s Financial Stresses in Pharmacy - It's Part of a Cycle | I2P: Information to Pharmacists - Archive
Publication Date 01/07/2014         Volume. 6 No. 6   
Information to Pharmacists


From the desk of the editor

Welcome to the July 2014 homepage edition of i2P (Information to Pharmacists) E-Magazine.
At the commencement of 2014 i2P focused on the need for the entire profession of pharmacy and its associated industry supports to undergo a renewal and regeneration.
We are now half-way through this year and it is quite apparent that pharmacy leaders do not yet have a cohesive and clear sense of direction.
Maybe the new initiative by Woolworths to deliver clinical service through young pharmacists and nurses may sharpen their focus.
If not, community pharmacy can look forward to losing a substantial and profitable market share of the clinical services market.
Who would you blame when that happens?
But I have to admit there is some effort, even though the results are but meagre.
In this edition of i2P we focus on the need for research about community pharmacy, the lack of activity from practicing pharmacists and when some research is delivered, a disconnect appears in its interpretation and implementation.

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Newsflash Updates for July 2014

Newsflash Updates

Regular weekly updates that supplement the regular monthly homepage edition of i2P. 
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Feature Contribution

Woolworths Pharmacy - Getting One Stage Closer

Neil Johnston

It started with “tablet” computers deployed on shelves inside the retailer Coles, specifically to provide information to consumers relating to pain management and the sale of strong analgesics.
This development was reported in i2P under the title Coles Pharmacy Expansion and the Arid PGA Landscape”
In that article we reported that qualified information was a missing link that had come out of Coles market research as the reason to why it had not succeeded in dominating the pain market.
Of course, Woolworths was working on the same problem at the same time and had come up with a better solution - real people with good information.

Comments: 5

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Intensive Exposition without crossing over with a supermarket

Fiona Sartoretto Verna AIAPP

Editor's Note: The understanding of a pharmacy's presentation through the research that goes into the design of fixtures and fittings that highlight displays, is a never-ending component of pharmacy marketing.
Over the past decade, Australian pharmacy shop presentations have fallen behind in standards of excellence.
It does not take rocket science - you just have to open your eyes.
Recently, our two major supermarkets, Woolworths and Coles, have entered into the field of drug and condition information provision - right into the heartland of Australian Pharmacy.

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The sure way to drive business away

Gerald Quigley

I attended the Pregnancy, Baby and Children’s Expo in Brisbane recently.
What an eye and ear opening event that was!
Young Mums, mature Mums, partners of all ages, grandparents and friends……...many asking about health issues and seeking reassurances that they were doing the right thing.

Comments: 1

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‘Marketing Based Medicine’ – how bad is it?

Baz Bardoe

It should be the scandal of the century.
It potentially affects the health of almost everyone.
Healthcare providers and consumers alike should be up in arms. But apart from coverage in a few credible news sources the problem of ‘Marketing Based Medicine,’ as psychiatrist Dr Peter Parry terms it, hasn’t as yet generated the kind of universal outrage one might expect.

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Community Pharmacy Research - Are You Involved?

Mark Coleman

Government funding is always scarce and restricted.
If you are ever going to be a recipient of government funds you will need to fortify any application with evidence.
From a government perspective, this minimises risk.
I must admit that while I see evidence of research projects being managed by the PGA, I rarely see community pharmacists individually and actively engaged in the type of research that would further their own aims and objectives (and survival).

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Organisational Amnesia and the Lack of a Curator Inhibits Cultural Progress

Neil Johnston

Most of us leave a tremendous impact on pharmacies we work for (as proprietors, managers, contractors or employees)—in ways we’re not even aware of.
But organisational memories are often all too short, and without a central way to record that impact and capture the knowledge and individual contributions, they become lost to time.
It is ironic that technology has provided us with phenomenal tools for communication and connection, but much of it has also sped up our work lives and made knowledge and memory at work much more ephemeral.

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Academics on the payroll: the advertising you don't see

Staff Writer

This article was first published in The Conversation and was written by Wendy Lipworth, University of Sydney and Ian Kerridge, University of Sydney
In the endless drive to get people’s attention, advertising is going ‘native’, creeping in to places formerly reserved for editorial content. In this Native Advertising series we find out what it looks like, if readers can tell the difference, and more importantly, whether they care.
i2P has republished the article as it supports our own independent and ongoing investigations on how drug companies are involved in marketing-based medicine rather than evidence-based medicine.

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I’ve been thinking about admitting wrong.

Mark Neuenschwander

Editor's Note: This is an early article by Mark Neuenschwander we have republished after the soul-searching surrounding a recent Australian dispensing error involving methotrexate.
Hmm. There’s more than one way you could take that, huh? Like Someday when I get around to it (I’m not sure) I may admit that I was wrong about something. Actually, I’ve been thinking about the concept of admitting wrong. So don’t get your hopes up. No juicy confessions this month except that I wish it were easier for me to admit when I have been wrong or made a mistake.
Brian Goldman, an ER physician from Toronto, is host of the award-winning White Coat, Black Art on CBC Radio and slated to deliver the keynote at The unSUMMIT for Bedside Barcoding in Anaheim this May. His TED lecture, entitled, “Doctors make mistakes. Can we talk about it?” had already been viewed by 386,072 others before I watched it last week.

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Dispensing errors – a ripple effect of damage

Kay Dunkley - BPharm, Grad Dip Hosp Pharm, Grad Dip Health Admin, MPS, MSHPA

Most readers will be aware of recent publicity relating to dispensing errors and in particular to deaths caused by methotrexate being incorrectly packed in dose administration aids.
The Pharmacy Board of Australia (PBA), in its Communique of 13 June 2014, described a methotrexate packing error leading to the death of a patient and noted “extra vigilance is required to be exercised by pharmacists with these drugs”.
This same case was reported by A Current Affair (ACA) in its program on Friday 20 June

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Take a vacation from your vocation

Harvey Mackay

Have you ever had one of those days when all you could think was, “Gosh, do I need a vacation.”
Of course you have – because all work and no play aren’t good for anyone.
A vacation doesn’t have to be two weeks on a tropical island, or even a long weekend at the beach. 
A vacation just means taking a break from your everyday activities. 
A change of pace. 
It doesn’t matter where.
Everyone needs a vacation to rejuvenate mentally and physically. 
But did you also know that you can help boost our economy by taking some days off? 
Call it your personal stimulus package.

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Explainer: what is peer review?

Staff Writer

This article was first published in the Conversation. It caught our eye because "peer review" it is one of the standards for evidence-based medicines that has also been corrupted by global pharma.
The article is republished by i2P as part of its ongoing investigation into scientific fraud and was writtenby Andre Spicer, City University London and Thomas Roulet, University of Oxford
We’ve all heard the phrase “peer review” as giving credence to research and scholarly papers, but what does it actually mean?
How does it work?
Peer review is one of the gold standards of science. It’s a process where scientists (“peers”) evaluate the quality of other scientists' work. By doing this, they aim to ensure the work is rigorous, coherent, uses past research and adds to what we already knew.
Most scientific journals, conferences and grant applications have some sort of peer review system. In most cases it is “double blind” peer review. This means evaluators do not know the author(s), and the author(s) do not know the identity of the evaluators.
The intention behind this system is to ensure evaluation is not biased.
The more prestigious the journal, conference, or grant, the more demanding will be the review process, and the more likely the rejection. This prestige is why these papers tend to be more read and more cited.

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Dentists from the dark side?

Loretta Marron OAM BSc

While dining out with an elderly friend, I noticed that he kept his false tooth plate in his shirt pocket. He had recently had seven amalgam-filled teeth removed, because he believed that their toxins were making him sick; but his new plate was uncomfortable. He had been treated by an 'holistic dentist'. Claiming to offer a "safe and healthier alternative" to conventional dentistry, are they committed to our overall health and wellbeing or are they promoting unjustified fear, unnecessarily extracting teeth and wasting our money?

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Planning for Profit in 2015 – Your key to Business Success

Chris Foster

We are now entering a new financial year and it’s a great time to reflect on last year and highlight those things that went well and those that may have impacted negatively in the pursuit of your goals.
It's also a great to spend some time re-evaluating your personal and business short, medium and long term goals in the light of events over the last year.
The achievement of your goals will in many cases be dependent on setting and aspiring to specific financial targets. It's important that recognise that many of your personal goals will require you to generate sufficient business profits to fund those aspirations

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ReWalk™ Personal Exoskeleton System Cleared by FDA for Home Use

Staff Writer

Exoskeleton leader ReWalk Robotics announced today that the U.S. Food and Drug Administration has cleared the company’s ReWalk Personal System for use at home and in the community.
ReWalk is a wearable robotic exoskeleton that provides powered hip and knee motion to enable individuals with Spinal Cord Injury (SCI) to stand upright and walk.
ReWalk, the only exoskeleton with FDA clearance via clinical studies and extensive performance testing for personal use, is now available throughout the United States.

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Attracting and Retaining Great People

Barry Urquhart

Welcome to the new financial year in Australia.
For many in business the past year has been described as a challenging period.
Adjectives are a key feature of the English language.  In the business lexicon their use can be, and often is evocative and stimulate creative images.  But they can also contribute to inexact, emotional perceptions.
Throughout the financial pages of newspapers and business magazines adjectives abound.
References to “hot” money draw attention and comment.  The recent wave of funds from Chinese investors, keen to remove their wealth from the jurisdiction and control of government regulations is creating a potential property bubble in Australia.

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Updating Your Values - Extending Your Culture

Neil Johnston

Pharmacy culture is dormant.
Being comprised of values, unless each value is continually addressed, updated or deleted, entire organisations can stagnate (or entire professions such as the pharmacy profession).
Good values offer a strong sense of security, knowing that if you operate within the boundaries of your values, you will succeed in your endeavours.

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Evidence-based medicine is broken. Why we need data and technology to fix it

Staff Writer

The following article is reprinted from The Conversation and forms up part of our library collection on evidence-based medicines.
At i2P we also believe that the current model of evidence is so fractured it will never be able to be repaired.
All that can happen is that health professionals should independently test and verify through their own investigations what evidence exists to prescribe a medicine of any potency.
Health professionals that have patients (such as pharmacists) are ideally placed to observe and record the efficacy for medicines.
All else should confine their criticisms to their evidence of the actual evidence published.
If there are holes in it then share that evidence with the rest of the world.
Otherwise, do not be in such a hurry to criticise professions that have good experience and judgement to make a good choice on behalf of their patients, simply because good evidence has not caught up with reality.

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Laropiprant is the Bad One; Niacin is/was/will always be the Good One

Staff Writer

Orthomolecular Medicine News Service, July 25, 2014
Laropiprant is the Bad One; Niacin is/was/will always be the Good One
by W. Todd Penberthy, PhD

(OMNS July 25, 2014) Niacin has been used for over 60 years in tens of thousands of patients with tremendously favorable therapeutic benefit (Carlson 2005).
In the first-person NY Times best seller, "8 Weeks to a Cure for Cholesterol," the author describes his journey from being a walking heart attack time bomb to a becoming a healthy individual.
He hails high-dose niacin as the one treatment that did more to correct his poor lipid profile than any other (Kowalski 2001).

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Culture Drive & Pharmacy Renewal

Neil Johnston

Deep within all of us we have a core set of values and beliefs that create the standards of behaviour that we align with when we set a particular direction in life.
Directions may change many times over a lifetime, but with life experiences and maturity values may increase in number or gain greater depth.
All of this is embraced under one word – “culture”.
When a business is born it will only develop if it has a sound culture, and the values that comprise that culture are initially inherent in the business founder.
A sound business culture equates to a successful business and that success is often expressed in the term “goodwill” which can be eventually translated to a dollar value.

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ReWalk™ Personal Exoskeleton System Cleared by FDA for Home Use

Staff Writer

Exoskeleton leader ReWalk Robotics announced today that the U.S. Food and Drug Administration has cleared the company’s ReWalk Personal System for use at home and in the community.
ReWalk is a wearable robotic exoskeleton that provides powered hip and knee motion to enable individuals with Spinal Cord Injury (SCI) to stand upright and walk.
ReWalk, the only exoskeleton with FDA clearance via clinical studies and extensive performance testing for personal use, is now available throughout the United States.

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Pharmacy 2014 - Pharmacy Management Conference

Neil Johnston

The brave new world of health and wellness is not the enemy of Pharmacy, it is its champion.
Australian futurist, Morris Miselowski, one of the world's leading business visionaries, will present the Opening Keynote address on Pharmacy's Future in the new Health and Wellness Landscape at 2.00pm on Wednesday July 30.
Morris believes the key to better health care could already be in your pocket, with doctors soon set to prescribe iPhone apps, instead of pills.
Technology will revolutionise the health industry - a paradigm shift from healthcare to personal wellness.
Health and wellness applications on smartphones are already big news, and are dramatically changing the way we manage our personal health and everyday wellness.

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Generation and Application of Community Pharmacy Research

Neil Johnston

Editor’s Note: We have had a number of articles in this issue relating to pharmacy research.
The PGA has conducted a number of research initiatives over the years, including one recently reported in Pharmacy News that resulted from an analysis of the QCPP Patient Questionnaire.
Pharmacy Guild president, George Tambassis, appears to have authored the article following, and there also appears to be a disconnect between the survey report and its target audience illustrated by one of the respondent comments published.
I have asked Mark Coleman to follow through, elaborate and comment:

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Financial Stresses in Pharmacy - It's Part of a Cycle

Neil Johnston

articles by this author...

Neil Johnston is a pharmacist who trained as a management consultant. He was the first consultant to service the pharmacy profession and commenced practice as a full time consultant in 1972, specialising in community pharmacy management, pharmacy systems, preventive medicine and the marketing of professional services. He has owned, or part-owned a total of six pharmacies during his career, and for a decade spent time both as a clinical pharmacist and Chief Pharmacist in the public hospital system. He has been editor of i2P since 2000.

Financial experts are now openly commenting that Community Pharmacy is under financial stress and they estimate that around 1000 pharmacies (20% of the total of all pharmacies within Australia), can identify with that tag.
It's never happened to that degree before.
Of the financially stressed, 20% of those are drowning or under administration of some sort.
“Stay liquid and stay profitable” is, more than ever, the catchphrase for today’s financial environment.
Maybe it’s “crunch time” for a number of models of pharmacy because it is the most severe financial stress ever, when compared to past cycles.
The warehouse-type pharmacy that relies on low margin and quick turnover to generate a strong cash flow will be one of the entities feeling the pinch unless they have a strong financial management control that is able to turn that cash flow into a profit, usually by investing through the short-term money market.

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Those pharmacies that have not set up this type of profit centre will be the first to feel stressed and will ultimately collapse. Running a low-margin-high turnover business is fine, until some aspect of the financial mix hits a brick wall and brings everything down in a heap.
Apart from the global financial crisis that has severely affected bank lending policies in most countries except Australia, pharmacy financial impacts have come from wholesaler altered margins (without any real corresponding offset from direct supply manufacturers such as Pfizer), with the remainder of impacts coming through PBS reforms.
However, major Australian banks are now reviewing their lending policies and practices for capital and inventories for the pharmacy sector, and depending on their severity, are liable to have a major impact on the pharmacies that are already stressed.

The big problem with community pharmacy is that it has not adjusted its offerings to include professional fees for service activities that could gradually offset the gross profit losses from prescription business, incurred through PBS reforms.

Clearly, something must be done and more creative solutions must emerge.

While i2P has been publishing warnings regarding this eventuality for some years, it appears that community pharmacy leaders have done little to avert this problem.
 It is significant that a trade union of community pharmacies can turn a profit of $28.5 million while its members are starting to crash and burn around them.

What can be done?

Well, for a start, analyse and separate out all inventory holding costs in your accounts and present them in a clear and concise manner. These are the costs the banks are not going to be in a hurry to fund.

Secondly, separate out all the consumer services that may attract a fee.
You will not find many except for Medication Reviews of various types and the supply of Dose Administration Aids.
Structure these services (and any others that you may have independently developed) into a proprietary limited company, and focus on building company activity by:

(i) generating volume for each service;

(ii) value-adding to each service to attract a higher fee (if possible);

(iii) developing other pharmacy-related services (both clinical and non-clinical).
Financial management and investment services may be a good fit in this mix.

The first two starter services require a range of trained people – consultant pharmacists and qualified dispensary technicians.
The eventual battle will be won through pharmacy services companies that can train and recruit the best human resources for both categories.

Inventory management has always been a difficult area for community pharmacies to manage, but it can be profitable if done properly.
Many years ago I worked out that the Australian retail cycle was a two-week cycle and that the trend cycle was approximately six weeks (half a season).
If a rigid system is imposed on a pharmacy inventory to develop stock holdings that represent no more than two weeks of sales coupled with a maximum of four weeks in reserve, it immediately translates into a minimum of eight stock turns per annum.

It also means that stock is sold well in advance of payment.
Further, if the volume end of inventory held is managed by split ordering with each delivery representing as close as possible two-weeks of sales, there is a potential 26 stock turns per annum in that segment of inventory.
The amount of cash flow unlocked by good systems of inventory management, are immense.
Negotiated credit terms that extend normal terms of credit add to the bounty.

Financial managers can create profit through appropriate short-term investment strategies.
Remember, the people engaged in providing these services are self-funded. They do not have to be paid out of slender PBS margins.
It also takes up some of the slack in relation to new pharmacists who are currently unable to gain employment, but if you add primary health care clinical services to the mix, great opportunity is unlocked.

Back in the pharmacy environment it is now important that you review your pricing structures. You do not have to be the cheapest to maintain a high market share.

Always offer to match a competitor’s price rather that trying to beat it, when consumer pressure hits.
Join a bulk-buying group to ensure good buying prices. Also, a group that has the capacity to parallel–import may prove beneficial in resisting pressure created by direct supply manufacturers.

As a general observation to help plot some future strategies, it is probably helpful to know that pharmacy revolves through a 20-year cycle. I have briefly identified the cycles of recent history, highlighting the initial cycle through the introduction of the Pharmaceutical Benefits Scheme. Each cycle appears to take two years to take hold and six years to provide an adjustment response by pharmacy.


Introduction of PBS. Pharmacy loses first contact with patient through free doctor visits that creates a loss in professional market share (compared to doctors) because of free scripts.
Manufacturers also begin to compete with pharmacy extemporaneous dispensing by providing pre-manufactured versions of official formulae.

PBS list expands to include almost anything, causing serious PBS budgetary problems. Pharmacy numbers rapidly expand. PBS margins put under the magnifying glass and reduced. Supermarkets begin to compete for pharmacy markets and ownership of pharmacies.

Dispensing fees slashed by 40%.
Many pharmacists sell out, amalgamate or close down.
Government trumpets “Too many pharmacies” as the reason for high PBS cost.
Supermarkets are encouraged to continue pressure on pharmacy.

Pfizer direct distribution and PBS “Reform” plus the rise of Internet retailing.
According to cycle predictions up to 2012, we will see more major changes (probably more direct distribution, loss of wholesaler services), and wholesaler competition for primary care professional services in direct competition with their pharmacy clients.
It will not be until 2016 that the cycle reaches a point of stability and pharmacy settles back into a vastly different (but profitable) period of development.
Supermarkets will continue their quest for pharmacy ownership.

At the starting point for each cycle, pharmacy has always had to reinvent itself, with each cycle presenting a more difficult range of choices.
Always, the PGA has not taken hard decisions to create a more competitive and attractive pharmacy business model. The PGA consistently retarded the ability for pharmacy to transition at the end of each cycle. Therefore the landing has always been a hard one.
Pharmacy has gradually lost control and the respect of consumers by not recognising consumer dissatisfaction.
How many times have you heard disappointment expressed when consumers have not been able to access a pharmacist, and when they do, privacy is found to be totally inadequate?
How many times have pharmacists not taken charge of the sale of evidence-based medicines?
Even though empowered by earlier government decisions, pharmacy has not assumed responsibility for provision of complementary medicines and advice in their safe use. Why did the PGA abandon support for its excellent College of Clinical Nutrition - an educational initiative that proded much needed guidance and informationin for complementary medicine consumers.

The list goes on and pharmacy must get its act into gear.

Each time the wheel has turned in the cycle it has generated harsher conditions for pharmacists under the PBS. Recognition needs to occur that the PBS as a product is in the decline phase of its own product cycle and will need to be replaced.

Throughout the pharmacy cycle pharmacy has generally coped, but there will be casualties.
I think these are beginning to emerge as financial stresses become more evident.

The model of pharmacy that now needs to evolve I have titled “chameleon”
- a pharmacy that gives the appearance of being a discount pharmacy while allocating an increased share of floor space to professional activity; fully integrated with the Internet, and one that complements professional services.
It’s time to get your act together pharmacists!

Return to home

Submitted by Peter Sayers on Mon, 12/09/2011 - 14:34.

Advertisement noticed in Pharmacy Daily on 12 September 2011

TWC Charlestown Pty Limited (Receivers & Managers
Appointed) T/A Terry White Chemists Charlestown
is being offered to the market for sale.
For a copy of the information memorandum please
contact Sean Roffey (PBS Pharmacy Brokers) on email
pbs@healthbusinesssales.com.au or call 0408 882 111.

Submitted by william so on Fri, 02/09/2011 - 09:55.

Thanks Neil, this is the best advice I had seen so far. One question, why bundle all the consumer service into a separate PTY? Whats the advantage of doing that?

Submitted by Neil Johnston on Fri, 02/09/2011 - 12:02.

Hi William,
Thanks for your comment.
Yes, I was a bit vague on that aspect.
What was at the back of my mind is that a separate company would enable a number of issues to be managed to achieve three objectives:
1. If future bank financing is required for expansion,this company has no association with stock and capital of a pharmacy i.e. bank guidelines will be more relaxed for the service entity.
2. This separate company will be able to provide services to other pharmacies under contract, if desired.
3. It enables recruitment of other pharmacist shareholders separate to the actual pharmacy.And they don't have to be pharmacists either as the Pharmacy Act only governs pharmacy ownership (they could be a mix of accountants or naturopaths for example).
It also means that pharmacy capital is not diluted if this type of company is self-funding.

This type of company also has the potential to become a listed or unlisted public company that gives access to other investor sources.

Who knows - the service company may become a funder (or owner) of the original pharmacy.

Regards, Neil

Submitted by Anne Todd on Thu, 22/09/2011 - 10:40.

Section about inventory managment was spot on. We did something similar using our POS and an excel spreadsheet to track turnover orders in the 90s to keep stock to 6 weeks including those coming from the regular wholesaler. Only fly in the ointment were the cosmetic companies - getting a stockturn of more than 4 was impossible till we ditched the stand and "self" selected the best sellers and stopped stocking the duds. the consumers didn't mind only having 12 instead of 25 nailpolishes to chose from per brand,as long as they had all the foundation choices they wanted but boy did it help my stockholding.

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