How to decide whether to invest in an online pharmacy compared to a brick-and-mortar. (5 quick tips)

Victor Hugo, the French writer, once said, “no army can stop an idea whose time has come.” There are no better words that echo the impact technology has had across industries least of which the pharmaceutical industry. I remember in 2015 when Uber, the taxi hailing app set its roots in Kenya, its launch was mulled with controversy and discontent.  There was huge uproar by the ‘traditional’ taxi drivers who felt their jobs and livelihoods were at risk. They fought it, at least they tried, but Uber’s time had come and no one could stop it.

Does the same apply to the Kenyan pharmaceutical retail industry? In this article I discuss 5 factors investors have to consider before choosing between an online vs the traditional brick and wall model.

Which Market segment are you targeting?

Behavioral economists describe willingness to pay (WTP) as the maximum price at which a consumer and in this case, a patient is willing to pay for his/her medicines. In the Kenyan context there is a disparity in levels of disposal income and willingness and ability therein to purchase medicines. If you are targeting the low-income earners, it is advisable to have the traditional retail outlet in the estates where one can walk in and pick their medicines and go back home at no extra cost. If you are targeting the middle to upper class, then convenience may seem appealing, even if it means parting with a few extra shillings.

What Costs are involved?

The bottom line of every business is profit.  Profitability ensures that the business not only survives but also succeeds in the longer term. In this regard it is vital that organizations maintain the right balance between supply chain costs and the customer value generated from that supply chain. When one chooses the online pharmacy model, he or she has to be alive to the inevitable accruing supply chain costs.  To ensure customer satisfaction, substantial investments in good transport networks, regional distribution centers and reliable information technology systems have to be made. These investments involve significant capital and operational costs. Some may argue that these costs can be passed on to the patient, but then, why would I pay KES 100 for a pair of Panadol tablets that I can get for KES 20 at my neighborhood chemist?

What does the law say?

Most strategic planners use the PESTEL framework (Political, Economic, Social, Technological, Economic and Legal factors) to analyze a particular market and its suitability for investment. The Legal factors are ones that no prudent investor can overlook when making significant capital outlays in whichever industry. In Kenya the Cap244 (Pharmacy & Poisons Act) does not explicitly state the confines within which an online pharmacy can operate. However, after calling the Pharmacy & Poisons Board, I am told that one has to set up a retail premise with all the relevant licenses and fees required then go ahead and set up their online pharmacy. In essence put up a retail outlet, then put up an online outlet.  Businesses explore online channels for many reasons one being that they can reduce on costs related in setting up and maintaining retail stores. Refer to point number 2 above.

What is the market’s perception?

Everyone has the lawful right to privacy, especially when dealing with matters health.  In the Kenyan set up, an online pharmacy will require you to upload on their website, or even worse send your prescription through the messaging app “WhatsApp”, to access prescription only medicines. Due to fear of stigma, patients will understandably be apprehensive before posting a document that contains their diagnosis and medicines that they will be on. So before investing in an online pharmacy one must invest in proven latest technology that ensures patient’s data protection.

How will service delivery be done?

Unlike other consumer goods, the distribution and handling of pharmaceuticals requires significant information exchanges to ensure patient safety and quality of service. Patient counselling has to be done in line with good dispensing practices ensuring that they are not only harmed by these medicines but they achieve optimal therapeutic effects. Online pharmaceutical retail models require a direct line with pharmacists to allow for medication therapy management (MTM) and room for patients to learn more about the medicines they are taking. There are special groups however like the geriatrics whose cognitive ability and technological prowess may not be at its peak, and therefore better solutions need to be explored.