Reliance Retail has made a foray into standalone pharmacy stores under its subsidiary, Netmeds, a move that will intensify competition in the highly fragmented Rs 2-lakh crore organized pharma retail market. So far, Netmeds, the e-pharmacy chain majority controlled by Reliance Retail, has focused on the online sale and delivery of medicines.
The move comes on the heels of discount supermarket chain DMart announcing plans to set up pharmacies within its stores.
Most of India’s over eight lakh retail pharmacies are small, independent businesses, and majorly concentrated in metros, Tier l and ll cities. The aggressive expansion by biggies like Apollo, and e-commerce platforms like Netmeds, Tata 1mg, Amazon and Flipkart Health+ could pose serious competition for brick-and-mortar pharmacies, experts say. E-pharmacies including Tata 1mg and Pharmeasy are understood to be experimenting with offline stores for an omnichannel play.
The company currently operates around 1,000 shop-in-shop pharma stores across Reliance Smart Bazaar in cities, and Smart Point stores in towns and villages. Typically, a shop-in-shop is a store within a store, retailing a product or service distinct from that of the main occupant.
The pharma store will also include alternative medicine categories such as Ayurveda, Unani, and Homeopathy. A foray into the pharmacy business through a shop-in-shop or a standalone format indicates options online grocery platforms could explore to widen their customer base. Only a small percentage of the Indian population orders medicines from online channels currently, with consumers in smaller towns and cities looking for reliable pharmacies.
The move will help Reliance to strengthen its omnichannel play and in last-mile delivery, experts added. Most FMCG and pharma companies as well as e-commerce platforms have ramped up their digital play, triggered by the pandemic-related lockdowns.
Analysts expect the e-pharmacy market to grow at 60 percent CAGR in FY21-25 to reach around $5 billion, as well as increase penetration to 15 percent from over 5 percent.
In Netmeds, in which Reliance acquired a 60 percent stake in 2020, “pharma business revenue doubled on a year-on-year basis across all the channels. The digital commerce orders went up 67 percent and the hyperlocal deliveries for us, which is really the omni channel play, went up 4X during the period as compared to last year,” Gaurav Jain, Head Strategy and Business Development, Reliance Retail, said at the company’s post-earnings analysts’ call recently.
The offline stores will be pitted against large pharmacy chains including Apollo and Medplus. According to data from Statista, as of March 2021, Apollo Pharmacy with over 4,000 stores across India was the largest pharmacy retailer, followed by Medplus and Wellness Forever, which had 2,000 and 220 stores across India, respectively.
The organized offline market should also grow fast with Apollo aiming to more than double its pharmacy stores and Reliance planning to scale up SMART Point stores (with pharmacy counters) and standalone stores, analysts added.