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E-Pharma vs Offline Pharmacy: Which Segment to invest in?

23 September, 2020 Samadrita Chanda

Overview

The pharmacy business has emerged jointly of the foremost profitable segments within the healthcare industry. Industry experts believe that India is soon becoming one in every of the highest ten countries in terms of individual medical expenditure. Medicine spending in India is projected to grow 9-12 percent over the subsequent five years.

Now, the organized players are getting a fashionable increasing footprint through franchising. 

With different formats available to the investor, it would get overwhelming to narrow down on one segment to take a position their money in. But fret not; we've got jotted down both the pros and cons of e-pharmacy and also the offline business to assist you to create an informed decision before investing.

Ease of Business

Establishing an internet pharmacy in India may be a daunting task thanks to the laws related to it. The owner will buy lots of medical insurance within the case of a liability claim. the common cost of a pharmaceutical claim is quite $14,000, and people numbers will likely increase thanks to the still somewhat unregulated online healthcare space. If you are looking for online medicine purchase in India you can easily avail 3meds.com.

Apart from this, you'll purchase an internet site developer, courier service, advertisement, etc. Thus, the initial investment could also be between 20 - 50 lakhs. additionally, the law only allows selling certain drugs online without prescription. you have got to travel through every small detail so consult your lawyer before you begin a store.

On the opposite hand, offline pharmacy offers you the convenience of fixing a business. With the franchising model rising in every sector, pharmacy franchises are emerging because of the most preferred option. The pharmacy franchise incorporates an initial investment ranging from INR 8 10 lakhs, which has licensing and documentation. 

Profit Margin in Offline and Online Pharmacy

The margin of profit in offline pharmacies typically ranges between 15-26% for branded medicines, which can go up to 40-50% within the case of generics. Even with offering 12-80% discounts to draw in customers, franchisors make sure that their franchisees gain over 15% margin.

On the opposite hand, cash burn within the e-pharma industry could be a common problem because the discounts (up to 35% for some) exceed the margins within the chain (about 30-32%). While the race to proportion requires greater adoption and discounts which are an integral part of growth, profitability can't be achieved only by operational efficiency and lowering of delivery costs; discounts must come all the way down to reasonable levels to attain breakeven and any meaningful profitability.

Consumer Acceptance

The pharmacy business is all about serving the requirements on time. this is often the key reason why offline pharmacies are booming. Medicine and medicines are something that customers need quickly; they won't have the time to attend 3-4 days for his or her order to induce delivered. Consumers mostly prefer offline stores thanks to its hand-to-hand delivery of medicines and credibility, also a reputable name adds a brownie point for offline pharmacies.

Despite increasing downloads of the mobile applications, certain challenges like trust deficit(arising from the fear of receiving counterfeit medicines), customer support issues(linked to timely delivery and quick redressal), language barrier(lack of mobile apps in regional languages), access(unable to succeed in remote parts of cities) and data privacy (especially with health records and prescriptions) remains within the online space. 

Analysis

According to the report, this can be mainly thanks to the challenges that are being faced by physical pharmacies, further giving impetus to their online counterparts. Citing experts, the report highlighted that e-pharmacies are likely to unravel the issues that traditional pharmacies might not be ready to and for this, a large-scale of online pharma space is required which successively needs huge investments or consolidation.

All of them work on three main business models including marketplace, franchise-led hybrid (offline/online) together with inventory-led hybrid (offline/online), the report said.

However, until now, many investments within the online space are kept trapped because of no defined regulations decided by the govt. it's to notice that since e-pharmacies haven't been regulated to this point, their operations get competition from brick and mortar chemists. 

Even as brick-and-mortar pharmacies enjoy a lion’s share of the market, online e-pharmacy is predicted to grow over fourfold in a very few years, as per research firm Redseer Consulting, latest findings. Although like every e-commerce enterprise, consumers were interested in the net platform thanks to the steep discounts, now the bottom is growing because of convenience.

Meanwhile, discounts and convenience drive web growth at 98% and 95%, respectively.

E-pharmacy remains a distinct segment category. Therefore, marketing spend is required to form consumer awareness. 

“As consumers still try online platforms and these online platforms improve their service levels over time, we expect to determine the whole still as sticky consumer base both expand rapidly, which should enable the market to realize the aforementioned targets.” The report concluded that the online platform will still grow with new consumers and stronger service. Order medicine online in India from online pharmacy apps.

Conclusion

The lockdown and fear of contracting Covid-19 are making Indians wary of visiting hospitals and pharmacies and this has given a lift to the net medicine business.

In the past few years, the market has also benefited from the growing penetration of the net and smartphones.

To tap this emerging market, online retail giant Amazon has launched an online pharmacy in Bangalore on an effort basis and plans to scale it up to other cities. The Amazon Pharmacy service will offer prescription, over-the-counter, and traditional Ayurveda medication, also as basic health devices.