Tata 1mg had a 31% market share in September 2023 against 19% in October 2022 while PharmEasy slipped to 15% from about 33% during the same period, according to a data analysis by third-party internet market research firm Redseer, which ET has seen.
Elevate Your Tech Prowess with High-Value Skill Courses
| Offering College | Course | Website |
|---|---|---|
| Indian School of Business | ISB Professional Certificate in Product Management | Visit |
| Indian School of Business | ISB Digital Transformation | Visit |
| Northwestern University | Kellogg Post Graduate Certificate in Product Management | Visit |
This comes after PharmEasy put major restrictions on its marketing spends in order to prioritise profitability plans as part of a restructuring exercise over the past one year.
Other major platforms such as Flipkart Health Plus, Reliance-Netmeds and Apollo have largely maintained their GMV market share at 15-18% during the same period, as per Redseer data, which is not public and has been circulated among industry executives.
At least three senior industry executives confirmed a directional shift in market share dynamics that has been underway since early 2023, at least.
For example, PharmEasy had about 29% share in January which slipped to 20% in May. During the same period, 1mg’s market share improved from around 21% to 27%, they said.
Discover the stories of your interest
“PharmEasy has been cutting costs on overall spends – especially in incentivising deliveries and that has had its impact on market share,” one of the persons aware of the numbers said. “While Flipkart, Apollo and Netmeds have largely remained in the same zone, 1mg has gained the most,” the person added.
ETtechET reported in August that PharmEasy management has adjusted its expectations to the ‘new reality’ to grow in a sustainable manner.
Emails sent to PharmEasy, 1mg, Redseer, Flipkart, Apollo and Netmeds did not elicit any response as of press time Wednesday.
Sector analysts said PharmEasy, which was facing a debt-repayment burden and challenges in raising new capital, had to shift focus to profitable growth.
Also read | Till debt do us part: will startups go the PharmEasy way
“Definitely, overall aggressive discounting has come down after the market leader PharmEasy has gone slow on cash burn,” a senior industry analyst said.
Companies have also reduced discounting in their diagnostics business.
“There was discounting in the diagnostics business also, and we also had to spend more, or we would lose customers. All that froth has now settled,” one of the top five e-pharmacy players said.
PharmEasy owns lab test chain Thyrocare while 1mg, too, offers diagnostics services through its own labs as well as third-party labs.
Such moves have helped PharmEasy improve its financials. The company clocked a cumulative Ebitda profit of Rs 60 crore during the first six months of the ongoing financial year, ET reported on November 1.
The company has also finally closed its Rs 3,500-crore rights issue, giving it much-needed ammunition to clear pending debt and continue growing the business.
Tata 1mg had reported a 160% jump in operating revenue for 2022-23 at Rs 1,627 crore with sales of medicines accounting for nearly 80% of it. However, its net loss more than doubled from the previous year to Rs 1,254.9 crore.
At ET Soonicorns Summit earlier this month, 1mg CEO Prashant Tandon had said it is hoping to attain overall profitability at a group level in the coming few quarters even as certain business verticals are profitable already. “We have strengthened our market share materially,” Tandon had said at the event while emphasising on the growth in the current financial year.
According to investment company Sastasundar Ventures, the online pharmacy market size was $345 million in 2021 and is expected to grow at a CAGR of 22%.
Sastasundar Ventures is a 25% shareholder in Flipkart Health Plus. According to its FY23 annual report, the online pharmacy market is categorised into two segments – chronic and acute therapy.
“In 2020, the chronic therapy segment dominated the market, accounting for 63.42% of the revenue. It is expected to dominate during the forecast period. However, its market share is likely to decline to 53.92% in 2026,” the report said. “The acute therapy segment is forecast to achieve promising growth during the forecast period. Its market share is anticipated to increase from 36.58% in 2020 to 46.08% in 2026, expanding at a CAGR of 50.56% during the 2021-2026 period.”
The shift in market share dynamics coincides with a challenging period for the e-pharmacy sector as policymakers have intensified scrutiny. In February, the Central Drugs Standard Control Organisation issued show-cause notices to various online pharmacy firms including Tata 1mg, PharmEasy, Flipkart Health+, and Netmeds, suggesting violations of existing rules.
Also read | After notices, e-pharmacies look to make a case to government
Later, the government said the firms had mostly responded by asserting that they provided only online platforms to facilitate the sale of pharmaceutical products, connecting users with licensed pharmacies. While e-pharmacy companies had sought meetings with government officials, there has been no movement on the matter in recent weeks. The government had said offline chemists have been complaining about online medicine delivery platforms.