Consistency in pricing and tight monitoring of the supply chain for authentic medicines helped Tata 1mg gain a large consumer base and subsequent market share in the last few months, co-founder and chief technology officer (CTO) Gaurav Agarwal said.
Agarwal said the online pharmacy carefully monitors its partnerships with drugmakers to weed out fake products, gaining customer trust and reliability.
He rejected discount-centric strategies, which he claimed were favoured by some of Tata 1mg’s rivals, deeming them unsustainable in the long term.
“Our customer base grew, especially when the capital market (fundraising) started to become tough. It became hard for discount-centric models to give cuts. So their (competitors) customers vanished because they came to their platform only for discounts, and not the service,” Agarwal said in an interview on the sidelines of TiEcon Delhi 2024 conference, without naming its competitors.
In terms of the gross merchandise value (GMV), the company’s market share expanded from 19 percent in October 2022 to 31 percent in September 2023, according to the latest data released by consulting firm Redseer.
Tata 1mg’s market share gains came mainly at the expense of PharmEasy, whose share fell from 33 percent to 15 percent over the same period.
From being the market leader with a valuation of as much as $5.5 billion, the going has been challenging for PharmEasy.
Its valuation has plummeted by 90 percent, its initial public offering was delayed, and its losses widened. CEO Siddharth Shah is confident that his company will return to test public markets appetite for its shares.
On the company’s market share gain, Tata 1mg’s Agarwal said, “Some things that we did right, and some that PharmEasy got wrong…We stayed consistent on the pricing which helped us. We didn’t go crazy when the times were good, and not go bonkers when the times were bad.”
“In the market, it is very clear that 1mg doesn’t stand for discounts. That consistency (in pricing) helped us,” he added.
The online pharmacy sector first emerged in India around 2015, disrupting traditional market dynamics. However, the once-booming sector is now facing challenges as the initial surge in demand, fueled by the Covid-19 pandemic, waned. Regulatory ambiguity and legal hurdles have further complicated matters.
Despite the government proposing draft regulations back in August 2018 to oversee online medicine sales, these rules haven’t been officially implemented yet.
“As long as we stick to existing laws, i.e. the IT Act and Drugs and Cosmetics Rules, we’re fine,” Agarwal said.
He said that the industry has been proactive, suggesting to the government the need for a registry of sources and stricter compliance standards for online pharmacies.
“Not anyone should not be able to become an e-pharmacy; there should be a certain compliance (in place),” he added.
While CTO Agarwal claims Gurugram-based Tata 1mg aims to be profitable in six months, the task will be uphill. Especially because the company saw its losses jump 139 percent to Rs 1,255 crore in FY23, even as the operating revenue grew 160 percent to Rs 1,627 crore.
The losses increased primarily due to mounting expenses, which are likely to remain elevated as the firm looks to expand its store count from 50 to a few hundred by the end of the year and subsequently offer quick delivery services in select areas.
The company is currently conducting pilots in Gurugram for 15-30-minute medicine delivery via Tata 1mg’s retail store chains. If successful, the model will be replicated in other regions as well.
Moneycontrol had earlier reported that Tata 1mg is partnering with players like Xpressbees and Delhivery for quicker deliveries.
That was over and above its own fleet. The e-pharmacy also works with Zomato to deliver hyperlocal deliveries.
While online medicine sales continue to be the primary focus, contributing almost 70 percent to the business, Tata 1mg has been ramping up efforts in high-margin growth sectors such as corporate partnerships and diagnostics, which contribute 15 percent as of now.
“We’re particularly enthusiastic about the next generation of diagnostics, leveraging data and AI. With nearly three million diagnostic tests conducted annually in our own labs, we aim to integrate prescription data, diagnostic results, and user activity,” Agarwal said.
“This represents a significant area of expansion for us,” he concluded.
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