Why Reliance Retail acquired NetMeds Online Pharmacy ?

Reliance Retail has announced the acquisition of a 60% stake in Netmeds (Indian digital pharma market place) for US$83mn. Netmeds is present in 670 cities and towns and offers more than 70,000+ prescription and lifestyle drugs and thousands of non-prescription goods for wellness, health and personal care. Netmed promoters have a long history in pharma retailing and manufacturing. Netmeds had ~US$1mn in revenues ~(US$8mn loss) in F18. Its app also offers doctor consultation services as well.

Online medicine market currently is small at 3-3.5% of total pharma market as the existing players do not offer express delivery option and delivery of medicine typically takes 24-48 hours. This limits the market largely to refill prescriptions or for chronic medicines for the new prescriptions. RIL with its significant physical retail presence should be able to reduce the delivery timeline and hence likely expand the market. Further large physical retail network, likely would reduce delivery cost for Reliance too.

Synergy between Reliance and Netmeds ?
Currently, Reliance Jio Health App [under Jio Platforms] offers digital consultation and diagnostic tests online and this acquisition completed Jio’s gap of medicine delivery as well. Post tele-consultation, prescription is captured in the app and patients can be given a customized offer for both diagnostic tests and medicines prescribed. The margins are low in online pharmacy (given delivery cost involved) but total medicine market in India is large at about US$18-19bn.

In the medium term, it is possible that RIL may go for aggregator model for mom-and-pop pharmacy stores (similar to kirana store format in grocery) which could further expand reach for RIL. In the recent AGM, Ambani has mentioned that JioMart (under retail) operations would be extended beyond grocery to electronics, fashion and medicines. JioMart would start delivering electronics, apparels and footwear from next month (Sep-2020).

Mukesh Ambani is gaining deep insight into the Pharma retail business with a SaaS company controlled by Reliance – C-square, that offers software for distributors/retailers in the pharma sector and handles 1mn+ transactions daily.

One thought on “Why Reliance Retail acquired NetMeds Online Pharmacy ?

  1. I believe the likely reason for the entry of cash-rich/strong investor backed players in this space is not just limited to the expectation of robust industry growth, it also likely extends to the fact that online pharmacies can create several synergies with the broader eHealth market that besides medicine delivery also includes consultancy and diagnostics markets.

    These late industry entrants are also developing their own hyper-local business delivery models (e.g. Reliance, Amazon and Flipkart recently ventured in to grocery deliveries). Therefore, it is also very likely that they are planning to use their existing hyper local delivery infrastructure (warehouses, logistics partners, delivery partners, etc.) to realize synergies with the e-pharmacies market.

Comments are closed.