Good demand from consumers but low compliance acceptability
As an online medicine order aggregator, Pharmeasy has had massive acceptability. However, the stringent norms around prescription that the aggregator follows at some levels were unaccepted. Dhaval Shah, co-founder, discusses his approach and learning with
What has been the major hindrance to your business model?
Demand and acceptability are not an issue. But our 'no compromise' policy and strict compliance part that we follow has been somewhat of a constraint to our growth. The way we process a prescription --compared to the brickand-mortar chemist fraternity who may not even ask for one in the first place – is really stringent. We honour the official stipulations.
The content of the prescription, format, doctor credentials etc are among the 7-8 compliance requirements. This in the beginning led to a situation if there were 100 requests we received on our site or app, we were rejecting 75. However with time and education, this has come down to around 35-38. People were unaware that a prescription is needed and they had no idea of the need for a valid format. With awareness improving, we saw a 10 per cent drop in rejections. The lack of tech-savviness was also a hindrance, for which we installed a helpline to raise the awareness. This step raised the level of acceptable prescriptions by another 10-15 per cent.
Our system currently gives a unique ID code to a person linked to a mobile number and an email address. Today we have a registered user base of around 6.5 lakh, with 10 lakh downloads of our mobile app. Our data-backed experience is that one person generally orders for 34 different patients.
Our analytics shows that 80 per cent of our clients are chronic patients, where medication is time-bound and regular rather than an urgent requirement. They appreciate the discount and delivery value proposition that we offer. We offer refill reminders for specific illnesses, which is an appreciated feature. About 70 per cent users have a stickiness of more than 12 months.
Can you elaborate on your current business coverage?
Today, we have coverage of ten cities – Mumbai (the MMR area), Pune, Delhi, Bangalore, Kolkata, Howrah, Delhi (the NCR area), Pune, Jaipur and Ahmedabad (where we cover Rajkot and Surat). Our delivery fleet of 600-700 persons are based on contract. Beyond that, today we are covering a good part of Gujarat and Bengal through courier tie-ups.
Our fleet a year back, covering four cities, was just 100. Delivery is an important part of our business. We invest in fleet training in-house as well as incentive-based pay systems. We also have a milk-run type of routine and a background check (including police check) prior to recruitment. Each individual has a dedicated vehicle and mobile. Our pay system includes a minor deduction and the vehicle/mobile handed over to the person as his own at the end of two years. We place great emphasis on the delivery fleet. Incidentally, we aim to be asset-light ourselves in every way, down to not investing in the office furniture.
Can you give your perspective of the markets and your plans?
We understand that pharma spend in India today is around USD 13-14 billion where online has a market share of perhaps 0.5 per cent. This share should go to 5 per cent in the next 3-4 years in a market which itself is growing at 10-12 per cent annually. That means a 15 times growth opportunity. As of now we are 50 per cent of the online market space and if we can maintain that for next 3-4 years we will be highly satisfied. If you talk profitability, we are moving to that in Mumbai.
How do you get the chemists on your side, given that they see you as direct competition which eats away market share?
There were three structural points based on which we deal with chemists. Firstly, we associate with the local, mom-andpop shops, not the organised corporate chains. Secondly, we insisted on around 20 checklist items which meant that some stores had to get into computerisation, non-manual billing, increase the items in stock and so on. With all that, they could get access to potential area of business and increase sales irrespective of their own location, which was our third structural point.
Given our database of orders, we can actually predict area requirements for the next 3-4 months with the key items, the volumes and further break-down into activity levels stretching to system and manpower requirements, and stores can plan accordingly. Some stores with daily sales of Rs 2 lakh or so have reported a 10 times growth after associating with us. Today, we have tie-ups with around 200 stores, including 50-55 in Mumbai and 30-35 in Delhi as primary activity areas.
Our annual throughput today is around Rs 250 crore and when 20 per cent discount is added (that we give customers), it translates into nearly Rs 350 crore equivalent at the store level. If that is distributed across 200 outlets as an add-on, it means good business and makes for a pretty solid argument to partner with us.
What is your role in diagnostics?
We have a fleet of around 100 DMLT (Diploma in Medical Lab Technology) / BMLT (Bachelor in Medical Lab Technology) certified people who offer home-based diagnostics presently across five cities and deliver it to testing centres. This service is being utilised by around 5 per cent of our current 25 lakh patient base, which is around 1.2 lakh diagnostics cases.
How you create relationships with doctors?
Doctors initially were not very appreciative of our stringent standards and efforts to drop rejection. However, we have a system where the client gets free tele-consultation (around 50-100 daily) and we pay the doctor. If a doctor were to give three hours of consultation for 20 days, wherein he could manage 30 cases, it is worth Rs.50, 000 a month to him.
The tele-consultations are also a key in our plan to drop rejection rates. We plan to reach a 15-17 per cent level in two months from now.