2. Effectofrecentchangesonsmallscalehealthcareretailindustry
2
Small Scale Healthcare Retail Industry
Overview
The Indian Pharma sector is a regulated, unconcentrated with HHI below 1500 and unorganized market where
there are licensed individuals who independently perform authorized drug trades. The market is heavily
fragmented. As per report by All India Organization of Chemists and Druggists (AIOCD), the Indian
pharmaceutical market posted annual sales of Rs 53.69 billion in fiscal 2011-2012. There are approximately
700,000 pharma retail outlets, out of these only 20 to 30 per cent is from all the organized retail companies
and rest is dominated by traditional/local chemists [1]
India is a low-middle income country as per the World Bank classification. In fact, the growth in expenditure
on total healthcare in India has been decreased from what it was a decade ago (from 4.3 per cent to 4.05 per
cent).In a talk at Harvard School of Public Health (HSPH) in 2012, it was noted that India spent about $40
per person annually on health care where as the United States spent $8,500 [2]
The organized retail pharmacies provide many value added services like availing medicines in air-
conditioned surroundings, 24x7 operations, door delivery, credit-card acceptance, insurance cover, nurse
station and online pharmacy. Are the unorganized retail pharmacies willing to show the shift towards
providing value added services? For a vast country like India, population demographics of different cities and
towns are very different. This would be a game changer since most of the unorganized retail outlets develop
in areas where it is difficult for high investment pharmacy retailers to extend their coverage. With proper
value added system it can be a threat to the organized medium scale retail outlets.
Findings from Indian Pharmaceutical Industry Research for Nov’16 issue of IBEF [3]
The Indian pharma industry, which is expected to grow over 15 per cent per annum between 2015 and
2020, will outperform the global pharma industry, which is set to grow at an annual rate of 5 per cent
between the same period.
3. Effectofrecentchangesonsmallscalehealthcareretailindustry
3
India has also maintained its lead over China in pharmaceutical exports with a year-on-year growth of 11.44
per cent to US$ 12.91 billion in FY 2015-16, according to data from the Ministry of Commerce and Industry.
Imports of pharmaceutical products rose marginally by 0.80 per cent year-on-year to US$ 1,641.15 million.
India’s third largest drug maker Lupin Limited plans to file its first biosimilar Etanercept for approval in
Japan, world’s second largest drug market, in 2017.
India is expected to rank among the top five global pharmaceutical innovation hubs by 2020, based on
Government of India's decision to allow 50 per cent public funding in the pharmaceuticals sector through its
Public Private Partnership (PPP) model
ExecutiveSummary
BACKGROUND
The unorganized phrama retail in West Bengal is a regulated sector as it is controlled & monitored by the
State Director of Drugs Control & Licensing Authority. The personnel of this department conducts
inspection of the premises of the firm applying for license & if found suitable & after due compliance of
statutory norms & submission of fees wholesale or retails license to sale homeopathic & allopathic medicines
are granted [1]. It is divided into 25 districts with 62 organized and unorganized medicine outlets. Retailing is
the largest private industry in India and second largest employer after agriculture. The sector contributes to
around 10 per cent of GDP and 6-7 per cent of employment. With over 15 million retail outlets, India has the
highest retail outlet density in the world.
The retailing sector in India has undergone significant transformation in the past 10 years. Traditionally,
Indian retail sector has been characterized by the presence of a large number of small-unorganized retailers.
However, in the past decade there has been development of organized retailing, which has encouraged large
private sector player to invest in this sector. Many foreign players have also entered India through different
routes such as test marketing, franchising, wholesale cash-and-carry operation.
METHODS
The team will adopt a collaborative approach where in each member will personally involved in day-to-day
research activities like, plan and design survey questioners, personally visit and interview small scale
retailers and study other secondary resources regarding recent trends that affect the small scale retail
industry, within the targeted market region. Here, the team will follow both primary and secondary research
techniques so as to cover all aspects of market scenario in order to understand the impact of changes on
target respondents and on the industry as a whole.
Sampling Unit
Shopkeepers, their distributors, consumers
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Sampling Technique:
METHOD REASON
Convenience
Sampling
Not all shopkeepers will be willing to take part in surveys
Stratified Sampling Entire population can be divided as shopkeepers from Kirana, marts or road side
vegetable seller
Simple Random
Sample
As there is a defined target population
Sample Size:
A sample of 78 shops has been taken for the research
Fig1: Flowchart of sampling method. Sample size is 30
1. Introduction and Objective
1.1 Background to the study
We have conducted the research keeping in mind the existing changes in pharma sector within
WestBengal. We have taken Murshidabad as our survey location taking proximity and ease of reach into
consideration.
1.2 WestBengal demography,healthsystem and access to medicinessituation
List of villages and towns in Raghunathganj under Murshidabad is attached below.[Source: 2011 census of
India]. It is found that North Twenty Four Parganas is the most populous districts with 1,00,82,852 people
living followed by south Twenty Four Parganas 81,53,176 and Barddhaman 77,23,663. Murshidabad counts
71,02,430.
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Rural-19.CSV Rural-19 (1).CSV WB population
Census 2011.xlsx
Bengali is the language of most of the people, with Hindi, Urdu, Nepali, and English as minority languages.
English, however, is the language of administration and lingua franca for business purposes. Agriculture plays
a pivotal role in the state's income, and nearly three out of four persons in the state are directly or indirectly
dependent on agricultural activities [1]
The healthcare infrastructure in West Bengal is a mix of public, private and nongovernment organization (NGO)
facilities. Patients do not have to pay for drugs dispensed from public hospitals. It is estimated that around
70% of the population avail public healthcare services and therefore have access to essential drugs. The health
department spends about 7% of the total health budget on drugs – the health budget constitutes 3.9% of the
government's total budget [Source: Draft State Drug Policy - West Bengal, 2004]
Census 2011 report.
Pricing of drugs is regulated to a limited extent by the Government of India through its Drug Prices Control
Order (DPCO). The state Drug Control Authority is entrusted with the regulatory mandates of the Drugs and
Cosmetics Act of 1940, the National Pharmaceutical Policy 2002 and the successive DPCOs. However, with
an operating strength of only about 50% of its sanctioned strength of 148 drug inspectors at [2] the state drug
control is not in a position to monitor medicine availability and pricing on a regular, or even occasional,
basis. This vital job therefore must be undertaken from other quarters.
Murshidabad is one of the big districts in the state, having 5 sub-divisions, 26 blocks and 27 numbers of
Police Stations. Area wise, the biggest sub-division is Jangipur which has seven blocks and the smallest and
lately formed sub-division is Domkal which has four blocks only. Sub-divisions are headed by the Sub-
divisional Officers under whom the Block Development Officers function in Blocks. The District Magistrate
& DEO discharges duties through the Addl. District Magistrates and Deputy Magistrates [3]. The research
study is performed for retailers in the district of Murshidabad (in bold). The administrative set up is shown as
below.
Subdivision Block
FARAKKA
RAGHUNATHGANJ I
RAGHUNATHGANJ II
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JANGIPUR SAGARDIGHI
SAMSHERGANJ
SUTI I
SUTI-II
SADAR
BELDANGA I
BELDANGA II
BAHARAMPUR
HARIHARPARA
NOWDA
KANDI
KANDI
BHARATPUR I
BHARATPUR II
BURWAN
KANDI
KHARGRAM
LALBAGH
BHAGAWANGOLA I
BHAGAWANGOLA II
LALGOLA
MURSHIDABAD JIAGANJ
NABAGRAM
DOMKAL
DOMKAL
JALANGI
RANINAGAR I
RANINAGAR II
[Source: District Administration of Murshidabad]
1.3 Objectives
Analysis of change in the market scenario of retail industries and build a marketing strategy towards industry
growth.
2. Methods
2.1 Survey planningand preparation
To meet the objectives of the project, an exploratory, experience survey design was used for collecting and
analyzing data. Data were collected using personal interview recorded from subjects.
SurveyAdministration:
Survey procedures included four phases- determining survey location, estimating the time to record the
response, and approaching the retail stores at suitable time for interview. A pilot test was conducted to
determine the feasibility of these proposed methods.
We have taken individual interviews of retailers to collect massive information which will help us building a
concrete conclusion.
We prepared questionnaires keeping current market changes in considerations. In cases where respondents
were unaware of the recent changes we had taken necessary resources (online data/ newspaper clip outs in
regional language).
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2.2 Sampling
A list was prepared from the reference of local people: a random sample of 19 pharmacists at Raghunathganj and
another random sample of 9 pharmacists at Omarpur, another random sample of 44 pharmacists at Berhampur,
another random sample of 6 pharmacists at Jangipur so the final sample would contain between 25% and 30% of
the population. From the list, we randomly selected a sample of 21 stores.
Sampling Technique:
METHOD REASON
Convenience
Sampling
Not all shopkeepers will be willing to take part in surveys
Stratified Sampling Entire population can be divided as shopkeepers from Kirana, marts or road side
vegetable seller
Simple Random
Sample
As there is a defined target population
2.3 Data collection
We enlisted the small scale pharmacies retailers in the Raghunathganj,Behrampore,Omarpur and Jangipur
area is approximately 78.We approached 59 of them and conducted in depth interview with the owner.
We first tried to encourage participants to provide accurate details when talking on crucial topics and
bringing them to the light by informing the importance of their responses in our analysis
We started with specific and direct questions and moved to open ended questions.
Each interview consumed approx 45mins.
2.4 Data analysis
A survey was processed for data entry. Data was extracted from the database which was recorded from data
collection step and analyzed for the report using open-ended answers. Data are presented in this report in a
manner that allows findings what are the changes and the effect of demonetization.
PilotTestResults
A pilot test was conducted to determine the feasibility of the proposed methods. From our sample of 78, a
random sample of 15 pharmacists was chosen to receive the questionnaire using the steps described above.
We received responses from 6 of the 8 subjects assumed to be contacted (47.0% response rate). No wording
changes were made to the final survey based on the pilot test. One procedure was modified approaching to
the respondent at different time when store owner is not busy in his work and took appointment from them
by pre notifying them. Because when we approached store owner on random basis without considering the
fact that they are engage with the customer regarding sales or they are busy with their work they denied to
give us time.
Main Survey Administration
Based on the pilot test results the following procedures were used for personal interview :
1. Pre appointment from store owner
2. Approaching store owner when they are free.
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3. Results
3.1 Effectof Online Pharma Retail
Trends of E-retailing in 2016 the retail market is expected to reach a whooping Rs. 47 lakh crore by 2016-17,
as it expands at a compounded annual growth rate of 15 per cent, accordingly to the ‘Yes Bank - Assocham’
study. [1]
Snapdeal that sold medicines online without prescription had discouraged online pharma retail in India for a
while. This created a scandal with effect of which the Maharashtra FDA had initiated action against the
commercial giant, Snapdeal. Retailers are hyper about the presence of online pharma services.
Indian law does not regulate e-pharmacies [2] India's Drugs and Act does not differentiate between drugs sold
online or through brick-and-mortar retail stores.
This has led to several conflicts between chemists and online drug sellers, with the chemist lobby group All
India Organization of Chemists and Druggists (AIOCD) approaching 10 Cosmetics high courts over the
continued operation of e-pharmacies earlier this month. [3]
From the interview with pharma retailers it can be understood that they are ready to provide value added
service to retain their customer base. Technologies like whatsapp which is in popular use can be an help to
complete delivery with prescription details and address shared online.
In e-retail customers will be charged less as compared to traditional retail outlet because the later has an
inefficient supply chain system which adds to price that customers have to pay. This might pull customers to
avail e-services.
3.2 Private and GovernmentHospital
The Private hospitals have adverse effect on small retailers as they have the control over pricing. As such they
can either waive or hike prices ultimately creating waves in the price structure in open market. As observed
from the research there is certain numbers of private hospitals like Akshadeep nursing home and diagnostic
centre, Sathi Nursing Home and Jeevan Deep. However, on further interviews from general public it is seen
that due to high prices of medicines they prefer to buy it from outside. Public prefer visiting private hospitals
because of ease of treatment (emergency situation).
9. Effectofrecentchangesonsmallscalehealthcareretailindustry
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The Government hospitals give away free prescribed medicines and have high trust factor because of doctors’
references. Under the region of research there are more government hospitals than private.
From public opinion it is observed that most of the prescribed medicines are not available in Government
hospitals and hence they have to move out to retail outlets. This is because of Medical practitioner’s self interest
in making commission. On the contrary, retailers completely denied of accepting any such collaborations.
3.3 Fair Price Medicine Shop(FPMS)
This market model has been introduced to curb the cause of price difference created by the public hospitals. Poor
patients are denied the availability of medicines and are indirectly forced to but the same at higher price in open
market. This price difference is shared by the corrupt stockholders. Introduction of FPMS would provide quality
medicines and other medial aids at a heavily discounted price compared to the maximum retail price. Many
small retailers have agreed to follow the FPMS during its inception in 2012.
Effect: It has been observed that FPMS is of no help, neither to customers nor to suppliers. Thus, making its
impact negligible on other small retailers. It has been seen that Essential medicines like Albendazole Tabs. &
Susp., Metronidazole Tabs. Amoxicillin Caps. 250mg, Ciprofloxacin Tabs. 250 mg, Diazepam Tabs.,
Metformin 500 mg Tabs. Are frequently in short-Supply whereas here in West Bengal, pharma outlets
properly manage inventories and hence are not short of essential meds. Ofloxacin and Domperidone
Pantoparazole which are the most wanted medicines are always in stock with the retailers.
FPMS will have no effect on sales of retailer because from present situation it is understood that people are
willing to pay extra for good quality medicines and won’t risk their health.
There will not be any shift toward FPMS practice.
3.4 EmergingLarge scale Retail -Towards organizedsector
1. Entry of corporate:
2. Value-added services
3.5 Difference inProfitMargin
Pharmaceutical industry traditionally provides 28-30% discount on MRP. In this 28–30%, 8–10% margin is
for distributors and remaining 18–20%,they have to give to retailers. So the discount for distributors is around
10% and for retailers 20%.For food n nutrition items, the margin is extremely low due to 15% tax
Government of
India charges 14.5% VAT to the retailers when they purchase from Distributors/Wholesale. So, this reduces
the retail margin to 15-16%.. Similarly, for refrigeration products margin is around 16% for retailers [1]
As per the interview experience, not many retailers own the power to control the pricing. It is mostly decided
by the wholesalers allowing just a minimum 12%-17% profit margin from the suppliers. If the wholesaler
reduces supply these small retailers will have no choice but to sell under compulsive prices with minimum
profit. There are many private retail stores that make bulky purchase and thus suppliers tend to sell all of their
stock leading
to less supply to small retailers.
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3.6 Demonetization(2016)
From the observations we interpreted that most retailers opted for no credit sales and hence customers were
bound to make immediate payments. To prevent from adverse effect of demonetization retailers adopted this
approach as a result there was reduced purchases.
Ayushmati Scheme (2007)
Target Specifics Description
Approach FinancingCare and ChangingBehavior
Contracting Consumereducation
Vouchers
Target geography Rural
Target Population ChildrenunderfiveWomen
Target income level Bottom20%
Healthfocus Maternal,newbornandchildhealth Primarycare
Objective behind this scheme revolve around healthy pre and postnatal treatment around the rural region.
Awareness about this scheme and its implementation would avoid patients moving out of the place, looking
for better delivery services.
It has not been implemented in Jangipur yet but in Sadar (Berhampore), Lalbagh (Lalgola) and Domkal [X].
Faster it becomes operational, number of institutional deliveries will increase and so will the medication
requirements. This can be a boost to the sales of retailers during the off time like –the winters.
4. Discussion
4.1 Implicationof the results
Change Impact
Online Pharma Retail Tendency towards offering value added services to keep up with market
competition
Private Hospital Impact negligible on other small retailers
Government Hospital Good sales from Doctors reference
Fair Price Medicine Shop
(FPMS)
No effect on sales of retailer
Towards Organized Sector Progressive effect
Difference in Profit Margin High penetration of private hospital will have adverse effect on sales
value.
Ayushmati Scheme (2007) Boost up sales of retailers during the off time like –the winters
Demonetization (2016) Reduced purchases
Cross tabulation and
sample test analysis of effects.xlsx
11. Effectofrecentchangesonsmallscalehealthcareretailindustry
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4.2 Limitationsof the study
1. Geography: We covered three municipalities namely Behrampore, Jangipur and Murshidabad. Retail
market is distributed over regions. It was difficult to locate medicine outlets.
2. Respondents: We mostly covered retailers out of which many were reluctant in taking the interview
because of disinterest and other concern like leakage of sensitive information. We also conducted
interview of few residents which was an impromptu interaction (audio recorded) where in they shared
their ease in making transactions with these retail outlets. We were not able to conduct any interview
with wholesalers because of their unavailability.
3. Language: People in and around the target geography speak less of Hindi and English. It was
Challenging to communicate the meaning of questions as we had to break each of them into simpler
ones that they could pick easily.
4. Time: Most of the retailers take a day off and thus it was difficult to match up days of availability. We
had to plan our days of visit in accordance with their availability, which was again uncertain.
5. Data regarding number of outlets that came up recently was not available to further furnish the
research work.
6. Negligence of respondents:
5. Conclusions
There have beenchangesincreditsaleswhichhasincreasedcomparedtocashsales.Rural marketismoderately
informedaboutrecentschemes.Thiscanaffecttheirgrowthto urbanmarket.Retailershave showninterestin
adoptinge-servicestoincrease valueaddedservicesinordertoincrease theircustomerbase.
More discountedsalestoattractmore customers.
![Effectofrecentchangesonsmallscalehealthcareretailindustry
2
Small Scale Healthcare Retail Industry
Overview
The Indian Pharma sector is a regulated, unconcentrated with HHI below 1500 and unorganized market where
there are licensed individuals who independently perform authorized drug trades. The market is heavily
fragmented. As per report by All India Organization of Chemists and Druggists (AIOCD), the Indian
pharmaceutical market posted annual sales of Rs 53.69 billion in fiscal 2011-2012. There are approximately
700,000 pharma retail outlets, out of these only 20 to 30 per cent is from all the organized retail companies
and rest is dominated by traditional/local chemists [1]
India is a low-middle income country as per the World Bank classification. In fact, the growth in expenditure
on total healthcare in India has been decreased from what it was a decade ago (from 4.3 per cent to 4.05 per
cent).In a talk at Harvard School of Public Health (HSPH) in 2012, it was noted that India spent about $40
per person annually on health care where as the United States spent $8,500 [2]
The organized retail pharmacies provide many value added services like availing medicines in air-
conditioned surroundings, 24x7 operations, door delivery, credit-card acceptance, insurance cover, nurse
station and online pharmacy. Are the unorganized retail pharmacies willing to show the shift towards
providing value added services? For a vast country like India, population demographics of different cities and
towns are very different. This would be a game changer since most of the unorganized retail outlets develop
in areas where it is difficult for high investment pharmacy retailers to extend their coverage. With proper
value added system it can be a threat to the organized medium scale retail outlets.
Findings from Indian Pharmaceutical Industry Research for Nov’16 issue of IBEF [3]
The Indian pharma industry, which is expected to grow over 15 per cent per annum between 2015 and
2020, will outperform the global pharma industry, which is set to grow at an annual rate of 5 per cent
between the same period.](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)