Friday, February 15, 2008

Power retailing

The new trend of retailing is leading to a rise of the retailing power and influencing the availability and consumption of goods and services like never before. In fact, retailing power is squeezing the manufacturers like never before. Walmart's greatest collaborator is Procter and Gamble. The other collaborator is China - the global sourcing hub of Walmart is a place in China called Shenzen. The catchword in retailing is footfalls, and this influences consumption. Thus, Walmart is using its sourcing bargaining power to ensure that goods are purchased by the retailing giant at low prices, and sold at everyday low prices, as per its philosophy. Walmart has used this strategy in dispensing pharma goods at low prices too. Thus, retail chains have a great impact on availability and profitability of manufacturers.
The rise of Private Labels. The rise of Private Labels held particularly by retail giants is giving rise to a new trend in retailing. Consumers are led to private label products on retail shelves. Retail availability influences brand consumption significantly. Private label in India has changed sales trends and consumption patterns. After all, ultimately, the consumer or prospect wants quality goods, availability, and best value-for-money. Retail chains are at the forefront of contact with prospects and customers, hence, they can jack up sales of Private Labels significantly, when they sense it is to their advantage.
Pharma retailing and rise of Private Labels? Pharma retailing is a new phenomenon in India. Subhiksha is the trendsetter Pharma retail chain. Fortis Healthworld, Manipal Cure and Care, Mediplus, Medicine Shoppe, Apollo Phamacy, Trust, Pill and Powder, Aushadi, Reliance Wellness stores, Health and Glow, Gaurdian Lifecare, Global Healthline, CRS Health, Lifeken... are some of the healthcare and Pharma retail chains making waves. Already, chains like Manipal Cure and Care have entered in to exclusive agreements marketing dermacosmeceutical brands like Living Proof. After consolidation of retail space and ramping the nos. of retail outlets of each chain... NEXT WHAT?... OBVIOUSLY IT WILL BE THE RISE OF PRIVATE LABELS IN PHARMA CHAINS...what can stop Subhiksha from retailing its own brand of paracetamol and other analgesics and anti-inflammatory drugs? Lifeken may start its own PRIVATE LABEL of fast moving antibiotics like amoxycillin and cephalexin. Trust is in infact owned by Medreich a Pharma manufacturer. It will be easy for Trust to launch a Private Label range of Pharma goods (both and allopathic and ayurvedic).
There are manufacturers and retailers interested in Pand healthcare retailing: CLICK HERE

Manufacturers in Pharma retailing: Perhaps the first of its kind and a visionary strategy of setting up a manufacturer's retail chain was by The Himalaya Drug Company, Bangalore...This retail initiative primarily serves as a touch and feel brand store, but with the rise of franchising power (both business development format and product distribution format of franchising), this company will end up owning an ecosystem for ensuring effective retailing, availability, and sales of their herbal active range. This retail set up strategy creates independence from muscle flexing from big Pharma retail chains. Already there are health camps being conducted routinely at the Himalaya retail outlets that is leading to increasing footfalls and loyal customer base.

For such retail chains, the next logical step is to launch a branded PRODUCT USERS CLUB. This will help create a database of product users with their characteristics. Mining this data base will help in targeted marketing communication activity, and cross selling and upselling activities. For eg., let us say, a TB patient purchases Liv 52 DS (for management of TB drug induced hepatic dysfunctioning), and joins the HIMALAYA PRODUCT USERS CLUB. This patient later receives a leaflet on Koflet (cough syrup and cough lozenges) through the targeted marketing initiative. Such a customer is likely to revisit the exclusive Himalaya retail chain and purchase Koflet and perhaps other goods. There is enhanced footfalls, and better word-of-mouth through such initiatives.

'Manufacturers to hospitals' marketing relationship. A survey of the high price and high margin oncology chemotherapy drug market shows a new trend. There are some private cancer treatment hospitals particularly 150 bed and above, that are entering in to contract relationships with small quality manufacturers to supply certain onco drugs like docetaxel directly to their pharmacy at highly discounted rates (disintermediation at work). The hospital pharmacy authorities even dictate the price and terms of payment. Branded onco drugs marketed through MRs are now facing such "private label" competition too. These high value brands are also taken for long periods of time. For eg., I met a patient's attender who was purchasing tamoxifen tablets (for the management of breast cancer in the patient) for the past five years. So this business is very attractive for private label Pharma marketers too.

So we observe that POWER RETAILING is a phenomenon that is in tandem with worldwide trends. This phenomenon is changing the landscape of retailing and marketing. Power retailing represents a challenge to manufacturer-marketers, in the Pharma world too.

Thanks for reading this blogpost, I invite you to read all other blogposts too. Thanks...


DR. RANGESH said...

Namaskaara Sir,

Thanks for the thought provoking blogpost on power of retailing in general and that of pharma in particular. Although I agree to your view on certain company brands that were built on this concept with an increased footfalls, but the inflamed trends in pharma retailing has serious reflections. This is particularly regarding Schedule H drugs and if we are ready in India to shift to the OTC drugs keeping in mind the state of ADR
monitoring in India. Unequal comparisons of the status of drugs in USA
versus India are not well justified. It is a well-established truth
that in USA the drugs that gets banned and pulled voluntarily out of
the profitable market due to stringent post marketing surveillance is
not what happens in India. We continue to use a lot of drugs in our
country that have been banned outside?? Pharma retailing may add to the existing predicament.

I salute your great thoughts which undoubtedly are ingenious, of introducing Product Users Club. Even though this may enhance the business, but the question of ethical promotion would take a back seat in this endeavor. Even though the private labeling may benefit the customer with low priced products but it may affect the brand building exercise of a manufacturer on the long run.

However this blogpost has all ingredients for an interesting and captivated reading. Thank you for the same.

sunil said...

Thanks for your viewpoint and very thoughtprovoking comments. True, that brand building in Pharma should involve the doctor more intimately, for larger good of the society. Profits and ethics - striking the balance is important...

Ankur Bansal said...

Hello sir,
First of all thanks for sharing your valuable thoughts for power retailing & aware all of us regarding some important facts involved. But pharma retail is all together a different story when we talk in terms of private label promotion I suppose. Although such a promotion is easily possible for healthcare products but for pharmaceuticals it is very difficult to convince the today’s educated customer for a substitute for what he/she is prescribed by the doctor. Moreover any promotion of 'schedule H' drugs is also illegal. I think organized retail in pharma is more patient friendly as they will never try to sell substandard substitutes for more margins as most of the other retailers are doing from past so many years. As far as the manufacturers are concern, in my opinion research driven manufacturing with good marketing will be the key for them.

Sunil S Chiplunkar said...

Your comments are interesting Ankur, thanks. Do see my most recent blogpost that highlights the pharma retail situation. It is a fact that pharma retail chains do less brand substitution, but they drive better bargains while purchasing goods wholesale for all their outlets. So they need not do brand substitution. Educated customers like you said usually do not want brand substitution, however, many educated customers do not mind brand substitution from 'good companies' (as per their understanding) that offer the same drug at lower cost.