To gain the competitive advantage needed to survive and compete in an environment led by large distribution chains, small-scale retailers need to develop distinctive competencies. This is particularly relevant in the case of retail pharmacies, which are already affected by continuously eroding profit margins, increasing liberalization of the sector and growing competition from new non-pharmaceutical outlets. Against this background, this paper contributes to identifying distinctive competencies with the potential to enhance business performance in retail pharmacies. Using structural equation modelling on a sample of Spanish pharmacies, it also establishes relationships between possession of certain distinctive competencies and success in building a sustainable competitive advantage.