Goodbye, corner drug store; hello, Capsule

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For anyone who has ever desperately waited in a long line at a pharmacy only to find out one hour later that the medication is out of stock, well, Eric Kinariwala hears you. It was this very personal experience three years ago that convinced Kinariwala to cofound Capsule Pharmacy, the New York City-based online pharmacy and delivery service that — with just one location — is shaking up the pharmacy industry.

Kinariwala cofounded Capsule in 2016 with one mission: to build a friendly if not caring pharmacy system that makes life easier for consumers, doctors, hospitals, insurers and pharmaceutical companies.

By building and mixing ultramodern technology with simple but caring touches, Capsule is trying to go where no pharmacy has gone before — never mind that retail giants just might be breathing down its back.

Capsule’s very existence leaves many questions in search of answers: Where does all this potentially leave the traditional pharmacies of the retail world? What will this mean for retail sales of candy bars and sodas, which Capsule does not sell? And just how far off might we be from forever nixing that trip to the corner drug store? Kinariwala, a speaker at NRF 2018: Retail’s Big Show in New York, shares his thoughts on these questions with STORES contributing writer Bruce Horovitz.

Tell me about the corner drug store.

The corner drug store hasn’t changed in 50 to 100 years. They are all the same. Yet two fundamental shifts have happened in the world. How consumers interact with retail has shifted from bricks-and-mortar to a third wave of commerce, which is digital. At the same time, the role of medication in the health care system has changed. We’ve never had a time with more medications and more complex medications. But against this backdrop, you have the corner drug store, which is still the same.

Some would say buying prescription drugs online seems a lot riskier than walking over to the local pharmacy and privately speaking with a familiar pharmacist about your needs.

For the consumer, the average wait time at the chain pharmacy is one hour. About 40 percent of people need to return because an item is out of stock. At most pharmacies, you don’t even know the price of the medication until you pay for it. And who wants to ask private questions to the pharmacist with 25 people standing in line behind you? The corner drug store is not in line with the way people today react with the retail experience. It is disconnected from the rest of the health care system.

How did you get the idea for Capsule Pharmacy?

I woke up one morning with a throbbing headache. This was in January 2015, when I was living on the Lower East Side of New York. I called my doctor, who says I had a sinus infection and he’d send my prescription to the pharmacy.

Everything that could go wrong did go wrong. When I got to the drug store, I couldn’t even find the pharmacy section. The cashier pointed me toward the basement, where I found myself in a line behind 40 people. I waited in line for one hour. When I finally got to the counter, the pharmacist told me that the drug my doctor ordered was not in stock.

So, I pulled my phone out to call my doctor for a different drug, but because I was down in the basement, my cellphone wouldn’t work. I left with nothing. When I got home, I fell asleep and woke up the next morning asking myself some hard questions: What just happened? How can pharmacies be this bad? I wondered if this is what everyone else experiences, too.

You essentially had an epiphany?

I realized that the pharmacy is at the intersection of two enormous changes in consumer behavior. Local retail is becoming customized — and it will live on your phone.

But you had zero pharmacy background.

An old friend of mine [Sonia Patel] was a pharmacist for 20 years. I reconnected with her, and she got it. We built a lot of the brand together. We figured we had to build the brand as if we were starting a pharmacy from scratch. We says, “Let’s throw out everything that exists today and figure out what consumers actually want.”

What differentiates Capsule Pharmacy?

We rebuilt the consumer experience from scratch and all the technology that allows that. We have reinvented the customer experience. We’re built on modern software that totally handles the pharmacy and is built with a predictive tool to keep inventory in stock. We have price transparency, so you know what you’re paying. We built in the ability to text or chat with a pharmacist whenever you need to from the security of your own phone. That’s a lot better than standing in a long line with 25 people behind you.

Can you explain in simple terms how Capsule Pharmacy works?

Capsule is a next-generation pharmacy. If you already have an existing pharmacy, you can simply download our app or go to our website, and we will become your pharmacy. Your order will be delivered often within two hours in New York City. You have access to the pharmacy whenever you want it.

Why don’t you use an outside delivery service?

We don’t think it’s the best way to create a positive experience. Delivery is the last touchpoint on the brand, so we won’t hire third parties to deliver. All messengers are Capsule employees, whether they arrive by bicycle, foot or public transport.

How did you get from concept to reality?

We methodically mapped out what it takes to build a pharmacy. We knew brand was important. We spent a lot of time recruiting amazing people. Sonja had been with Sam’s Club pharmacy for years and knew how to build a pharmacy. I had experience in building a brand. We spent one year planning, and our store opened in May 2016.

Aren’t doctors much more accustomed to filling prescriptions with drug stores?

Of course. There are 70,000 pharmacies in America. Pharmacies are one of the largest categories of local commerce. But when your doctor asks where to send the order, all you have to say is, “Capsule.” The doctor will type in the prescription, and we will receive it. You can schedule delivery within one hour. We’ve taken away the process of going to the pharmacy and all the things that can go wrong along the way. We’re using technology to eliminate all the friction.

Where did the name Capsule come from? It kind of sounds like a plastic-coated pill.

I made the name up. Most names have a great story, but there’s no great story behind our name. It just feels modern. There’s the double meaning of medicine in a plastic container and things like time capsules and space capsules. The name points to the future.

When will Capsule be a household name?

I hope it’s already becoming one, at least in New York City. New York City is a 430,000-per-day prescription market.

When will you expand outside of New York City?

I want to make sure that every New Yorker has the opportunity to use Capsule before we expand. So, for now, we’re only focused on New York City.

When will you be a national chain?

Over the next 10 years, we’ll be all across America, if not international.

What were your sales over the past year?

We’ve never disclosed our sales or our customer count. Let’s just say we work with tens of thousands of patients in New York City, and the business has grown sevenfold in one year.

When will you be a $1 billion brand?

New York City alone is a $10 billion pharmacy market. We’d have to take 10 percent of the market to be a billion-dollar brand. Duane Reade did it in about 60 years. We’ll do that in a fraction of the time.

If I’m a strip-mall owner who depends on drug store tenants, should I be worried?

Many local retail businesses are being commoditized. But things like restaurants, bars and cinemas will always exist because they offer experiences. Retailers that do not offer experiences will be very challenged going forward.

Meanwhile, you’ve got something to worry about, too. Are you concerned that Amazon will go into the pharmacy business and put you out of business?

No. I don’t worry about Amazon because what we are building is fundamentally different. Our business isn’t about delivery. It’s about creating value and reducing friction. Delivery is just the table stakes. Every modern company has delivery.

What’s the most astounding thing you’ve learned about the health care business?

The No. 1 wow for me is how big health care companies can make the average consumer feel so small, so alone, so afraid and so vulnerable.

How have you gotten doctors on board?

Doctors have actually approached us. They come by word of mouth. We make doctors’ lives easier because we take care of them. We’ve removed a lot of pain for doctors dealing with the pharmacy system.

Tell me about a customer whom you unexpectedly won over.

Sonja [Patel] called me over one day and told me about a woman who used our chat app late at night. The woman wanted to know if she could take her iron supplement while she was pregnant. Then, she says, “By the way, this is weird that I’m telling you first because my husband doesn’t even know that I’m pregnant yet.”

Has Amazon tried to purchase you?

We’ve been contacted by a wide variety of people for a whole bunch of things. I’m pretty committed to building this company for the next 30 years.

Since you can’t share sales data, what data can you share with me that show Capsule is successful?

I can tell you that our customers interact with Capsule six times more than the corner drug store.

Bruce Horovitz, a freelance writer, is a former USA Today marketing reporter and Los Angeles Times marketing columnist. He can be reached at brucehorovitz@gmail.com.

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