In Part 1 of the two part interview, YoPharma founders Chavvi Gupta and Himanshu Goel talked about setting up an online pharmacy business, operations, building trust among new users, and target segment. In part 2, they talk about other details related to the business, including monetization, the regulatory framework around it, and existing and new partnerships.
YoPharma: Right now, we’d say, it’s mainly medicines that are not available in the nearby medical store. We are also looking at baby products, and are seeing some growth in the sale of nutritional products. But we plan to add more to our catalogue to improve business in that segment.
MediaNama: Which products get you recurring business?
YoPharma: Nutrition is one that is on the recurring list. Medicines for chronic diseases such as diabetes and hypertension also fall in this category.
MediaNama: Which products don’t sell well online?
YoPharma: I think it is too early to comment on that. If the customer is looking for convenience and home delivery of medicines, then we don’t think there is any differentiation in that part with respect to products.
MediaNama: What is the kind of response that you have received so far, with respect to being looked at as a credible and trustworthy destination for buying medicines?
YoPharma: These are early days. We are looking at contacting people who know us directly or indirectly. Himanshu comes from a pharma background, and has worked with the Guardian chain of pharmacies, heading their retail operations. He has also worked with Apollo and with others in the healthcare industry. So we are building our credibility with this experience. Like we mentioned before, people are trying our service buying one or two products. Over time, they will be able to judge us better.
MediaNama: Do you think you will ever be able to bridge the gap of providing medicines during emergency with the speed of an offline pharmacy? Do you think there is a possibility of doing it? How?
YoPharma: It’s difficult in the short term, as our delivery system is not geared for it. But in the long term, given our reach, we would aim to do that.
The Business of Online Pharmacy
MediaNama: What is your revenue model? What kind of margins do you get on pharmaceuticals?
YoPharma: Like any other business, we are selling products and are making money on it by keeping costs low. The margin is higher than other segments but we have to comply with government regulations. But otherwise, this segment makes more margin in retail than other sectors. With repeat customers, the lifetime of the customer is also higher, which adds to the business. World over, online pharmacy businesses are doing well- in the U.S, drugstore.com is a successful venture, pharmacy2u is another online pharmacy store in the U.K. We are confident about the model, and if we are able to serve customers well, then we see that it has good potential for us.
MediaNama: How do you see this model working with more people in India requiring medicines in non-internet India than with India with Internet access?
YoPharma: The guy who is diabetic and 65 years old might not do it. But someone who is taking care of him might have Internet access. So given the options available, they might want to purchase medicines online.
MediaNama: What are the costs involved in running an online pharmacy? Where are the cost savings compared to offline businesses?
YoPharma: In terms of costs, other than the real estate, there’s not much difference in running an online business. It comes more from efficiency; if you go to a traditional pharmacy, their cost is on real estate and inventory. This is what we avoid and pass this cost benefit to our customers. Our local pharmacists who are experienced, can talk and reach out to more people and cater to them through us. We also save on inventory costs, as well.
MediaNama: Is this a discount model business, wherein you give medicines for less?
YoPharma: No, discount is not the primary benefit that we deliver to customers. Given our special model, although we are lesser than a normal pharmacy, 20-30% discount is not our focus. We are looking at convenience and providing information that they need to have. Our model is not discount driven but convenience driven. Prices are lesser than traditional stores, wherever we can afford.
MediaNama: Where are you delivering? How do you collect money, without extensive credit card penetration?
YoPharma: We’d say that you can draw parallels with Domino’s (the Pizza chain). We are relying more on our delivery. We are working more on COD(cash on delivery) right now. We will be using a payment gateway in sometime. COD will be a big component of our long term plan, as well. The good thing is nobody rejects the order after ordering; nobody orders medicines for fun. We have not seen a single rejection for our cash on delivery, so far.
MediaNama: What are the marketing strategies that you employ offline to get traffic online?
YoPharma: We are doing the regular online stuff. Offline, we are working with hospitals, and other communities that exist. We are offering e-pharmacy services for hospitals. If a patient buys from their pharmacy and wants to refill his medicines later, he can purchase from us. The patient gets the surety of receiving genuine medicines and for the hospitals, this is an additional source of revenue.
MediaNama: How does your partnership work with hospitals? Do hospitals use their front end and your pharmacy’s backend for online purchase or vice versa?
YoPharma: Currently, it is YoPharma’s front end and YoPharma’s backend, except that a percentage is shared with the hospital. We work more like service provider to the hospital. Their patients can order from us and get their medicines delivered at home.
MediaNama: Who do you see as competition?
YoPharma: In terms of pharmacy or medicine side, there aren’t many. Most of the traditional pharmacy chains like Apollo, offer delivery but that is an extension of their traditional service. In terms of regular health products, there are a few players such as Healthkart. There are also other small sites like Healthgenie and others. As far as offline chains are concerned, there is Guardian – their offline stores give them the power of distribution; there is Hyderabad based Medplus as well. In the next 3-6 months we plan to expand to all metros. That is the advantage an ecommerce player would get over traditional pharmacy. Being in the ecommerce space, you don’t have to serve the customer on the counter. He orders medicines that you can sometimes source when required. You can also leverage partners instead of franchisees.
Note: Although not mentioned by the Founders of Yopharma, Getdevai.com is also an ecommerce company in the same space that was launched on December 26, 2012 from Mumbai.
Regulations for online pharmacies
MediaNama: How do you handle the sale of medicines that are sold only on prescription?
YoPharma: So we’ve set up a system that complies with regulations. Sometimes it is not easy for customers to buy from us. They can either upload or mail the prescription. We are introducing a mobile app that will allow customers to upload a camera copy or scanned copy of prescriptions, soon. We also use traditional means – even if we are able to see the prescription before delivery, it is good enough. We check the prescription and deliver only if the order value is high.
MediaNama: How do you ensure that prescribed drugs are being purchased for legitimate purposes? How do you verify prescriptions?
YoPharma: Compared to traditional pharmacies, we have stricter guidelines. Our guys check the name of the doctor, patient’s name, dosage, time and quantity. We are slightly more cautioned about that. Wherever we are delivering, we take care of all these factors and we deliver only if the dates (of prescription) and other things comply. Our pharmacists can also call the doctor if they have any doubts to confirm the prescription.
MediaNama: What are the key regulations around online pharmacies in India?
YoPharma: Regulations exist for pharmaceuticals. Since online pharmacy is a new area, regulations will follow. They are not there right now. We need to comply with all the regulations and licenses for premises, and see that other aspects are in place. Online is only for purchase. In the backend, we are just like a traditional pharmacy. We have to follow all the regulations that apply to offline pharmacies.
MediaNama: How does this premises license work?
YoPharma: Based on the area where we are dispensing medicines, we need to have a license – if we have a license for Delhi, we can only deliver in Delhi. We have our own licenses and will depend on franchise licenses, once we scale to other cities. As a consumer, you can buy medicines from anywhere.
MediaNama: Since you need city based licenses, are you looking at working with existing offline pharmacies in other cities?
YoPharma: It is too early to comment but it is not very difficult to set up a pharmacy. Both models can work for us. It would be a business related call. Depending on the volume of business from different locations, we might set up new licenses or use partner licenses.
MediaNama: How do you market YoPharma? Are there regulations regarding marketing pharmaceuticals, especially online?
YoPharma: There are regulations for Pharma manufacturers on how they market the products. Our marketing is on our services, and convenience. We don’t have any regulations for advertising. We are not marketing any products; we are only selling medicines prescribed by doctors.