As COVID-19 engulfed the world, the need for medical services and medicines went through a sea change. On one hand, the world was grappling with the immediate need for COVID-related health infrastructure, while on the other, there was a dip in the demand for services and medicines for common ailments. As lockdowns and threat of COVID19 infection kept most indoors, consumers/people across India turned towards online deliveries of almost all necessities—groceries and electronics to medicines.
While the pandemic has lent a sudden push to the e-pharmacies business in India, several other factors have already been setting stage for industry growth.
- Increasing internet penetration: At a CAGR of 18.17% between 2015 and 2019. The no. of internet users is expected to increase at a CAGR of 8.78% in 2020-25. Rising internet penetration will directly boost the e-commerce business in the country.
- Changing consumer preferences: While consumers were already inching towards e-commerce, the pandemic has spurred adoption. According to a Razorpay survey, e-commerce transactions increased by 71.3% between April and September 2020. Also, in 2020, Tier III markets have recorded a 53% YoY growth in e-commerce adoption.
- Government initiatives: Programmes such as Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) are bolstering growth in the sector by enlarging the canvas of the pharmaceutical market. The programme aims to ensure availability of quality and affordable medicines across the country.
In May 2019, a leading consulting firm predicted the Indian e-pharma market to grow >7 times between 2019 and 2023—expected to reach US$ 2.7 billion (Rs. ~199 billion) by 2023, from US$ 360 million (Rs. 26.5 billion), at a staggering CAGR of 65.5%.
“Today, India is adapting to e-commerce rapidly with mobile-first consumer behavior and improving digital payments infrastructure; online pharmacies, one of the verticals of e-commerce, are starting to gain momentum and have tremendous growth potential. The e-pharmacy market is expected to grow at a significant pace in the next four years on the back of renewed focus of the government and households on healthcare spending and faster adoption of the Internet among users. It will not only create value for customers, but also generate a host of B2B opportunities going forward.” – Ankur Pahwa, Partner and National Leader – E-Commerce and Consumer Internet, EY India
Despite surge during the pandemic, the domestic e-pharmacy market is still in its infancy and offers significant growth potential. The market has a few established players such as Netmeds, EasyMedico and Medlife. Additionally, start-ups including 1mg, Practo and Myra have been growing rapidly. Even established traditional pharmacy chains such as Apollo Pharmacy have started online ventures with Appolopharmacy.in and Apollo247. The e-pharmacy market potential has even attracted global giants and conglomerates such as Amazon and Reliance Industries. In August 2020, Amazon launched its e-pharmacy operations in the country. At the same time, Reliance Retail acquired a majority stake in the existing market player Netmeds.
To tackle the fierce contribution, most players are offering discounts, loyalty programmes and cashbacks to lure customers. For example, 1mg offers 1mgCash as loyalty points, which can be used by customers for future purchases. Netmeds also offers reward points on every purchase, which can be redeemed as cash for future purchases. Additionally, existing e-pharmacies are also looking at consolidation to combat the swelling competition, e.g., PharmEasy and Medlife announced a merger in August 2020.
Despite positive outlook, industry players will have to work towards overcoming a wide range of challenges including the following:
- Lack of trust: The Indian e-pharmacy market is still in its infancy and customers still fear receiving counterfeit medicines. Most players provide FAQs and have media campaigns to establish authenticity of the medicines.
- Limited customer support: Currently, concerns over lack of timely delivery and issue redressals also plague the market. While most players offer voice-based customer support, technology is expected to play a key role in overcoming challenges. Chatbots, self-help systems and faster payment/refund processing will be tech-based success enablers for the industry.
- Limited presence in regional languages: Currently, most e-pharmacies provide user interfaces and support systems only in English. As India is a multilingual society, companies will have to offer capabilities in native languages to customers for deeper penetration through apps, customer support and payment systems
- Access to Tier II and III cities/towns: E-pharmacies will have to establish logistics channels to reach customers in remote cities & towns and achieve the significant growth potential. The country is already witnessing a surge in logistics investments to support the e-commerce boom. E-pharmacies must tap on the rising logistics bandwidth
- Data privacy issues: With rise in the e-pharmacy industry, consumer concerns around health records and prescriptions are also expected to go up. Market players will have to take stringent measures to ensure data privacy of customers
E-pharmacies in the country will have to go a long way to acquire customers. Available options to boost penetration and customer retention include customised solutions—one-time order with repeat deliveries at regular intervals for chronic-ailment patients; creating awareness about the benefits of e-pharmacies by enhancing reach in regional languages; stricter time-bound delivery infrastructure to ensure medicines reach customers at the right time; collaborations with hospital chains and standalone clinics for connected medicine deliveries; and finally, campaigns towards boosting trust among customers, especially in Tier II and III cities.
The e-pharmacy industry is slated to eat into the market share of traditional brick & mortar competitors. With potential and growth opportunities, the industry will continue to attract investments from new and established players. As laws governing the e-pharmacy market are already in the works with the Union Health Ministry, the industry is expected to get the much-needed legal cushion to operate and flourish in the country.