The UK market for retail chemists and drugstores is an increasingly competitive market, complicated in terms of the broad range of products sold, the high degree of regulation and the relatively devolved nature of retail delivery. The disperse nature of delivery through small independent retail pharmacies has traditionally been protected and fostered by regulatory and pricing controls. However, many of these controls are beginning to disappear, opening out the market to other retailers, such as supermarket chains and convenience stores. The retail chemist market itself has become polarised between large High Street operators and small retail pharmacy outlets, which are increasingly part of larger chains.

The market in the UK is now dominated by three companies — Boots the Chemists Ltd, GEHE (Lloyds Pharmacy Ltd, AAH Pharmaceuticals Ltd) and Alliance Unichem PLC (E Moss Ltd) — all of which are wholesalers and distributors of pharmaceutical products as well as retailers. Boots dominates the large High Street retail end of the market, whereas GEHE and Alliance Unichem are buying increasing numbers of small retail pharmacy outlets.

In 2001, the market for retail chemists and drugstores is estimated to be worth £18.72bn, with an annual growth of 9.5 percent. The largest sector of the market is prescription pharmaceuticals, which also accounted for the highest level of growth. The rise in prescription pharmaceuticals continues in spite of government initiatives to control expenditure in this area, primarily as a result of increasing demands from an ageing population and new treatments expanding the scope of the market.

The abolition in May 2001 of Resale Price Maintenance (RPM) has already generated significant discounting activity by supermarkets and large retail chains. It seems certain to intensify the competition between retail chemists and the supermarket chains. Certain industry groups have predicted that up to 25 percent of small retail pharmacies could disappear as a result of the abolition. The personal-care sector of the market is also under pressure from health and beauty stores, and many drugstores are upgrading and rebranding accordingly.

The market for retail chemists and drugstores is projected to continue rising. The prescription pharmaceuticals sector will continue to increase significantly in value, but the highest levels of growth will be observed in the
over-the-counter (OTC) sector, as increasing numbers of pharmaceutical products switch to OTC status. The true effects of the abolition of RPM are difficult to gauge but, since increasing numbers of small retail pharmacies belong to large retail chains or voluntary trading organisations, the effects could be less severe than predicted.