Rising competition and costs have hit players in the organised pharmacy market. The glitzy outlets that promised to change the face of Retail pharmacy—threatening the existence of the corner medical stores by combining lifestyle products, cosmetics and consumer experience with a wider range of pharma products—are facing pressure during slowdown. This is mainly because shrinking budgets in the tough times have slowed spending on lifestyle products and cosmetics, the high margins categories that kept the format going.
Organised retailer MedPlus pharmacy has closed down all its 20 stores in the city and other players are also experiencing the effect of economic slowdown. With curbs on consumer spending, retail chains have to put brakes on the expansion plans. MedPlus closed its stores just within 10 months of operations.
Planet Health, one of the better known formats, is withdrawing presence from petrol pumps phasewise, say sources. Although this could not be confirmed from the company, the outlets have been closed at various petrol pumps in the city.
Drug & Food Pharmacy too had planned to open 60 stores in Ahmedabad till the end of March. However, due to shrinking business, it has managed to open only 22 stores. “Sales of cosmetics and life-style products have decreased by 25%. The highly competitive market has reduced margins. Turnover too is down nearly 30%. Our cost is increasing with the number of stores and has delayed our expansion plans,” MD Kamlesh Patel told ET. The retail chain is finding new ways to reduce the effect of recession. The company is now restructuring its business model by changing the product category. “We have introduced 70 private label products in our stores and will include food products also,” Mr Patel added.
UK-based pharmacy retail chain Medipharmacy has entered Indian market and opened first 10 stores in Ahmedabad since October-2008. However, the chain is now facing challenges due to the slowdown and has put its expansion plan on hold. Said director K L Shukla: “We were planning to open 30 stores in Ahmedabad till the end of 2009. But, the ongoing slowdown has forced us to wait. Now, we hope that we will open 30 stores in the city till the end of 2010. We will also open stores in Gandhinagar , Anand, Nadiad, Vadodara and Surat.” According to Dr Shukla, Medipharmacy has 40 stores in London and it is witnessing decrease in business due to financial turmoil in the entire Europe. This is directly affecting its Indian operations.
Medipharmacy is getting only 50% turnover against its expectation. The company is planning to open 200 stores in Gujarat, Punjab, Rajasthan, Madhya Pradesh and Maharashtra with an estimated investment of Rs 100 crore till 2015.
The chains, which are new to the markets and are yet to achieve breakeven, are either forced to close down or change the format. Says Prof Piyush Sinha, chairperson of Centre of Retailing of IIM-A: “Life-style products contribute significantly to the total sale of pharmacy stores. Organised pharmacy stores have to bear heavy costs and even a marginal decrease in the sale affects their profitability. These chains are new in the market and they have not reached their break-even point. Hence, decrease in their sales affects them easily.”
However, Apollo Pharmacy is not witnessing any effect of the slowdown. Ashok Chaudhary, manager (Gujarat state) of Apollo pharmacy told ET, “Pharmacy retail is based on necessity and not on luxury. Services play a major role in this segment. We have 63 stores in Gujarat, out of which, 37 are in Ahmedabad. In the current calendar year, we have opened 10 new stores in Gujarat.”