Insightful solution to the case of Online Pharma Industry in India as a part of Master Solver Competition Organised by Grail Research.

2. Drivers/Challenges
First Year Impact
Revenues at Risk
Executive Summary
Market Estimation
CONTENTS

3. In 2013, Asia-Pacific emerged as the strongest business to consumer e-Commerce region in the world with sales of around 567.3 billion USD, and a growth of over 45% in 2012. India
in particular had had e-Commerce sales of 10.7 billion USD.[1 ]
This presentation analyses the current scenario of Indian Pharmaceutical companies, potential for the online presence of pharmaceuticals, factors causing
the population to adopt the services of an online pharmacy, risks involved, and the probable effect on the existing retail pharmacists if the online
pharmaceutical company strives for an year. Revenues at risk have also been addressed.
While India ranks tenth globally in terms of value, it is third in terms of volume[2]. Indian ecommerce sector has grown by 34% since 2009 to touch 16.4 billion USD in 2014. The sector
was predicted to be in the range of 22 billion USD in 2015.[1] An increase in the use of smartphones, tablets, internet and 3G has also contributed in the same.
70-80% of the retail market is comprised of branded generics. Local players have enjoyed a dominant position owing to the formulation developmental capabilities and early
investments.[2] The price levels are low in lieu of the intense competition in the market.
The market is undergoing a period of flux, as illustrated by manifold increase in public healthcare spending, rising patient awareness, emergence of new hospital formats etc. industry
structure in pharmaceuticals has also changed considerably. In fact, traditional sources of growth are making room for newer ones. Pricing control and an economic slowdown in the
future can significantly depress the market.
According to FICCI’s spokesperson, “Presently, online pharmacy is at its nascent stage in India, but like other categories, it has the potential to be a very large industry segment. It is
expected that the online pharmacy model could account for five to 15 per cent of the total pharma sales in India, largely by enhancing adherence and access to the medicines for a lot
of the under-served population.” [3]
With market diversity on a rise, coupled with various growth drivers like improvement in GDP, the upcoming 7th pay commission in 2016 increasing the affordability of drugs, and
majorly the mammoth benefits offered so as to encourage contribution to the digital India campaign puts you in a very opportune position to enter the market. At the same time, it is
advisable to focus on a particular segment of population to gain a good head start as is explained in the upcoming slides.
Rising E commerce
Growth Potential
Characteristics
Potential Risks
PURPOSE EXECUTIVE SUMMARY
Experts Speak
Opportunity

4. 0
500
1000
1500
2000
2500
3000
RS BN
Year-wise Pharmaceutical Sale, offline (₹ Billion)
1990-91 1991-92 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
2010-11 2011-12 2012-13 2013-14 2014-15 2019-20
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
No. users
No. of Internet Users In India(Yearwise)
2015* 2014 2013 2012 2011 2010
2009 2008 2007 2006 2005 2004
 Current Pharma Market (Online + Retail Stores)[11] = ₹ 1780 Bn
 Total internet users = 332,606,546 = 333 million [12]
 Digital Buyer Penetration = 26%
 Hence, the number of Digital Buyers = [(332,606,546)*(26)]/100
D = 8,647,770,1.96 = 86.5 million
Digital Buyers Estimation
 Per Indian average Health cost(Urban),2014= ₹ 400 Pm [13]
 Per Indian average Health cost(Rural) ,2014= ₹ 120 Pm [13]
 Assuming ₹15 rise owing to GDP Increase
(World Bank Bank Report[7]).
 Per Indian avg. Health cost 2015= Urban(₹ 415 pm)
Rural(₹ 135 pm)
Health Cost Estimation
 Assuming approx. 50% health cost is spent on Pharmaceuticals
 % Rural People = 73% || % Urban People = 27%
 Urban: U’=415/2= ₹ 207.5 pm || Rural: R’= 135/2= ₹ 67.5 pm
 Assuming Current Population = P
 Hence ,total expenditure on Pharma per year by an Indian== ₹ [ {[(207.5*0.27) +
(67.5*0.73)]*P}/P ] * 12 H =₹ 105.3*12 =₹ 1263.6
 Total Market Size = Total Pharma cost per person * Total estimated Digital Buyers (H*D)
= 1263.6 * 86.5 Million == 109301.4 Million == ₹ 109.3 Billion
Online Pharma Market Estimation
0
5
10
15
20
25
30
35
digital buyer penetration %
2013 2014 2105 2016 2017 2018
TOTAL MARKET ESTIMATION

5. MAJOR COMPETITORS IN THE MARKET
Retail Market
The main competition is with the local pharmacists clogging the market
and providing a major advantage of immediacy to the customers.
Moreover, a big issue of trust also exists, wherein, people prefer to buy
from traditional sources rather than trusting a newbie online platform.
Major Online Players
 There are certain trends in the industry which has led to the
emergence of Online Healthcare Products Market in India. For years,
the local pharmacies and nearby healthcare product shops have
been supplying the products to the local customers, and have
attained higher degree of trust and bond with them.
 The customers treat these shops as their family pharmacies, and
sought to pay whatever price is asked. This trend was initially
changed among the customers with the emergence of pharmacy
retail chains like Med-Plus, Apollo Pharmacies and Global Health-line,
where customers can find wide range of products under a single roof
with a less price range and high discounts. [16]
India is the world's third largest pharmaceutical industry in terms of
volume and world's 13th largest pharmaceutical industry by value. The
top 8 to 10 companies including Sun Pharma, Lupin, Dr. Reddy’s Labs
and Cipla occupy 70 to 80 percent of the Indian pharmaceutical market
space. [15]
Major Pharma Companies in India
 The total revenue generated by the online sales of Healthcare
products in India was ₹5,075.9 million in FY’2015 which has
increased from ₹771.0 million in FY’2012 at a CAGR of 87.4 during
the period FY’2012-FY’2015.
 The Online healthcare products market has showcased a remarkable
growth during the span of last five years on the grounds of
expansion in product range as well as surge in online market places.
In line with the Industry revenues, the average order size has also
widely enhanced which has been registered at ₹1,762.0 during
FY’2015.
 India’s online healthcare products market is at a very nascent stage
and is growing year on year as people have switched their
preferences towards shopping online.
 The major players are in a race to increase their share in the
industry by implementing various marketing initiatives, technology
advancements, switching to different business models and others.
 Health-kart is the leading player in the industry which has
commanded a promising market share of worth ~% during FY’2015
in terms of GMV. [16]
Understanding the current retail and online Healthcare trends can help
you evaluate your opportunities.
SIGNIFICANT TRENDS IN MARKET

6. 1. Retailing Laws in India: A major drawback is the non cooperative laws governing e-
Retailing and e-Pharmacy. Indian Laws related to pharmacies were written prior to arrival
computers, let alone internet. India doesn’t have any concrete laws defined for
Ecommerce Companies. The only laws related to internet in India are defined under
Information Technology Act, 2000.[10]
2. Payments & Transactions : Issues related to security, privacy breach and controlling
fictitious transactions may crop up in time. Further, RBI restrictions for prepaid instruments
or e-Wallets act as hindrances. [1]
3. Time Taken to complete order: Immediacy is a big factor that can deter the growth of your
company’s user base. People usually need medicine at a very short notice. And most
doctors and hospitals are surrounded by multiple pharmacies. So people prefer buying
from the nearest store rather than wait a day or two for an order placed online to arrive.
4. Customer & Digital Experience: You will need to provide an innovative yet simple
customer experience; manage inconsistent brand experience across platforms; manage
proliferation of technologies; and handle time-to-market pressure for new applications. It
would be very helpful if you could create a mobile app to attract more customers.
DRIVERS & CHALLENGES
1. Increase in Internet Penetration[4] : India features at 3RD spot among the top 5
countries with maximum internet users. Only 19% Indians use the internet, showing the
immense potential of the market as internet penetration (mobiles as well as wired
internet) increases further.
2. Huge Growth Potential[5] : Pharmaceutical companies in India are growing at a
rate of 45 billion USD, registering a further growth of 8-9%. The Indian Pharmaceutical
industry is expected to grow at 202 compound annual growth rate over the next five
years, which is why this is the apt time to invest in such a venture
3. Urbanization coupled with Increase in customer satisfaction: Around 60-70% of time
of an individual in urban India is taken up by sleep, in the office, and commuting to
work. Paucity of time for shopping at regular stores and convenience of online shopping
is expected to continue driving sales. When the customers in India were asked to specify
their favorite shopping channel through which they purchased something, 74% people
cited online shopping via PC as their choice. This points to the changing trends in the
country and is proof that the Indian customer is opening up to the online market.
4. Projected increase in GDP & Effect of 7th Pay Commission : India’s GDP is set to
increase in the near future as has been estimated by the world bank[7]. Also, the 7th pay
commission that will be passed in 2016 will increase the average salaries and hence
people will be able to spend less meagerly on their health needs.
5. Digital India Campaign: The Digital India initiative is a dream project of the
Government to transform India into a digitally empowered society and knowledge
economy. According to analysts, the Digital India plan could boost GDP up to $1 trillion
by 2025[8]. This campaign along with the penetration of mobile devices may be highly
useful as a tool for your company to connect to a larger population. Because of this
campaign, the internet users will eventually increase even in the rural areas.
5.1
6.9 7.3 7.5 7.9 8
2012 2013 2014 2015 2016 2017
GDP
GDP
0 20 40 60 80
In-Store
Catalogue/Magazine
TV Shopping
Online via PC
Percentage
Percentage

7. Market= ₹170
Billion
Total Online
Pharma
Market,2016=
P*D
Pharma cost
(p)= 0.5* B=
₹1398
Avg. Indian’s
Health Budget
(B) in 2016=
₹2796
Digital Buyer
Penetration(D)
= 27% * U=
121,500,000
Total Internet
users = 450
Million
(U)
Total Pharma
Market in
2016= ₹1910
Billion
IMPACTS
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
Pharma Market
Online Pharmacy's Impcat on Retailers
2014 2015 2016 2016 after Online sale
Down by ₹170 Bn
Revenues at Risk
We compute the Revenues at Risk, i.e., cost of customers and cost of poor service
in the following manner:
Research shows that there is typically a 25% drop in loyalty amongst customers
who experience problems. Research also shows that as many as 35 - 50% of a
company’s customers may be experiencing problems - even though only as few as
5% may actually complain to an organization’s complaints department.[17]
CALCULATIONS:
Revenues at Risk= 25% of Total Potential Market.
= 0.25 * 109.3 billion = ₹ 27.3 billion
Conclusion
The graph on the left depicts the effect of the presence of your pharmacy on the
current operational retail sellers. The predictions of 2016 are also presented above.
In time, a major share of the retailers market shall be taken by the online
pharmacy.

8. 1. E-Commerce in India: Accelerating Growth – a report by pwc
2. India Pharma 2020 : Propelling access and acceptance, realizing true potential.
3. http://www.financialexpress.com/article/pharma/management-pharma/online-pharmacies-revolution-in-the-making/128881/
4. Internet Live stats website
5. A brief report on pharmaceutical industry In india – July 2015
6. Total retail 2015: Retailers and the age of disruption – a report by pwc
7. Global economy prospects by World Bank
8. http://economictimes.indiatimes.com/industry/telecom/digital-india-plan-couldboost-gdp-up-to-1-trillion-by-2025-mckinsey/articleshow/45536177.cms
9. E- retailing laws and regulation in india: a critical analysis 1Deepa Shrivastava 2Dr. Vishal Sharma 3Reetu Trivedi
10. BookMeds.com insight by Mohammed Abubakr
11. IndiaStat.com
12. Internetlivestat.com
13. Internetlivestats.com in association with Internet and Mobile Association of India, International Telecom Union and World Bank.
14. Around 73 per cent of households in India are rural, according to the Socio Economic and Caste Census (SECC) data released by the government on july,
2015
15. http://business.mapsofindia.com/india-company/pharmaceutical.html
16. http://www.news.kenresearch.com/post/122842299523/india-online-healthcare-products-market
17. http://ctmaworld.com/Tools-RAR.htm
REFERENCES

9. grail research
Thank you
Bharat Thakur
EEE
UIET, Panjab University