Suresh Naagar, CEO & Co Founder, EasyMedico

Mr Suresh is a seasoned management executive with over 20 years of experience specializing strategy, execution, contract negotiation & identifying new opportunities through consultative discussion & by forming close partnership with existing and potential clients. For the last few years Suresh has been engaged in organizing the unorganized offline pharmacy market with Easymedico, which is aspiring to be the Largest & Trusted Omni Channel Pharmacy & Wellness Brand in Tier 2 & Tier 3 Cities in India. Easymedico is a tech-enabled aggregator & supplier of pharma & non-pharma products to its omni channel franchise retail chain, traditional medical stores (EasyEnabled) and to leading online pharmacies & health service providers apart from its own online customers. It is Central India’s fastest growing omni channel brand with 70+ franchise stores growing at 2x yoy

 

 

There has never been so much focus on the healthcare sector as much asit happened in the last couple of years, thanks to pandemic & expedited attemptsto bring disruption with tech and external funding. Most of the attention was grabbed by the retail side of the pharma, & supply chain. Significant investment went into e-pharmacies compared to offline retail. Many of the sport eventsrecently were sponsored by these heavily funded players. Intense advertising spend can be attributed to create brand and channel awareness as well as to capture market share in a heavily fought competition.

Between 2015-2017, many start-ups came up with online platform for customers to place orders for medicines. Each one of them offered discounts to attract customers, something that was unheard of on medicines.

We saw bit of consolidation & acquisitions in 2018-19, which is still going on. Now much larger e commerce & other big corporates with deep pockets have moved in by acquiring some of the existing players. This was bound to happen however, it happened much faster than anticipated.

Earlier, we had better visibility of the business model of online & offline players, and there existed a clear demarcation between the two. Come 2021, this demarcation is getting blurred if not fully eliminated, at least this is what recent activities including mergers and acquisitions and newly introduced services or products by these companies is telling us.
Different categories of player

We have 3 kinds of player, an online player who also started offering services like offline store, second is offline standalone store but with or without online capability limited to its area of influence and third is organized offline retail chain with its own online channel. Many of the offline players have presence in limited geography or say in few states, whereas for online such limitation does not apply as long as their logistic tie ups are intact, but same logistic capabilities or tie up can make offline players’ online channel also a national player.

Disruption, convergence & complimentary services
Since e-pharmacies’ USP was discount, ease of placing the order and home delivery. This certainly was a threat to local neighbourhood pharmacies. To counter online threat, many of the local pharmacy also started giving discounts with huge sign boards to display. They were also able to offer online order through whatsapp or call and home delivery as well in the local area. With this, online got challenged in their own game and each such offline player became a competitor but with an added advantage of immediate delivery vs 4-5days that online was taking. With deep pockets, Online’s aim was to price the competitor out, and build the volume much rapidly, not realizing that it wasn’t much difficult for offline player to extend similar discounts and provide home delivery. But this reduced the profit offline was making earlier. On the other hand, online is also facing competition from its peers apart from nationally spread each offline player who is able to sustain similar discounts & offer similar services.

One other hurdle that online players face is that there is hardly any stickiness once every online player offers same product & almost same discount. If not all, most of the online customers, generally carry mobile app of all these e-pharmacies. In general, easiest target segment is the chronic patient who take same medicines on monthly basis, who were looking to reduce their health expense. Then there are also many customers who would is required to take the prescribed dose immediately. In such cases, they always purchase medicines from local pharmacy stores. Most of the time, in those situations, discount doesn’t mean much to them even though offline players are also offering discount these days, thanks to online. Customer remains the key beneficiary in all such competition.

When product differentiation including discounts offered by different players converge, customer service becomes critical. Almost every online player has identified time to deliver and prescription fulfilment rate as the key concern. To address this, online players are trying to create their own logistic & inventory infrastructure and thereby increasing its capex, or tie up with local retailers for inventory support, this requires sharing of margins which is already under pressure.
Realizing shrinking margins and continued intense competition leading to pushing the profit further away especially in online; some of these players are expanding their service offering in the areas of diagnostics, laboratories, doctor consultations, etc, pretty much trying to become a single point integrated healthcare provider. Unfortunately, while scale is coming at a cost, barrier to entry is very low these services, and each of the local player has a capability to influence the customer in the area of its presence, and hence pricing pressure will continue.
We now see more Omni channel player instead of early avatar of pure play offline or online retail.

Standalone Pharmacy

In all this, maximum threat is for standalone pharmacies with low volume, with not much bargain power for procurement but at the same time is forced to offer discount to customer, provide home delivery,though not every customer is a discount seeker. Once govt regulation or compliances become necessary, they may find it even harder with or without increasing the cost of operation. Almost all of the offline pharmacy players sooner or later will have to adopt technology if not done already.
Tech-enabled Organized Retail Chains

Slowly but surely small standalone stores will need to become more efficient on their own or become part of the tech-enabled organized chains and get the benefit of backend supply chain integration other benefits that come with the established brand.

That’s where organized offline retail players comes in with chain of stores, owned or franchised. Some of them have been in existence for over a decade with multi state presence and strong supply chain & backend integration. Two of the biggest players own and operate their stores, thereby retain retailer margins. Their speed to scale has been slower than e-pharmacies. To reduce the differentiation and cover up the lost ground in online space, these offline players also started promoting their own online channel with discounts. These organized offline players can leverage their network of physical stores for faster reach & fulfilment in a hub & spoke model.

Currently ~6500 stores account for organized retail chain out of approx. 10L pharmacies in India. These stores got doubled in recent years and will continue to grow at over 30% yoy for next few years. These are mostly split between two dominant players Apollo Pharmacy and Medplus and then there are others with 50 to 200 stores like wellness forever, Noble and EasyMedico among others. Most of them have regional presence.
Shift towards tech-enabled organized retail chain is inevitable. This will also help regulatory compliances.

Supply Chain & Manufacturers
Constantly evolving landscape and GST making India as one market is forcing manufacturers to relook at its supply chain. Manufacturers started treating these retail chains and e-pharmacies as large retailer, very similar to modern trade in FMCG. This is opening the gate for direct purchase at better margins. This was expected to happen sooner or later & is a welcome sign for these retailers.
Tech-enabled organized retail chain is also favourable for the manufacturers as it allows them to get more precise data of drug usage and adherence, redefining marketing strategies and replicating the concept of FMCG modern retail into pharmacy retail

Sentiments
Last two year’s development has led to fast paced investment & M&A activities though mostly in the e-pharmacies channel. However, successful IPO of the major offline player recently and its premium listing on the stock exchange may change or revive investment sentiments for offline organized players. After all, market has rewarded a profit making player, which is a good sign for the industry & the investors.
Will there be a clear winner or maybe there is a room for everyone to co-exist, we are certainly in for the long haul & interesting time ahead!!!

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