With the acquisition of a majority stake in the digital pharma marketplace Netmeds by Reliance Retail, the entry of e-commerce major Amazon to the online pharma retail segment, and reports about of Flipkart also planning an entry into the space, the overall segment is expected to see robust growth and activity this year.
The online pharma market has emerged as one of the most resilient sectors in the spectrum of e-commerce markets in India. Not only is the sector immune to economic slowdown but the stickiness of a patient's relationship, especially for lifestyle diseases, results in high customer lifetime values. Given the high distribution margins prevailing in the sector, the online pharmaceutical markets offer high growth as well as high margins, a prospect that is not shared by other e-commerce verticals
As per market sources, the online pharma retail market is expected to touch Rs 20,000 crore by 2020. With the entry of Reliance Retail into the e-pharma space through Netmeds, it is expected that the competition is further going to surge in the space as Amazon had formally entered the foray last week.
Earlier in the day, Reliance Industries Limited (RIL) had announced that its subsidiary Reliance Retail Ventures Limited (RRVL) has acquired a majority equity stake in Vitalic Health Pvt. Ltd. (“Vitalic”) and its subsidiaries (collectively known as ‘Netmeds’) for a cash consideration of Rs 620 crores. This investment represents 60 per cent holding in the equity share capital of Vitalic and 100 per cent direct equity ownership of its subsidiaries such as Tresara Health Private Limited, Netmeds Market Place Limited and Dadha Pharma Distribution Limited.
Commenting on the acquisition, RRVL Director Isha Ambani said that Reliance Retail was impressed by Netmeds’ journey to build a nationwide digital franchise in such a short time and that their investment and partnership investment is aligned with the company’s commitment to providing digital access for everyone in India. On the other hand, Pradeep Dadha the Founder and CEO of Netmeds.com said that they would like to capitalise on Reliance’s strength of digital, retail and tech platforms that will help them in providing a superior Omni Channel experience to their consumers.
Similarly, Amazon, which had already entered the online e pharma space will be a direct competition to the Reliance and Netmeds entity. When contacted by THE WEEK, the Amazon spokesperson stated that Amazon Pharmacy has been launched in Bengaluru to allow customers to order prescription-based medication in addition to over-the-counter medicines, basic health devices and Ayurveda medication from certified sellers. This is particularly relevant in present times as it will help customers meet their essential needs while staying safe at home, the spokesperson said.
“Definitely interesting times for the overall e-pharmacy ecosystem with large e-tailers and conglomerates entering the space. Likely to have a positive effect on the overall market, with more households expected to adopt e-Pharmacy service. But the ride is not easy, especially to set up a new e-Pharma business because the purchase flows are quite complex (different from usual online retail) and the business requires specialized inventory management capabilities. That being said, Amazon and Flipkart do have the advantage of a huge online transacting consumer base and a ready delivery system. Overall, we expected the e-Health sector to reach 70 million households by FY2025, if it grows aggressively. We believe it will be able to at least meet its aggressive estimates,” observes Kushal Bhatnagar, Engagement Manager at RedSeer.
A few market experts point out that the high discounts, complete information regarding the ingredients and sources of medicines plus many other details about usage are provided by the online e-pharma companies—something that is seldom provided by the offline pharmacists.
There has been stiff opposition by offline pharma retailers, especially by the All India Organisation of Chemists and Druggists (AIOCD), which represents more than 850,000 members across the country, who protested against online e-pharma firms and the entry of Amazon into the space. However, this is expected to fizzle out as the benefits of online pharma outpace that being offered by the offline stores.
