Pharmaceutical Retailing

8/8/2019 Pharmaceutical Retailing

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PHARMACEUTICAL

RETAILING


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RETAILING

MAIN ACTIVITIES INVOLVED IN RETAILING

1. Choosing store location : Three attributes are important to all retaillocations

a. Attractivenessb. Conveniencec. Proximity

2. Sourcing / Buying / Vendor Partnership / Supply Chain Management

3. Achieving efficiencies in retail operationsa. Margin-Turnover positionb. Investment productivityc. Space Productivityd. Employee Productivitye. Average size of transactions


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INTRODUCTION

Pharmaceutical retailing is witnessing a major changein the way a pharmacy is managed

A pharmacist's role involves dispensing of prescribedmedicines, maintaining a drug profile of the patients,providing information about drugs and their usage andlastly monitoring the therapy

Pharma retail that has traditionally not witnessedmuch of competitive pricing owing to a strong tradebody will witness intense competition between theorganised players vying for the market share

Safe drugs at affordable price will become the mantraof success


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Global scenario

In the US and Europe, pharmaceutical retail issignificantly consolidated with fewer pharmaciesserving much larger markets

Drug retailers leveraging scale enjoy higher earnings,invest in building infrastructure and provide a suite ofvalue-added services

A mix of unorganised and organised players to providethe necessary reach and convenience


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In INDIA Indias pharma market is 13th largest in terms of value and 4th

largest in terms of volume in the world

Organized players are 1 % - 3 % of the total market

Currently 8,00,000 medical shops serving the market

The distribution is skewed, with most of these stores set in a

handful of states Maharashtra, Karnataka, Andhra Pradesh &Gujarat

Prevalence of counterfeit drugs is high, with estimates ranging from10% to 30% of the market

Stand-alone medical shops are able to avoid sales tax ; offering fakebills

Chain stores plan to opt for the franchisee route, with an eye onexpanding their pan-India footprint rapidly ; this is likely to hurt thelocal medical shops

International pharmacy chains have still not established a majorpresence in the country, but with the Indian government eager toopen up retailing to FDI, many are expected to enter India


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Characteristics of Indian market

Pharma market is growing at 27% annually

Low entry barriers and capital requirements

Highly lucrative market with high margins(20% and more)

Educated customers who ask questions and

demand answers Government regulation : air conditioning

mandatory for license

High penetration of unorganized sector


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Characteristics of Indian market

Contd..

The drugs are stored in sub-optimal conditions in mostplaces, making the efficacy of the medicinesquestionable

In rural areas, even expired drugs find their way to themarket

Distribution is highly tiered in this industry and it is notpossible to directly procure from the manufacturer yet

Experts like Murlidharan Nair of Ernst & Young say thatthe sector is growing at 15% and will double its size inthe next 5 years

< 5% pharmacies have computerised billing andinventory systems


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Too many cooks have always

spoilt the broth..!

Fragmented state of the industry

Poor earnings, low investment, dissatisfiedcustomers and a protectionist attitude entry

barriers for large and efficient players Lack of regulatory oversight, both in terms of

restrictions on number of outlets in an area andcompliance to set operational standards

lower entry barriers increased proliferationand fragmentation

A pharmacy maintains anywhere between 10,000 15,000 SKUs


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Future of the industry

PHASE I

Boom in organised segments and emergence ofnew formats : entry of several organised players

with multiple formats speciality pharmacy,hospital pharmacy, clinic-cum-path lab pharmacy,wellness centres, as also one-stop-shops for allmedical sciences allopathy, ayurveda,

homeopathy Franchisee models will gain popularity

Entry into rural markets


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Future of the industry Contd..

PHASE II

Consolidation and shakeout phase will set the trend forthe final picture with mergers and acquisitions leaving

behind few serious national players and many regionalplayers to operate in the market

Foreign players joining the fray

Number of standalone pharmacies will

- decrease in urban areas- increase in rural areas


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Future of the industry Contd..

PHASE III

The industry will stabilise with the coexistence

of multiple pharmacy models Organised trade, comprising of a few national

and regional pharmacies, will control a major

part of the market while neighbourhood

pharmacies would continue to live in a limited

way


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Advantages

Economies of scale

Technology driven

Retailing own pharma brands/generic brandsalong with competitors brands

Passing advantages to patients and consumers -with the optimum use of available resources andtechnology, some price

Increase in market share and profits

Discount parameter


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Disadvantages to small retailers

No economies of scale to small medical stores

Small geographic area

No home delivery services

Winding up of medical shops -

notwithstanding the business threats from

large pharma chain stores Losses from expiry of medicines

Discounts can not be offered


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CONCLUSION

Share of organized retail in the total market is

likely to grow many fold from existing 2% in

the coming year

Growth is attracting new players in the market


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Thank you..

Documents

Pharmaceutical Retailing