The ePharmacy Business Model and Revenue Streams

How did the ePharmacy boom begin?

With India currently going through a major shift with the growing number of people suffering from chronic diseases, patients are usually required to take their medicines long-term. However, they end up not taking their medicines as prescribed. With busy lives, health often takes second place. People struggle to find the time to visit the chemist or even if they do, it becomes frustrating when they do not find the medicines they want.

As a result of this struggle, people have started to turn to the internet to find a solution. A dominant search of the term ‘buy medicines online’ on Google Trends shows that India tops the list as compared to any other country in the world.

Getting proper access to healthcare has always been a problem, and with the increasing demands on their lifestyle, getting quality and timely access to healthcare is the need of the hour. Enter – ePharmacy!

Business Model:

While e-commerce isn’t new, e-pharmacy is definitely the newcomer. The business model of an online pharmacy store focuses on making the consumer’s life much easier by saving both time and money.

The online pharmacy store offers the consumer a variety of medicines against a prescription provided to the customer by a registered medical practitioner. The consumer can also purchase OTC (over-the-counter) medicines which do not require a prescription.

  • Key Stakeholders
  • Value proposition for the customer:
    • A convenient and easy way to buy medicines
    • Cheaper medicines as compared to the medical stores
    • Medicines delivered to the door step
    • Discounts and cashback on medicines
  • Business Model Process Flow:

Basic Revenue Streams:

Sponsored Listing:

EPharmacy platforms often add a featured section where they display sponsored results from pharmaceutical companies. This can be found on the homepage or even the search results.

For example, 1mg shows its featured brands when you scroll down on the landing page.

Source: 1mg.com

Advertisements:

Online advertisements are a big source of revenue for such stores. Advertisers can be from different sectors – Diagnostic Centres, eWallet companies, Telecom companies, pharmaceutical companies, insurance companies.

An interesting recent example is of PharmEasy who recently held an online contest for the Movie 102 Not Out to give consumers a chance to win movie tickets and a chance to meet the actors.

Source: PharmEasy

Commissions from the sale from drugs and health equipment:

This is the most popular and guaranteed revenue generation method followed by most of the e-commerce portals. The model is very simple – the pharma company sells and the patient buys, and the epharmacy platform makes money out this transaction. Wondering how?

The epharmacy owner predefines a percentage (commission) that is to be charged on each product which is sold on the epharmacy website by various sellers (pharmaceutical companies). This percentage (commission) can be set keeping in the view the market scenario and of course your business goals.

If the ePharmacy player sources the medicines directly from the pharmaceutical company, it is able to skip the steps in the pharmaceutical supply chain – the CFA, the distributor and the retailer. Each of these steps charge their own price margin which adds to the final price of the product that the patient pays. By skipping these steps, the ePharmacy is able to offer medicines at a discount to the patient and also earn a sizable commission from the sale. 

The broad ecommerce space is saturated as different companies try to implement new online business ideas. But the same is not true in the case of an online pharmacy store as it enjoys relatively less competition and has a high demand. The ePharmacy market is currently estimated to be 1000cr which is only 1% of the traditional pharma retail market and is expected to grow up to 10-15% over the next 10 years. (Source: DNA India)  

Now that we have set the stage for the ePharmacy landscape, in my next article, I will discuss how different ePharmacy players are ensuring that consumers return to their website and purchase from them regularly.

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