of stores shrinks. For us, this would not be a big matter since a huge amount of our products come and go. Also, I do not see this as competition because these Japanese-based stores are helping us by selling products that we cannot get and providing more choices to customers.

Does the Macau government provide any assistance to your business?

We rarely use subsidies or funding provided by the government. But in our second year, we applied for a subsidy of MOP600,000 from the government.

What are your future plans?

There are three aspects that we are planning to pursue: to build up an online to offline platform; to strengthen co-operation with social institutions and schools – so as to expand our structure as a social enterprise; and possibly to open another new store – if our customer base grows over time. But this will only happen in stages and not in the near future. Opening a new store is not easy, because business might be better when you have fewer stores, and the shortage of human resources remains another problem.