From FY 18 to FY 21 Indian E-Pharma sector grew at a CAGR of 85.64%

In FY 21, the Indian pharma industry was sized at USD 46.8 billion. Retail consumption comprised USD 22.4 billion while the remaining were exports. Meanwhile, Indian online pharma retail reached USD 564.9 million in FY 21, growing at a CAGR of 85.64% in the past 3 years.

Indian e-pharma sector is still relatively small when compared to other developed markets like USA and Europe, where it is a vital part of the healthcare ecosystem.

However, despite the small size, e-pharma has tremendous potential to grow like other categories such as food, grocery, fashion apparel, etc. Increasingly Indians are understanding how convenient it is to order drugs online and get them delivered at their doorsteps.

Online sales of drugs and medicines also got a shot in the arm during the two iterations of lockdown. During the lockdown period, millions of Indian households relied on e-pharma platforms for their healthcare needs. The rise in chronic diseases such as hypertension and diabetes, which require regular medication is also fuelling growth in the sector.

Key Trends in Indian E-Pharma Retail

Despite its initial phases, competition in E-Pharma is intensifying. There are around ~ 25 start-ups and enterprises working in the segment. Major e-pharma platforms include Netmeds, 1 MG, Medlife, Pharmeasy, Sasta Sundar, etc. Medicine supplies form ~ 80-85% of the revenue for most of the e-pharma companies. However, these start-ups are also moving up the value chain to complementary segments such as e-consultation, diagnostics, etc.

Lured by its potential, major retail powerhouses in India are venturing into the segment. Horizontal e-commerce giants Amazon and Flipkart have entered the e-pharma space. Meanwhile, Reliance & Tata has acquired major stakes in Netmeds and 1 MG respectively.

India has around 850,000 pharma retail shops alongside 40,000 distributers. An extensive retail network coupled with a rise in consumer internet makes India a prolific ground for the omnichannel distribution of pharma products. Large medical chains such as Apollo are also realizing the potential of e-pharmacy and have entered the segment through Apollo247 and Apollopharmacy.in. Around 40-45% of Apollo’s revenue comes from the pharmacy and going forward online sales will be one of the major growth drivers, complementing its ~ 3,700 retail units.

Like other e-commerce categories, most of the pharma companies are reeling under the pressure of losses and cash burn due to high discounts, incremental investments in warehousing & logistics, and other overheads such as marketing and IT spending.

Key Investments, M&A, and Tie-Ups

Reliance has acquired 60% stake in Vitalic, the parent company of Netmeds, following an investment of ~ USD 80 million. This will enrich Reliance Retail alongside enhancing the bandwidth of Jio Mart, Reliance’s retail’s digital consumer platform. Meanwhile, Tata, which is also building a robust & far-reaching digital ecosystem has acquired stake in 1 MG.

Flipkart has bought a majority stake in Sasta Sundar to foray into the growing e-health category. The new entity will be called Flipkart Health+. Likewise, Amazon has started medicine delivery in Bangalore and may scale up in near future.

While big giants like Amazon, Tata, and Reliance are raising their stake in the promising segment, incumbent players Pharmeasy and Medlife has declared merger. Post-merger, Medlife will be fully integrated into the Pharmeasy platform. Pharmeasy has also acquired a 66% stake in Thyrocare, a leading diagnostic chain in India. The company is eyeing IPO (when the analysis was written).

India’s one of the earliest health tech enterprises Practo, which is backed by coveted investors such as Sequoia Capital, Google Capital, Matrix Partners, is also active in the home delivery of medicine. Though, Practo’s main source of revenue includes online consultation and diagnostics alongside software solutions.

The Way Forward

Like other consumer internet categories, India’s e-pharma market is on an upswing. Increased investor interest, evolving digital and payment ecosystem, rise in per capita income, growth in insurance coverage, etc are some of the key growth enablers. The government has also launched a new regulatory framework for e-pharma companies.

Growth in digital footprint is also a positive sign for the pharma industry in general, which is marred by low margins, poor inventory management, limited SKUs in retail stores, counterfeit drugs, etc.

E-pharmacies source directly from producers and enjoy better margins (Close to 30% in the case of e-pharma, while traditional retail gets 18-20%.) In online pharma, as records are stored digitally, it can fight the menace of counterfeit drugs. They will also result in increased accessibility and convenience, as one can order and get their medicines delivered with the aid of a few simple clicks. As products are directly ordered from the platform, the challenge of limited SKUs can be systematically dismantled in the case of e-pharma.

Presently cash burn is high like other e-commerce companies, primarily due to large discounts (Close to 35%) and increased logistic costs. However, following wide-scale behavioral changes and growth in market share, the rate of discounts will be optimized, making the business more profitable. Similarly, enterprises will learn to effectively manage their inventory and rationalize their logistics costs, which is currently eating away their margins. This will further enable the industry to become profitable in the mid-run.

Schedule a Consultation Today

Back To Industries