E-commerce shake-up in India

OTCINACTION

India has been one of the major drivers of global OTC growth, with sales up 8.8% in the MAT Q3 2018 period, but there is now uncertainty over the country’s e-commerce sector after the government moved ahead with new rules that took effect last Friday (1st February 2019). The rules prohibit online retailers from selling products via companies or distributors in which they have an equity stake, so e-commerce giants like Amazon and Flipkart (owned by Walmart) have been most affected.

Amazon has now pulled various products from its Indian website, including some of its Amazon Basics line, while Walmart said it was “disappointed” at the government’s haste in implementing the new rules, which will create “significant work” for the company in overhauling its supply chains and systems. Political commentators see Prime Minister Narendra Modi’s decision to stand firm as a move intended to appease smaller Indian retailers ahead of a general election expected in May.

battle-between-e-commerce-giants-amazon-india-vs-flipkart.jpg

Amazon saw its shares dip 4% on the day the rules were implemented and it has lowered its sales guidance for India in Q1 2019. Walmart shares also fell, down 2.4%. In the short-term, there will be huge disruption to supply chains and increasing compliance costs, which will inevitably affect the availability and price of products online, while also giving a boost to bricks & mortar retailers. Long-term, however, Amazon and Flipkart have invested huge sums in India’s e-commerce market and will no doubt recover share.

In the meantime, more disruption to the e-commerce sector might be on its way. India issued draft regulations on the sale of medicines by e-pharmacies in September 2018, including a requirement to register for a licence with the country’s pharma regulator, CDSCO, which should be renewed every 3 years. However, the move has drawn protests and petitions from pharmacists, and opposing views in different regions of India, making the future implementation of these regulations highly uncertain.

The latest edition of our bestselling annual OTC Yearbook 2019 is available to pre-order! Scheduled for publication this April, this report will include reviews of major OTC categories, leading companies and brands, Medical Devices, Switch and much more. Pre-order your copy before 31 March to take advantage of our pre-publication rate! To find out more, or to reserve your copy, please contact Melissa.Lee@NicholasHall.com.

Advertisements

How will Amazon’s Basic Care line impact OTC?

Amazon recently announced the launch its line of generic OTC medications named the Basic Care range. The line competes with large and established US generic brands including Giant Eagle’s TopCare, Target’s Up & Up and Walmart’s Equate.

The Basic Care line is comprised of 60 items and includes cough, cold & allergy, gastrointestinal, analgesic, hair growth and smoking control products. Technically, Amazon does not own these products, which are produced by private label manufacturer Perrigo, but it does put Amazon in a position to put the squeeze on other marketers. Amazon has taken a very simplistic approach to the branding of Basic Care but claims the products are of the same standard as established OTCs.

Amazon BC

Should OTC marketers worry?

The answer is yes and no. Amazon’s biggest competitive advantage will be on price. Basic Care offers much lower prices compared to established brands especially when buying in bulk. This will work well for consumers who like to stock up on OTC items so they have them to hand when needed. Also the convenience of being able to couple this with a dash button and Amazon Prime will be a winning combination for some.

In an interview with CNBC, retail analyst Scot Ciccarelli suggested some OTC marketers may need to become more willing to lower prices. A number of retailers such as Walgreen’ and Walmart have already had to sacrifice margins to become more of a threat to Amazon after the acquisition of Whole Foods Market.

However, Amazon will still struggle in terms of accessibility. For example when the first symptoms of a headache come on, most consumers will go to their local pharmacy or supermarket to get instant relief. Amazon will not be able to offer convenience by just selling products online.

Is this part of a bigger picture?

Amazon is yet to make its plans for the prescription drug market completely clear. However, reports suggest launching an OTC range could be a step closer to a broader healthcare business play.

Whether you want to find out more about the latest innovations, benchmark the competition or simply keep abreast of new launches, Nicholas Hall’s extensive OTC New Products Tracker is an essential competitive intelligence tool that you simply must trial. Subscribers can also benefit from a newsletter highlighting the key product innovations affecting the industry. Find out more or set up your free trial today by contacting david.redford@NicholasHall.com