Rushing into the conference room for his next meeting, Rajesh, a marketing executive with a consumer goods company, was sure he would not be able to visit his parents in the suburbs in time to replenish their medicine stock. His parents had medicines only for a day or two. His work could have taken a toll on the health of his parents, but not this time. He opened the app of 1mg on his smartphone and placed an order by using images of the prescriptions he had saved earlier.
1mg, an online pharmacy based in Gurgaon, helps people order medicines and also provides information and suggestions on cheaper generic substitutes. The start-up was founded by Prashant Tandon, Gaurav Agarwal and Vikas Chauhan in April 2015 to tap into the digital health space, which includes a $15-billion retail pharmacy market and a $6-billion diagnostic services one.
Recently, 1mg raised Rs 100 crore from investors led by Maverick Capital Ventures. Existing investors participated as well. It had raised Rs 34 crore in April 2015 from Sequoia Capital, Intel Capital, Omidyar Network, Kae Capital and Deep Kalra, co-founder of MakeMyTrip.
Tandon, who also co-founded and was the managing director of nutrition e-commerce company HealthKart, ventured into digital health by launching an app, HealthKartPlus, a medicine information platform, in September 2012. "The initiative grew so fast that we saw a great opportunity to create an independent business and spun off a new business branded 1mg. We believe an informed consumer can bring change in health care," he added.
Launch date: April 2015
Area of Business: Online retail pharmacy & diagnostics services
Founders: Prashant Tandon, Gaurav Agarwal and Vikas Chauhan
Expansion plans: Online pharmacy service to 30 cities by end of 2017 from 13 now
Funding: Series-A of Rs 34 cr in April 2015 from Sequoia Capital, Intel Capital, Omidyar Network, Kae Capital and Deep Kalra, co-founder of MakeMyTrip; Series-B of Rs 100 cr from investors led by Maverick Capital Ventures
1mg has tied up with 30 pharmacists in 13 cities. An order is checked for authenticity and directed to a nearby pharmacist. Payment is cash-on-delivery. The company does not process requests for Schedule X and other habit-forming drugs.
The start-up charges a commission from service providers and retailers. "As volumes drive up, so will the profitability. We will try and introduce other monetisation models like advertising," said Tandon.
Medicines are a highly regulated area, where prescription and stringent norms of dispensation must be followed. While the drug regulator has been mulling regulation of online pharmacies, 1mg claims it is compliant with the Drugs and Cosmetics Rules.
The Indian Medical Association had issued a White Paper on online pharmacies. "This will encourage substitution of cheap and spurious drugs by online stores and the doctor-patient confidentiality will be affected," it said.
Shailesh Lakhani, managing director, Sequoia Capital India Advisors, said: "An integrated health platform is a very complex technology. 1mg is solving this in a way that has never been done globally. The team will have to come with solutions to make it happen."
Tandon said the challenge was to simplify medical data, so that customers can take an informed decision, and to improve supply-chain efficiency. 1mg has adopted open source technologies to reduce response time. The company had to invest a lot in algorithms and machine learning to ensure inventory prediction.
Matthew Kinsella, managing director at Maverick Capital Ventures, lead investor of the latest round, said it had been investing in digital health companies across the globe and 1mg was the clear leader, with outstanding engagement metrics.
With the Rs 100 crore raised from investors, the company plans to expand its pharmacy and diagnostics marketplaces, and develop new business lines, including online consultation by doctors. From 13 cities now, 1mg plans to expand to 30 by the end of next year. Pharmacy partners are expected to grow to 60 by then. It will also look at offering round-the-clock services.
Break-even will have to wait for a few years, considering the investment 1mg is making in technology and expansion.
Given the emergence of this space, regulatory guidelines for online sale of medicines through e-commerce channels are far from clear. The sector is also facing opposition from the Indian Pharmacist Association and the Drugs Controller General of India. Lack of clarity around intermediary liability has surfaced as an issue.
Establishing trust and driving health education among customers would be another key aspect for the growth of this market. Offline health market is marred by a large amount of counterfeit products and ensuring that online consumers buy authentic products online would play a big role in market expansion. Another important aspect is creating a unique customer experiences which will win over customers with recall value.
Online pharmacies will see the next phase of growth when these move towards giving customers a highly personalised experience to increase engagement and drive sales. Their investment in digital commerce (to provide the basis to achieve multichannel growth objectives) will be a key growth driver. The aim should be to have seamless integration of the e-commerce platform with back-end systems. Enabling users to purchase products through their mobile phones will be a key next step in the company's multichannel strategy to ensure customers can shop at any time and from any device. Add-on features like live chat facilities and interactive shopping environment will also need to be provided to customers to improve their shopping experience and recall value.
Sandeep Ladda, Partner & Leader - Technology & eCommerce, PwC India