cosmetics and wellness products. A large number of marketplace players are trying to enter this business but may
do so gradually given fluidity in the regulatory environment.

Omnichannel presence in organized pharmacy retail

B&M stores adopting the hyperlocal model and operating an omnichannel retail platform are emerging as important players in
the pharmacy retail market. This is primarily due to their multichannel approach to sales through a combination of B&M stores
and an online channel, which provides a seamless customer experience to consumers, whether the customer is shopping online
from an internet enabled device, tele-calling or visiting a physical (B&M) store.

The benefits of operating an omnichannel retail approach are the ability to deliver a consistent brand experience, irrespective
of the channel used, to meet the customer demand. Further, the omnichannel retail platform assists in optimizing business
through channel diversification and comprehensive integration of data and systems across the channels, allowing for higher
customer retention and higher wallet share. Omnichannel retail platforms have a strong focus on integration of the supply chain,
logistics, warehousing, technology and inventory across the channels.

The brick-and-mortar players have an edge over the online only players in rolling out such a framework given the fact that they
have an existing network of stores that are well-stocked with inventory to service the local cluster and address the demand faster
and an optimised cost structure. Key drivers of this include:

. Strong presence in neighborhood that ensures high brand visibility and low customer acquisition costs.

. Short turnaround time: Many modern B&M retailers with store-led order fulfilment can also deliver the order
within a shorter timeframe at a much lower delivery cost vis-a-vis digital natives (e.g. players such as MedPlus
can delivery within 2 hours in Hyderabad and Bangalore). Omni-channel players can better address the acute
therapy demand because of this faster response mechanism. These advantages particularly play out strongly in
Tier II/III cities where the online only players require a longer response time

. Optimized cost structure as Modern B&M pharmacies leverage their dense offline store network.

The omnichannel approach also allows players to offer discounts comparable to that offered by online only players while
remaining profitable because of their low-cost structure. Walgreens’ and CVS’s omnichannel initiatives have played out well
for the developed markets. Walgreens Boots Alliance’s partnership with Microsoft and Adobe to launch a digital experience
and customer insights platform testifies their confidence in this approach.

A summary of strengths and weaknesses across the different types of pharmacies is provided in the table below.

 

 

 

 

 

 

 

Modern B&M Pharmacy ‘Prautonel Unereanzed E-Pharmacy
macy
Strength Improved retail e Well entrenched «  Serviceability

environment and customer | ¢ High inventory turns + Range of offering (drug

experience reduces the working sale, medical equipment and

Assisted selling capital needs other gadgets, lab

Wide SKU range with Assisted selling consultations)

wellness options ¢ Personalized selling ° Convenience

Transparent discount and | e Credit to the customer Discounts

lower pricing to customer ° Personalized

Better availability of * Auto refills

brands and prescription

fulfilment

Payment options

Loyalty programs &

customer service

Higher gross margins due

to scale advantage and

vertical integration

Weakness Limited presence ¢ Poor retail environment ¢ Lack of assisted selling
¢ Limited assortment due to | ¢ Difficulty in catering to
SKU proliferation (over acute segment (60%+ of the
100K SKUs sold in domestic pharma market
Indian market) resulting which requires quick service
in lower fill rates and is more profitable as it is
less price-sensitive) well as

 

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