Amazon and Reliance square off as India’s online pharmacy sector booms during coronavirus pandemic

India’s online pharmacy battlefield is heating up with two business titans – Mukesh Ambani, Asia’s richest man, and Jeff Bezos, the world’s richest person – recently entering the market. Ambani’s Reliance Industries last week announced it spent US$83 million to buy digital health care firm Netmeds, which delivers drugs and arranges doctor appointments for 5.7 million customers. Ambani’s daughter, Isha, who is director of Reliance Retail Ventures Limited (RRVL), explained the acquisition. “We are impressed by Netmeds’ journey to build a nationwide digital franchise in such a short time and are confident of accelerating it with our investment and partnership,” she said. What’s behind India’s new-found animosity towards Amazon? The announcement of Reliance’s move came just days after Bezos’ Amazon, already a dominant e-commerce player in India, rolled out delivery services for prescription and over-the-counter medicines in Bangalore. India’s e-pharmacy sector remained relatively untapped before the coronavirus outbreak but the pandemic has created an opportunity for digital health care start-ups and telemedicine firms to accelerate their plans. In terms of building a customer base, securing investment and customers’ willingness to use e-health services, the past four months have brought rapid transformation that would have otherwise taken years. More than 6 million new households have used virtual pharmacy services during the pandemic, according to a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and RedSeer Consulting. Before the pandemic, there were 3 million households using these services, and industry estimates suggest that will skyrocket to 70 million households in five years, valuing the sector at US$16 billion by 2025. The entry of Amazon and Reliance heralds a period of acquisition, consolidation and mergers. Two other health care services, PharmEasy and Medlife, are in the final stages of a merger that will establish a US$1 billion company. The Walmart-backed Flipkart also has designs on the emerging market. E-commerce in Southeast Asia rides high on pandemic boom Nevertheless, the e-pharmacy sector operates in a legal grey area. In the absence of credible legislation or regulatory policies to streamline the operations and online distribution of drugs, the sector is governed by archaic regulations and faces resistance from bricks-and-mortar retailers. The All India Organisation of Chemists and Druggists (AIOCD) – which represents about 850,000 offline chemists – have writte a letter to Bezos and copied it to multiple government departments labelling Amazon’s launch as illegal. Reliance, which enjoys the goodwill of Prime Minister Narendra Modi’s government, has in recent months raised more than US$20 billion in investment funds while acquiring a series of small players in a range of industries, diversifying across different streams of household spending. This expansion into retail, e-commerce and entertainment makes Reliance and Amazon increasingly likely to be competing for the same customers. Furthermore, Alphabet’s Google, one of Amazon’s fiercest rivals, has thrown its weight behind Reliance. Last month, Google pumped in US$4.5 billion into Reliance picking up 7.73 per cent stake in the fast-growing entity, Jio Platforms. These developments also coincide with Modi’s launch of digital health mission – an ambitous overhaul and digitisation of India’s fragmented healthcare market – during his Independence Day speech on August 15. Coronavirus crisis’ latest victim could be India’s pharmaceutical industry Ankur Bisen, senior vice-president at the management consulting firm Technopak Advisers, said the e-pharmacy sector’s “repeatability of purchase” makes it a significant addition to both the Amazon and Reliance portfolios. “For medicines and drugs, there is consumer stickiness and it’s not a discretionary or impulsive purchase. It is about your daily need and repetition,” Bisen said. He added that the products and services are standardised with limited variables, unlike in consumables or electronic items. This will allow the companies to scale up their models. “It’s like food or groceries,” he said. “These categories [e-pharmacy] become important for the market-players to become dominant in the minds of the customer. Not so much because of the business size but with the promise of customer stickiness.”