Running a R22 billion pharmacy giant from a shopping basket

For many years, Dis-Chem did not have a corporate office, with founder Ivan Saltzman effectively running the company from a shopping basket he kept in his car. 

Instead of sitting in an air-conditioned office, Saltzman would travel around to individual Dis-Chem stores and work at them during the day. 

This way, Saltzman kept his finger on the company’s pulse, maintaining standards across multiple stores and correcting mistakes at the ground level. 

However, it also slowed the growth of Dis-Chem’s store footprint, which Saltzman admitted could have been significantly quicker in an interview with Broll Auctions. 

Saltzman founded Dis-Chem with his wife, Lynette, in 1978 with R10,000 in capital. Their first pharmacy was in Mondeor, Johannesburg. 

The key insight they had was to combine the traditional pharmacy business with a retail front-of-shop to increase sales and profitability. 

While this is common now, it was seen as a radical move that was fraught with danger when the Saltzmans did it. 

It brought Dis-Chem into direct competition with retail giants such as Pick n Pay, and observers gave the pharmacy chain a slim chance of success. 

There were very few options available to the Saltzmans to differentiate their business from other pharmacies. 

South African law strictly fixed medication prices when the first Dis-Chem opened, leaving no room to compete on price or service enhancements. 

To give Dis-Chem an edge, the Saltzmans tapped into their love of retail to offer non-pharmaceutical products, becoming a traditional corner shop. 

Using this model, the Saltzmans turned a single Dis-Chem store into a network of 324 pharmacies across South Africa. 

The revolutionary model of having a retail store attached to a pharmacy, which Dis-Chem calls a ‘discount pharmacy’, has now become commonplace. 

Over the four decades that followed, the Saltzmans turned this model into a highly profitable business that is now valued at R22 billion on the JSE.

Running Dis-Chem from a shopping basket

Speaking to Broll Auctions, Saltzman expressed his love for retail and for being on the shop floor despite the business’s scale. 

The Saltzmans held off on franchising stores and becoming a mass-market retailer for as long as possible to preserve their oversight of the business. 

They would visit as many stores as possible in the first decades of Dis-Chem’s growth to ensure a high standard was imposed across the company. 

This put immense strain on the Saltzmans, requiring them to travel around Johannesburg and turned family dinners into business meetings. 

Saltzman, in particular, did not want to turn the company into a corporate entity with a head office that is detached from the store floor. 

Thus, while running Dis-Chem, Saltzman would, for many years, work out of a shopping basket he kept in his car. 

“My office was wherever I went. I carried it with me in a shopping basket. Everything in that basket was my office,” Saltzman said. 

“It went in the car. It came out of the car. As I went into a shop, it would be my office for the day when I opened the basket.” 

This gave Saltzman sharp attention to detail at the company’s stores and enabled him to monitor stock levels, store layouts, and standards on an intimate level. 

The advantage of this was the standardisation of the Dis-Chem experience across its stores and the imposition of a high operating standard. 

It also enabled Saltzman to prevent standards from slipping well before they affected the company’s top and bottom lines. 

However, it also slowed Dis-Chem’s growth, as the pharmacy chain was constrained by the Saltzmans’ desire to remain intimately involved. 

Eventually, the Saltzmans opened up to accepting partners to run selected Dis-Chem stores in a similar fashion to franchisees. 

These pharmacists were given partner equity at no upfront cost, with the equity paid off from store profit distributions rather than salaries. 

This ensured the partners’ commitment to the store’s financial performance and gave them nearly unlimited upside from the wealth generated by Dis-Chem. 

These partnerships ultimately formed the bedrock of Dis-Chem’s expansion over the years into a JSE-listed pharmacy giant.