Alankit Life Care Limited manages its online pharmacy retail venture called Rx Pharmacy. This venture has both a physical store and an online platform to cater to its customers. It targets a customer base of 50,000 customers and 2,000 associated retail pharmacies by the year 2016. However, in 2015, the Alankit Group is concerned as government regulations posed a threat to the plight of online pharmacies. Also, strong marketing strategies are being adopted by competitors as regards their physical stores. Should Rx Pharmacy continue operating both its physical store and online platform or should it pursue the digital retail platform alone? How could it strengthen its online operations?
Sandeep Puri and Siddhant Puri
Harvard Business Review (W16390-PDF-ENG)
June 27, 2016
Case questions answered:
- What are the different challenges faced by e-pharmacy retailers in India? Discuss the possible ways of handling these challenges.
- Conduct Porter’s “five forces” analysis for the online pharmacy industry in India.
- Should Rx Pharmacy focus on its online presence only, or should it also rebuild its physical stores?
- Outline the different strategies that Rx Pharmacy can adopt to achieve its target of 50,000 customers and 2,000 associated retail pharmacies by 2016.
- What kind of technical and digital capabilities will Alankit Life Care need for success in e-pharmacy?
- What are the other growth options available for Rx Pharmacy?
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Rx Pharmacy: Physical versus Online Options Case Answers
1. What are the different challenges faced by e-pharmacy retailers in India? Discuss the possible ways of handling these challenges.
The different challenges faced by e-pharmacy retailers in India are the following:
The complexity of business: E-pharmacy is a complicated and legally risky sector, and the uncertainty about the laws governing the operations of e-pharmacies in India is high.
Customer preference: Most Indian customers prefer to buy medicines from pharmacies within hospital premises because many prescribed medicines are not available at other (non-hospital) pharmacies.
Reliability: Customers have concerns about the quality and authenticity of medicines supplied by online retailers.
Low Internet penetration: Internet penetration in India is low, with broadband and high-speed connections not widely available. This makes uploading prescriptions online time-consuming and also restricts the customer base.
Cyber security: Low cyber security and cases of online fraud have left many customers apprehensive about online transactions.
Supply chain issues: Lack of coordination in the supply chain at different levels may result in unnecessary delays and errors during delivery. The promised medicines may be out of stock at the time of delivery.
Customer loyalty: Many e-pharmacy companies offer discounts to attract customer loyalty, but buyers compare prices between websites and typically order from those that offer the best prices.
Inventory management: Unlike other businesses, the pharmaceutical sector has a sizeable number of brands, which means that pharmacies must maintain large inventories of different products. Not only do pharmacies have to keep in mind that storage requirements vary from medicine to medicine, but they must also ensure that the purchased drug is delivered to the consumer in proper condition within a reasonable time frame. The cold storage requirements of certain medicines increase the cost of the supply chain of the business exponentially.
Hyper competition: Because competition among online pharma retailers is intense, companies must offer massive discounts to attract customers, which in turn affects their profitability.
Delivery persons’ lack of knowledge: Most delivery persons from e-pharmacies do not have extensive knowledge about medicines, which means that they may not be in a position to guide customers about the dosage of the prescribed products. In this respect, traditional brick-and-mortar pharmacies are better than their online counterparts.
Spurious drugs: Spurious drugs are a major issue in the Indian pharmaceutical market, and online retailers supplying medicines through different companies may suffer from the supply of these spurious medicines.
These challenges may be resolved in several ways. The possible ways to handle the challenges faced by e-pharmacy companies are:
Associate with more pharmacies: E-pharmacy companies need to innovate and strengthen their supply chains. They need to collaborate with a greater number of chemists to offer quick delivery to customers. Speedy delivery of medicines from nearby pharmacies will also help to build customer trust.
Stringent selection process: E-pharmacies need to follow a stringent process when selecting associated pharmacies. This will help them offer reliable service to customers, and deliver quality medicines.
Cash on delivery: A cash-on-delivery system can tackle the lack of trust that many customers have regarding online payments.
Promotional campaigns: Online pharmacy companies could adopt different promotional campaigns, such as an introductory discount on first orders. They could also opt for a loss-leader strategy by offering fast-moving consumer goods—such as toothpaste, toothbrushes, razors, hair dyes, and deodorants—at discounts in order to encourage consumers to choose e-pharmacy portals to make their purchases.
Data analytics: E-pharmacies can use data analytics to get demographic insights, and to meet customers’ demands. This will also help develop a clear strategy to target the preferred customer segment.
Loyalty programs: Online retailers could start loyalty programs to retain regular and preferred customers.
Helpline: E-pharmacies can provide a customer care helpline for information about the dosage of different medicines.
2. Conduct Porter’s “five forces” analysis for the online pharmacy industry in India.
Michael Porter’s five forces model can be used to analyze and examine the competitive environment of India’s online pharmacy industry. Each of the five forces affects Rx Pharmacy’s ability to compete in the industry.
Threat of New Entrants (HIGH)
Online pharmacy is not a…
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