When Amazon makes an entry into any new vertical it sends shivers down the spine of others engaged in the same business for many decades. According to a FactorDaily report, Amazon India is in talks to acquire pharmacy chain Medplus.
Medplus is India’s second largest pharmacy store chain with an online presence to complement its 1400 offline pharmacy retail outlets. The company is 90% owned by its founder Madhukar Gangadi.
If the deal goes through, it will see another churn in the pharmacy retail space and the offline retailers’ association in the pharmacy trade is up in arms against the move already. Drugs and pharmaceuticals business has a high retail margin built into it (around 20-30%) and very few retailers pass on any discounts to the customers. And while many startups have floated online pharmacies offering discounts and other bundled offers, the overall business of selling medicines online is still to evolve in the country.
A big bonus for Amazon through the acquisition would be the rapid addition of offline stores to its armory and make the O2O shift quite smooth.
The Indian pharmacy business is worth around $17.5 billion annually and is likely to triple to around $55 in the next 2 years. As mentioned, the business is largely in the hands of small offline traders (except Apollo and Netmeds, who have a whole chain) and the online segment is just beginning to sprout.
No wonder Amazon’s rival Flipkart is also reported to be considering acquisitions in the same space. 1mg and PharmEasy are the names being mentioned with whom Flipkart is said to have initiated dialogue for a possible tie-up/takeover.
Interestingly, Amazon has already made its move in the pharmaceutical industry in the US by taking over PillPack, an online pharmacy business and spent $1 billion on it. The company also has a healthcare division headed by an NRI Atul Gawande, a Harvard surgeon. This venture has Berkshire Hathaway and JPMorgan as partners.
The Indian arm of Amazon has also forayed into areas like fintech, lending and digital payments businesses.