MODERN RETAIL CHANNELS

Brick and Mortar (B&M) Stores

The organized retail sector primarily comprises of B&M stores operated by established players such as Apollo Pharmacy,
MedPlus and Wellness Forever, and other smaller players like Emami Frank Ross Pharmacy, Thulasi Pharmacy, and Sagar
Drugs & Pharmaceuticals (Planet Health). These players continue to drive growth in the organized segment by establishing a
fast-emerging pan-India presence primarily through B&M stores and select players also operate an omnichannel platform.
These players typically open multiple outlets in a city and a regional warehouse nearby to cater to these outlets. Some modern
B&M retailers have also invested in advanced technology to capture sales data and automate warehouse management for
seamless inventory replenishment.

This model facilitates the implementation of logistics and distribution in a cost efficient manner, ensures accurate demand
forecast for that region and improved serviceability ensuring consistent availability of products and timely deliveries. Moreover,
this model also provides better fulfilment rates and higher profitability, and the benefit of economies of scale, with a high store
count ensuring low unit logistics costs and better operational efficiency due to distributed and balanced demand. The pie-chart
below sets out the retail market share in terms of number of stores of leading pharmacy retail chain through B&M stores across
India as of end of financial year 2021.

Total Number of Modern B&M Pharmacy Stores: ~10,000

= Apollo

= Medplus

= Wellness Forever
@ Emami Frank Ross
@ Thulasi Pharmacy

lm Others

 

Source: Technopak Analysis, based on number of stores

E-Commerce Channel

There has also been a rise in sales through the e-commerce channel with several players such as NetMeds, Tata Img and
PharmEasy operating in this segment through an online only model (“‘e-pharmacy”) alongside omnichannel platforms of BEM
retailers such as Apollo Pharmacy, MedPlus. E-commerce channel in pharmacy retail operates through the following models:

. Inventory-led Model for pharmacies with an online only presence: In an inventory-led model, the inventory
of goods and services is owned by the company (and managed through warehouses and fulfilment centres across
different locations), and the goods and services are sold directly to the customers.

€ Hyperlocal model: For players with an online only presence, this is an inventory-light model where the company
only provides the online infrastructure and corresponding logistical support. A partner offline retailer is
responsible for managing the inventory. This model can be implemented with a low seed capital. However, the
margins are shared with the offline partner retailers impacting the unit economics. Select modern B&M players
are moving towards the online model in order to generate sales from their digitally-enabled platforms by
leveraging their established network of stores and fulfilment centres. Established B&M store operators with high
technology focus also follow hyperlocal model for home delivery of medicines. The established players have high
brand awareness and better customer recall due to their existing omnichannel presence. The hyperlocal delivery
enabled Brick & Mortar retail chains have high distribution efficiency, low fulfilment costs and low delivery time,
making them a preferred choice for home delivery of pharmacy products. A strong offline presence also ensures
high brand visibility and low customer acquisition costs and hence, better economics vs. online players following
this model.

. E-Commerce Marketplace: Online horizontal marketplace platforms are tech-driven platforms that offer a wide
variety of product offerings, including products such as electronics, fashion, furniture, home furnishings,

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