New Value proposition for hyperlocal delivery of Pharmaceutical Products

Assignment Taken

Detailed Overview of the Business Opportunity and Business Operations

Case Understanding

Our company has a vast reach in India and its looking to venture into hyperlocal delivery segment. The hyperlocal services market size was valued at $1,324.2 billion in 2019, and is estimated to reach $3,634.3 billion by 2027, registering a CAGR of 17.9% from 2021 to 2027. For on-demand delivery business models, smartphones have become a game-changer. The rise of on-demand apps has made our lives easier than ever before, from buying groceries to ordering food, purchasing medicine to renting furniture. Consumers now prefer to have all of their basic needs met at their doorstep in order to save time and relax while waiting for their order to arrive. There is a rising demand for fulfillment of the delivery of this sector and the company can leverage its position and presence to capitalize on this opportunity. The company has identified the use of short distance drones due to low initial investment. The company aims to break even within its first year of operation and hence we need to have a solid customer base with good profit margins to achieve this target.

BCS Solution Summary

Our solution is to create a new model which is based on the convenience of both the traditional and Epharmacy sectors in delivering medicines. The average order number for the medicines is at a healthy level of 20 and combining it with higher margins per order can create a niche model for us.

Solution

Leveraging E-pharmacy Boom:

In 2020, the global e-Pharmacy market was valued at US$ 0.8 billion, with prescription drugs accounting for 68 percent of revenue and over-the-counter (OTC) drugs accounting for 32 percent. In 2020, the Indian E-Pharmacy market had 50 e-pharmacies and accounted for 14% of the total revenue generated by e-pharmacies in the Asia Pacific Region.

Growth Drivers for the E-Pharma Sector of India:

• Unorganized Nature: Traditional pharma retail is highly unorganized, with multiple retailers in multiple locations, posing problems such as the sale of substandard and counterfeit drugs, price wars among retailers, and drug scarcity. The rise of e-pharmacies may help to mitigate this threat by allowing customers to purchase drugs from a well-organized online platform.

• Governmental Support- During difficult times, the Central and State governments noted the significance of e-pharmacies, classifying them as a necessary service and promoting them on the Aarogya Setu App. Pradhan Some of the government's initiatives to boost growth and ease of doing business in the online pharmacy segment include the Mantri Bhartiya Janaushadhi Pariyojana (PMBJP), Digital India, Ayushman Bharat, Startup India, and the National Digital Health Mission (NDHM).

• Value and Convenience- E-pharmacies can help ensure the supply of genuine and authorized drugs (a wide variety of drugs that are safe to consume) at affordable prices (by removing middlemen and offering discounts) with easier accessibility (online platform, home delivery & improved digital payment infrastructure). As a result of the convenience and value they provide, E-Pharmacies are expected to be widely accepted in our country.

• Tremendous Potential Untapped in Tier II and Tier III cities: E-Pharmacies still have a lot of scope for expansion in tier II and III cities, that can be achieved by making huge investments for improvement of logistics channels in these cities.

 

Outlook for E-Pharmacies:

• Scope for Internet Penetration- In India, there is still a lot of scope for internet penetration and it is expected to increase at a CAGR of 8.78% between 2020-25. As a result of this, E-Pharmacies would continue to grow in India, with the gradual increase in internet and mobile phone penetration. Apart from this, constant technological upgradation will continue to support this growth.

• Increasing investments and consolidation activities - This sector is also attracting huge investments from some of the largest conglomerates around the world.

• Increase in medicine spending- Medicine spending in India is expected to grow between 9-12% over the next five years.

The hyperlocal delivery of pharmaceuticals can be the major customer for the company. The rise in the awareness of E-pharmacy products amongst Indians and the overall positive sector outlook can be leveraged to create a niche in this market.

 

Swot Analysis of Epharmacy Product Delivery:

Strength:

1. Stable Demand

2. Low Weight of Product

Weakness:

1. Securing Contract with Epharmacy Companies

2. Intense competition with Traditional Vendors

Opportunities:

1. Positive Sector Outlook

2. Carving a Niche Market

Threats:

1. Traditional Supply Chain of Pharmaceutical

2. Trust Issues for High-end Medicines

Operations Strategy:

The E-pharmacy sector has seen tremendous growth during the last 5 years and it is expected to continue in the next 5 years as well. The sector is now having intense competition rivalry and it is expected to be consolidated over the next few years.

The traditional pharmacy vendors are already seeing a decline in their sales volume thanks to the innovative technological use by Epharmacy companies. The traditional vendors can become the regular customers for a hyperlocal delivery. Their concern of lack of information technology infra sector can be solved by using our company as a facilitator. Our technological advancement can be combined with the brand name and reliability of traditional pharmacy vendors to create a new value offering of immediate delivery and tracking of orders. The orders can be delivered from the central warehouse of the pharmacy vendors to his elderly customers. The order will be generated on our platform and will be fulfilled within 15 min by using our drones. 

India's top four e-pharmacies, including Medlife, Netmeds, 1MG and PharmEasy contributed 90% to online drug sales. The average order value has gone up to Rs 1,200 with customers ordering on average 10 times per year. This statistic can be used to generate a guesstimate of the average order weight for pharma products.

On average the Epharma customers are ordering 10 times per year, but we can assume the average order no as 20 due to the convenience of our model and lower lead time in order fulfilment. Hence the average weight of them will be in the B category of our service. This way we can generate higher revenues per order.

 

Conclusion

By combining the strengths of both the traditional and Epharmacy segments, our model has the potential to create a new value proposition in the market. The model's added strength could be its short lead time and hyperlocal delivery. Due to a lack of technological advancement, traditional Indian pharmacists are already behind their Epharmcy counterparts. Using our model, we can close the value gap.

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