With internet access rapidly increasing, and consumers around the world increasingly going digital, this global technology penetration is also gradually changing the landscape on the pharmaceutical market. What are the current trends in pharmaceutical e-commerce? What does the business of selling medicines online look like and feel like today?
The most important trend we have to highlight at the outset is the wide penetration of technology, which is also crucial for this market’s development. Any interested player needs to have the resources to quickly implement new channels and new features. The availability of IT resources, as well as the technological strength of the systems they use often determine how fast market participants can join new platforms.
This year, for example, Magnit inaugurated a new e-commerce platform, Magnit Market. The faster market players react to the news and the better resources they have, the faster the new platform will be filled with vendors.
The next trend that is clearly present in e-pharma is collaborations. Everyone is collaborating with everyone: online pharmacies are collaborating with distributors, creating an endless aisle; both pharmacy chains and distributors are collaborating with marketplaces for delivery as well as customer pickup. And when we say delivery, that includes delivery by the marketplace, self-delivery, or a combination of both.
The third trend refers to maximum monetization of traffic. In e-com, one absolutely has to work with everyone. If a pharmacy chain does not work with a major player in this business, if it is not present on marketplaces, if it does not work with major online pharma marketplaces, it will not get enough traffic that can be monetized.
Another trend of today is the so-called endless aisle. The idea behind this is that customers can access and purchase from the pharmacy’s full inventory listed on the website, including items out of stock or in short supply. When a customer switches on endless aisle, they can basket an out-of-stock drug in required quantity to be delivered the next day. The online store can thus boost the quality of service and expand the available variety of products without actually stocking up on them but only purchasing specific items upon request.
In general, as e-commerce evolves in the pharmaceutical industry, the market consequently becomes divided: distributors focus on a broad variety and best rate offers while online drug stores have taken the express delivery niche.
As for user experience trends, we are getting accustomed to the fact that versatile stores have everything you may think of. This means that, even if we do not become allegiant, we at least stick with one specific aggregator and start filling the basket with everything we need in one place rather than searching outside this marketplace. This is an important trend because aggregators account for 40% of all search queries. If a niche is absent from a marketplace, this means lost profit.
Challenges of pharmaceutical e-commerce
With all the benefits of online pharmaceutical sales, there are certain negative trends that should be taken into account. Mainly, these include price dumping by certain market players when they try to win over the market, sometimes at a loss. Customers are very sensitive to the price of medication and these market players take advantage of it.
Market participants also must realize that giants like OZON and Yandex have already entered the pharmaceutical segment. As these corporations own warehouses licensed to store pharmaceutical products, we are most likely to see prescription drugs and drugs that require special storage conditions separated from so-called mass market medications. Marketplaces will not be able to compete in selling prescription drugs, but they will inevitably win over a share of the mass market.
When it comes to quickly supplying medication to regions to the east of Yekaterinburg, their pharmaceutical retail industry will still be on the losing side for some time. Marketplaces take about five days to deliver to Krasnoyarsk and seven days to deliver to Vladivostok. In the next two or three years, marketplaces will unlikely expand in the pharmaceutical segment because for them, there is always something more appealing than medical drugs.
In this light, the pharmaceutical industry is a seriously protected category that is hard to deal with and full of obstacles, including regulation, infrastructure, management and state-regulated markups.
There are also certain logistics nuances. First, it is important to track the delivery driver in order to promptly notify customers about changes in the order status. Second, there is social responsibility for delivering medication in full compliance with storage temperature requirements, which is done by continuously monitoring the cold chain along the delivery route.
Only top distributors can afford to equip their fleet with real-time temperature control systems. Puls Pharmaceutical Company has been number one on this list for five years.
Another important aspect is protecting customer data and privacy. Security is important for pharmacies first and foremost. We protect privacy by concealing a customer’s full name and showing only the last four digits of their phone number. Overall, we try to teach our clients to retrieve their orders by giving the order number or showing a bar code.
Growing online purchases and their impact on the pharmaceutical industry
Growing online sales certainly intimidate small and medium-sized businesses as they do not feel ready for these changes. Those who have adapted and built a steady traffic across their key channels are no longer afraid and realize that the share of online sales will grow to 20–25%.
Whether this share will grow further remains the biggest question for most market players. It is our belief that growth will continue but it will happen as generations change. Right now, the key customer demographic buying medication online are 35-year-olds and older. When they are joined by the generation born with smartphones glued to their hands, we will see another hike in online sales. It should be noted that this share is growing faster in the regions than in Moscow because the market is still to be saturated to Moscow’s level.
Pharmacies are worried that people might shift to buying medicines online, reducing in-store purchases. However, the core strategy of e-commerce in the pharmaceutical sector actually revolves around leveraging pharmacies as pick-up points for online orders. The goal of e-commerce isn’t to divert customers away from physical pharmacies but to bring in additional traffic from online shoppers.
Despite the growth of the online drug market, customers’ choice of pharmacy is still largely influenced by two factors: convenience (proximity to home or work) and the quality of consultation. Pharmacies where pharmacists provide professional advice, even when processing online orders, tend to cultivate a loyal customer base. When people pick up their orders and receive high-quality service, they are more likely to return.
By Yevgeny Polyakov, Head of the E-Commerce Department, POLZA.RU (Puls Pharmaceutical Company)