… consumers to benefit but rivals face higher customer acquisition cost
The move by Apollo Hospitals Enterprises, the country’s largest health care company, to create India’s biggest omnichannel digital health platform is likely to fuel more consolidation in the sector, apart from bringing down prices for the consumer.
The longer-term trend, say analysts, will be to have two to three large players in the space, while in the short to medium term, it will push both online and offline health care services companies to develop an omni-channel presence or get acquired by a bigger fish.
It is also likely to make the customer acquisition cost of players like 1mg or Pharmeasy more expensive.
Apollo will merge its online and offline pharmacy businesses (excluding hospital pharmacies) and telemedicine verticals into a single entity called Apollo Healthco.
Suneeta Reddy, managing director of Apollo Hospitals, said in a television interview Apollo Hospitals would continue to hold 80 per cent in Apollo Healthco with new investors coming in.
This renewed focus, and plans for fund-raising, are likely to make the task of capturing market share more daunting for the existing digital health players.
As Reddy put it, this is done to move closer to the consumer. The group has a strong presence in the digital health space — Apollo 24/7 already does teleconsultancy with doctors, delivers medicines home, and helps get a diagnostic test done.
In fact, 5,000 doctor consultations happen daily on Apollo’s digital platform, and the group has touched 270 million people through the omni-channel approach in the last 500 days.
Apollo 24/7 now aims to have 100 million registered users in five years, which is a huge data bank, point out analysts.
Telehealth will act as a feeder to both the pharmacy and hospital businesses.
Ashraf Biran, director, Wellness Forever, an organised offline pharmacy network in western India (250 stores), said businesses would have to move towards an omni-channel approach.
Wellness Forever, for example, has online pharmacy too. It is now gearing up to offer diagnostics and ambulance service too through its mobile app.
Biran said the sector was in for more consolidation. Wellness Forever is open for partnerships, stake sale, or even being acquired if the valuations are right, he added.
India’s e-health sector reached about $1.4 billion GMV in 2020. Seeing the sentiment in the market, it is expected to grow around 10 times over the period of CY20-25. The industry is expected to grow its GMV by $11-15 billion by CY25, according to a Redseer report.
The sector is underpenetrated in the country and the pie is too large for a single company to eat. The entry of multiple players such as Apollo, Tata, Reliance and Amazon is a validation for the large market opportunity that exists in the digital health care system as the needs of the consumer are evolving, especially after the pandemic.
Earlier this month, while Tata Digital, a 100 per cent subsidiary of Tata Sons, acquired 60 per cent in 1mg in a deal size valued at $270 million.
Mukesh Ambani-led Reliance Industries had last year acquired 60 per cent in online pharmacy Netmeds for ~620 crore.
Epharmacy unicorn Pharmeasy had in May acquired Medlife for an undisclosed amount, claiming to make Pharmeasy the largest player in the domestic online pharmacy sector, as the combined entity will serve around two million customers a month. It’s cofounder Dharmil Sheth declined to comment on how the creation of the largest omni-channel health care platform by Apollo impacted Pharmeasy.
“This move by Apollo may affect the customer acquisition cost of players such as 1mg and Pharmeasy in the short term as it may now become a little more expensive for start-ups to acquire new customers,” said Arpit Agarwal, director, Blume Ventures.
The online pharmacy segment currently forms only 3 per cent of the overall pharmacy market.
“New players coming in do not affect existing operators as the online pharmacy market is in a nascent stage, so there’s not going to be any kind of cannibalisation,” said Rehan Yar Khan, managing partner, Orios Venture Partners, an early investor in Pharmeasy.
While people in large metros have ready access to essential and critical medicines, it is still a challenge in cities beyond the metros and the rising awareness, rising internet penetration and improved logistics are creating a massive demand for epharmacies in even the remotest towns.
“Pure-play e-pharmacy start-ups are ensuring that they fulfil the massive demand but are faced with challenges such as lack of trust among consumers. However, the entry of large traditional pharma and hospital chains such as Apollo will bring in more transparency and trust,” said Anuj Golecha, co-founder, Venture Catalysts.