Financial Daily from THE HINDU group of publications
Saturday, May 11, 2002
Industry & Economy - Pharmaceuticals
`Pharma retail chains will replace corner chemists'
MUMBAI, May 10
IMAGINE walking into a one-stop shop for all your healthcare needs. Going by an ORG-Marg study on the emerging scenario of pharma retailing in the country, small chemists are likely to close shop with the emergence of big retail pharma chains promoted by pharma companies themselves, thereby marking the end of unorganised pharma retailing in the country.
Considering that pharma retailing is clubbed with fast-moving consumer goods (FMCG) retailing in most cases, smaller chemists will end up selling just FMCG or OTC products and exiting as pharma stockists in the near future. Pharma retailing will become the prerogative of big retailing chains such as Medicine Shoppe or Apollo, according to an ORG-Marg study titled `Retail Chains the emerging scenario'.
Speaking to Business Line, Mr Gautam Pandya, General Manager, Head of Pharma, ORG-Marg Pvt. Ltd, said, "Pharma retailing would become like discount store retailing whereby the chains would be sourcing directly from pharma companies."
This emerging trend is likely to happen first with pharma companies themselves who are entering the retail business and thereby getting the ready margins to supply the medicines at a discount.
Explains Mr Pandya, "The future trade channel will evolve in such a way that there will be value migration from suppliers to retailers, the reason being the proximity retailers will have with the end customer. As the role of the intermediary diminishes, retailers will become stronger in their negotiating powers than manufacturers and the only way for companies to keep this bargaining power is to enter into retailing themselves."
The retailing study outlines some of the benefits of these retail chains to companies. Due to the co-promotion with the retail chains, there will be increase in sales and a build-up of a long-term relationship with the consumer. There will be efficient supply chain management due to tight inventory control or self-warehousing.
Computerised operations will ensure efficient flow of information. Besides due to the centralised purchases and back-end support, there is a rare chance of spurious medicines trickling down to the shelves.
As for the retailers themselves, due to the computerised operations there will be less or negligible loss due to expiry and stock outs. The promotion and advertising will be taken care of by a master franchise. The value-added services from the companies in the form of free camps would help in building a loyal customer base. Due to the back-end support provided by the master franchisee controlled inventory, there would be better margins and therefore more profits.
The customers would benefit by getting medicines below the maximum retail price. There would be routine check-up and advice at free-of-cost to the participating companies. There would be maintenance of patients' profile and database to give expert advice and helping patient compliance and management thus leading to long-term loyalty.
According to the study, the consolidation in drug distribution in India is in a formative stage but corporatisation of the retail trade has already begun.
This will lead to elimination of at least one layer of distributors and the customers would thus benefit from the margins saved. The retail landscape will change from the dominating small chemists to organised retailers with a few national and international chains.
Adds Mr Pandya, "Organised pharma retailing will emerge as a Rs 10,000-crore business in the next 4-5 years."
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