Learning from one Pharma Stockist in Madhya Pradesh
Goods flow – Manufacturer to Brand warehouse to CFA / Distributor to Stockist to Retailer
Margins : CFA (1.5-2.0%), Stockist (Scheduled Drugs 8%, Non Scheduled Drugs 20%), Retailer (16-20%)
Mostly 1 CFA agent for one brand in one state
Pharmarack – Selling to Stockist as well as Retailers now
Case : Box : Loose (Eaches / Strips). Largest packaging is Case. Case average value is 50 K INR
Stocksit keep – 30-45 days inventory.
Stockist get 15-20 days credit but has to give 45-60 days credit to retailer
Post GST, stockist are allowed to sell to any retailer in the country. This has dramatically increased competition.
Stockist returns 5% due to expiry.
Problems stockists face:
Batch nos on product doesn’t match batch nos on invoice to him. A drug inspector comes and ask for proof of batch nos match (product to invoice).
Stockist also has to match batch nos while receiving returns and sending returns back to CFA.
Same product has different strengths. Matching same to invoices is a big headache. Avoid sending wrong strength is also a headache.
When retailer returns the product stockist is unable to confirm whether it’s the same product he had sent to retailer or not.
More and more end consumer order online (Tata, Reliance), all the power will move to Tata / Reliance. A) They can then remove stockist as well. B) They will have overwhelming power over brands as well. Medicine is highly regulated industry. Need to have licenses to sell and trade. Thus it’s easier to replace current channels unlike FMCG, in which any one can trade / sell.
Pharmarack (joint venture of 5-6 pharma brands) has also been created to mitigate this risk.
Insights from Gaurav Sekhri, Senior Principal, TVS Capital
Single pharma store makes 40 lakh to 1 cr/year.
Challenges for a retail drug store,
Right starting stock to keep.
Medicines are generally divided into two categories
Prescription - no visibility of demand
OTC - demand patterns are clear
Fill rate of inventory - if the medicines are not available, buyer will look for it elsewhere. A typical neighborhood store keeps around 30K SKUs.
Price sensitive customer - discount market. Customers are now looking for discounts.
Seasonality based fill-rates eg, higher demand for certain medicines during flu season.
26% margin for a pharma company, RX plus OTC combined.