ShareThisBy PAUL GRIMALDI
Wednesday, November 01, 2006
Two men, longtime business partners and friends, are bucking conventional wisdom.
Independent retailers just can't compete against national chains. Or so the rule goes.
They don't have the cash reserves. They don't have the inventory network. They don't have the advertising muscle.
Maybe they don't even have the sense to see how unlikely success will be.
"There was a certain amount of skepticism," said William J. Rosa Jr., of North Providence, R.I. "We wanted to give it a try."
Maybe that's all it takes.
That, and enough experience to believe they can make money in a low-margin business such as a pharmacy.
It's the second time around for Rosa and partner John L. Capuano Jr.
In the fall of 2003, Rosa and Capuano sold La Salle Pharmacy in Providence.
They had decided that the family atmosphere and pride in running an independent pharmacy couldn't sustain a business in the fiercely competitive drugstore industry.
The two had run the pharmacy since 1987, when they bought it from the DiSarro family.
The DiSarros had operated a pharmacy there since 1949. The two new owners had worked as pharmacists at the store since graduating from the University of Rhode Island in the 1970s.
But the balance sheet was getting harder and harder to keep in the black.
National chains had pushed general merchandise prices down to the floor. Everyone, it seemed, had a special on milk or toilet paper - every week. The chains were crowding into urban neighborhoods. Insurers were stingier on reimbursement rates. Government rules were harder to follow.
And pharmacist salaries were getting out of hand.
"If we had to pay a guy eighty or ninety thousand, we'd be broke," Rosa said at the time.
Other independents had struggled with the same issues before going out of business.
"Very few of our members make money from selling gifts and cards," said Douglas Hoey, of the National Community Pharmacists Association, headquartered in Alexandria, Va. "What the pharmacists have done is gone into a lot of niche areas that are health related. The niche market is where they're able to outperform their competitors."
Those niches include selling durable medical devices such as crutches and walkers, or offering vaccine shots and health-management programs such as smoking cessation and diabetes monitoring.
CVS, Walgreens, Target and other chains now offer many such clinical services.
So Capuano and Rosa sold the business to CVS and went to work for the Woonsocket-based drugstore chain.
It didn't take.
Kelly Orr, director of pharmacy at the University of Rhode Island's College of Pharmacy, knows both men. They help teach pharmacy students during clinical rounds in the six-year program she oversees.
"I know they loved independent pharmacy," Orr said. "When you talked to them, you can tell they just missed it."
Chance encounters would remind the two men how much they valued running their own place.
"I would run into our old customers," Capuano said. "It would always be the same old story, 'We miss you.'" People used to the personal touch of a family business had a hard time getting used to the corporate efficiencies of a CVS.
After fulfilling a 60-day transitional contract with CVS, Rosa went to work at Phred's Drugs in Cranston, R.I., another independent. He stayed until the summer of 2004.
Capuano took time off from work after the CVS contract ended, and rattled around his North Providence house until he drove his family crazy.
"It didn't work out" is all Capuano said of his experience at CVS.
Over morning coffee, they'd hash over their experiences at La Salle. "One day I said, 'Why don't we just try a small shop,'" Capuano said.
In September 2004, after clearing things with CVS, they did.
The partners opened JB Pharmacy in Johnston, R.I..
It's a no-frills store. They don't sell eye shadow. They don't sell wrapping paper.
They concentrate on prescription drugs and over-the-counter medicine.
"Whatever you can get from CVS, you can get from us," Capuano said.
It was a year before they could draw salaries. But they're making money now and ready to push the business further. A non-compete clause with CVS recently ended, allowing them to advertise their new business.
They've signed a franchise deal with Health Mart, a subsidiary of prescription-drug distribution giant McKesson Corp. The San Francisco company is revitalizing a pharmacy franchise operation it inherited as part of a corporate takeover 10 years ago.
Capuano and Rosa now have three part-time employees, including two pharmacy technicians. They hired one of those technicians earlier this month.
"It doesn't need to be a huge enterprise," Rosa said.
With a smaller space, staff and inventory, they don't face the bills that they had at the old store.
"If we were at La Salle now, with the overhead, Medicare D would be killing us," Capuano said. "We're acutely aware of that."
An eye for details comes with experience, said Hoey, of the pharmacists' association.
"It's often easier the second time because they know the pitfalls" of running a business, he said.
Experienced pharmacists might be in better financial shape, with money from the sale of their first business. They may have easier access to loans and credit lines to get a new pharmacy up and running, he said.
"The people who want to come to us, come to us," Capuano said, because the partners offer a "comfort level" customers can't find at chains where pharmacists often move around.
Electronic communications play into their hands as well.
For many small businesses, the Internet, e-mail and workplace software make them competitive with the biggest players in their industries.
"Once you hit that button, the whole electronic world is out there for us just like it is for the chains," Rosa said.
Capuano and Rosa know what they're up against.
"If it was easy, everybody would be doing it," he said.
