Right prescription

Being highly regulated, brands are wary about being too adventurous online

As Indian shoppers are rushing online to buy everything from gadgets to grocery, it was time for the pharma market to catch up to the trend. Globally, pharmacies are an important retail channel for health and personal care products with several leading players like CVS, Walgreen, Boots, and Watsons. The channel in India, however, remained unorganised and fragmented with small individual chemist shops barring a few national players like Apollo Pharmacy and Medplus. The sector in recent years has been disrupted by a new league of tech-savvy entrepreneurs through the e-pharmacy channel. The success of online retail in the country had demonstrated that shoppers in India have a high appetite for the channel. Following the footstep of general online retailers, e-pharmacies are making the process of purchasing medicines more convenient, economical, organised and transparent.

With over 200 e-pharmacy startups like 1mg, PharmEasy, mChemist, NetMeds and Myra, the channel is becoming increasingly acceptable to shoppers not only in metros but also in tier II, Tier III cities. As reported by Euromonitor, India’s pharmacy and healthcare retail market has grown from Rs 578 billion in 2012 to Rs 1,045 billion in 2017 exhibiting a CAGR of around 80 per cent. In the same period, online healthcare retail market size has been reported to grow from Rs 1.3 billion to Rs 3 billion and is projected to grow to Rs 4.2 billion by 2022 making it one of the fastest growing categories in the country. 

Unlike the regular fashion, electronics and general merchandise categories, Pharma is a fairly regulated sector where pharmacies are required to sell a large proportion of medicines based on doctor prescription only. While this remains to be a crucial logistics challenge, with the new set of regulations whereby electronic prescriptions uploaded by the customers are acceptable, the e-pharmacy channel has got a big boost. Further, unlike general online retail channel where customers are always looking for heavy discounts, e-pharmacies offering small discounts are attractive enough for the customers. This ensures that e-pharmacies don’t need to get into unsustainable predatory pricing to attract customers. 

Beyond prescription drugs, e-pharmacies sell a wide spectrum of OTC drugs, health supplements and personal care products offering customers convenience in a category where physical interaction for look and feel of products is not so important. These products offer better margins and higher sell-through for e-pharmacies. Standardised branded merchandise in health and personal care category also ensures lower returns which is a logistics nightmare for fashion and lifestyle e-retailers. Online pharmacies are also offering value-added services like providing easy access to medical advice and crucial information regarding the composition, benefits, substitutes, and side-effects of various drugs that is boosting their sales. E-pharmacies like 1mg provide detailed information in association with qualified doctors on several drugs and promote generic drugs as per government norms. This complementary value-added service helps customers choose more economic substitutes. With government aggressively promoting generics instead of branded drugs, the information on e-pharmacy sites helps them capture savvy customers.

e-pharmacy channel, though very promising, has its own set of challenges to deal with in the nascent market. With easy access to local chemists in every corner, customers don’t have a pressing need to buy online. Also, need for medicines is often urgent and customers may not have the luxury to wait for a two-day delivery similar to fashion merchandise. When people fall ill, they need relief immediately and in such situations, local pharmacy stores offer the convenience of immediate access. However, online pharmacy firms in other parts of the world have overcome similar challenges. As observed by Euromonitor, globally there is a surge in the online purchase of prescription drugs as well as other OTC products across different countries with players like Alibaba’s healthcare division Ali Health in China and Dutch firm DocMorris in Western Europe.

Germany is the largest online pharmacy market with a market size of  $713 million in 2017 and per capita spent of over $8.60 on OTC drugs via e-commerce in 2017. Dutch online player DocMorris is a driving force behind high acceptability of online channel in Germany and many Western Europian countries. Liberal Dutch laws around pricing, prescription and distribution enable DocMorris to deliver both prescription drugs and OTC products at lower prices as compared to local pharmacies at the doorstep of the shoppers. This leads to convenience as well as cost saving for customers leading to an increased preference for the channel for planned purchases. The challenge of OTC drugs not being a planned purchase has been addressed by players like Amazon and Instacart in the US by offering as fast as one hour delivery for specific OTC drugs like analgesics, drugs for seasonal cold, allergies etc. For some other planned or regular medications where next-day or 2-day delivery may also be acceptable, such as antacids or antihistamines, a “Subscribe and Save” option is  offered by Amazon. Another success story in this space is from China which is the fastest growing online-pharma market. Alibaba’s healthcare division Ali Health and Jingdong Mall are instrumental in increasing acceptability of online drugs in China.  These players work directly with wholesalers for the development, advertising, and sale of drug, food, and nutritional supplements products leading to high growth in online pharmacy business in China. 

At the end, needs vary as per the product and the customer. There will always be some categories where customers would need immediate purchases and local pharmacies would be the preferred option. Having said that, e-pharmacies can be a game changer in delivering affordable medicines to all by increasing competition, driving costs down and helping to deliver drugs in remote areas. Though still in infancy, e-pharma channel is likely to become a sustainable channel offering customers convenience, wide array of choices and cost savings.

Rakhi Thakur is Associate professor, marketing, S.P. Jain Institute of Management and Research