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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..