E-pharmacies: the future of pharma retail E-pharmacies: the future of pharma retail

With increasing internet penetration and smart phone availability, e-commerce has witnessed exponential growth across categories – from apparel to groceries, people have started purchasing most of their requirements via online platforms. As a result of this drastic shift of shopping behaviour, e-pharmacies have emerged as a promising sector as it managed to offer convenience of shopping out of the comfort of homes.

The global e-Pharmacy market was valued at US$ 0.8 Billion in 2020, out of which Prescription Drugs occupied 68 per cent revenue share and Over the counter (OTC) Drugs occupied 32% revenue share. The Indian E-Pharmacy market was operating with ~50 e-pharmacies and accounted for 14% share of the total revenue of e-Pharmacies in the Asia Pacific Region in 2020.¹
 

E-Pharmacies are slowly acquiring a major stake in the overall pharma retail value chain in India. This is being facilitated by the following factors: -

— Unorganized nature of traditional pharma retail- Traditional pharma retail sector is highly unorganized as there are multiple retailers at multiple locations leading to challenges such as sale of substandard and counterfeit drugs, price wars amongst various retailers and limited availability of drugs. The proliferation of e-pharmacies can help curb this menace, as it’ll allow consumers to purchase drugs from a highly organized online platform.

— Governmental Support- During covid times, the Central and State Government understood the necessity of E-Pharmacies and classified them as an essential service and also promoted them on the Aarogya Setu App. Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP), Digital India, Ayushman Bharat, Startup India and National Digital Health Mission (NDHM) are some of the initiatives undertaken by the government to boost the growth and enhance the ease of doing business in the online pharmacy segment.

— Value and convenience offered: E-pharmacies can help ensure supply of genuine and authorized drugs (wide variety of drugs that are safe for consumption) at affordable prices (by eliminating middlemen and offering discounts) with easier accessibility (online platform, home delivery & improved digital payment infrastructure). Therefore, E-Pharmacies are expected to be widely accepted in our country, due to the convenience and value it offers.

— Tremendous Potential Untapped in Tier II and Tier III cities: E-Pharmacies still have a lot of scope for expansion in tier II and III cities, that can be achieved by making huge investments for improvement of logistics channels in these cities.

Despite positive outlook, the Online Pharmacy segment is also exposed to various risks and challenges. These challenges can seriously damage the growth in this sector, if not taken seriously: -

— Cyberthreats and Data Security: These online platforms depend heavily on valuable insights derived from customer data (personal details, buying behavior, etc.) to deliver seamless customer experience. Thus, exposing this data to the risks of data breaches and other cyberthreats.

— Need for constant Technological Upgradation: In order to ensure its survival and growth in the Indian markets, E-Pharmacies need to constantly focus on utilizing latest technological advancements (AI, AR, VR, NPL, etc.) to deliver the best possible service to its customers.

— Need for strong Legal and regulatory framework-The legal regime governing the offline sale of pharmacies is also applicable to E-Pharmacy, as there is no special regime just for these players. The government needs to establish a special legal framework for E-Pharmacies in the near future, to protect the interests of the consumers and to serve as a backbone in facilitating growth in this sector.

Based on a few industry reports and analysis, the E-pharmacy market in India is expected to increase at a higher CAGR of around 40-45%³  as compared to Global E-Pharmacy markets that are expected to increase at a CAGR of around 15-20%⁴ .

— Scope for Internet Penetration- In India, there is still a lot of scope for internet penetration and it is expected to increase at a CAGR of 8.78% between 2020-25⁵ . As a result of this, E-Pharmacies would continue to grow in India, with the gradual increase in internet and mobile phone penetration. Apart from this, constant technological upgradation will continue to support this growth.

— Increasing investments and consolidation activities - This sector is also attracting huge investments from some of the largest conglomerates around the world.

— Increase in medicine spending- Medicine spending in India is expected to grow between 9-12% over the next five years.⁶

Therefore, it would be safe to say that E-Pharmacies have a bright future and will continue to boom in the Indian Markets. Factors such as rise in internet penetration, investments and medicine spending, improvement in supply chain logistics, digital payments infrastructure and legal/regulatory framework, measures to ensure data safety and sale of authorized drugs, will help in this endeavor. E-Pharmacies need to focus on delivering value apart from offering the products.

[1] Global E-Pharmacy Market, Mordor Global Industry Reports, EMIS, March 30, 2021
[2] Global E-Pharmacy Market, Mordor Global Industry Reports, EMIS, March 30, 2021
[3] E-pharmacy Market in India 2021, Netscribes Industry Reports, EMIS, September,2021
[4] Global E-Pharmacy Market, Mordor Global Industry Reports, EMIS, March 30, 2021
[5] E-Pharmacy in India is winning the battle over traditional medicines, IBEF, January 20, 2021
[6] Indian Pharmaceutical Industry, IBEF, October 2021