Beware the Amazon Threat

Paul Adams warns pharmacies need to act now to ensure they don’t become the next sector to be made redundant by more convenient solutions…

How companies deliver pharmaceuticals into the hands of the consumer is changing. The past year has seen an accelerated move to online across many aspects of the retail sector, from fashion to grocery, and the pharmaceuticals industry is following this trend.

In 2019, following the $750m (£566m) acquisition of PillPack, Amazon launched Amazon Pharmacy. It was created to enable customers to purchase prescription medications through the online store, without leaving their homes.

This acquisition was a clear signal from Amazon that it had set its sights on disrupting the traditional operating model of pharmacies and delivering drugs directly to consumers. Disruption is something Amazon does well, as evidenced by its impact on home entertainment, groceries and books.

Amazon recently registered the Amazon Pharmacy trademark in the UK. It’s now time
for the industry to take notice and act to seize the opportunity.

In the UK, consumers can obtain their prescriptions online from trusted pharmacies such as Superdrug, Lloyd’s and Boots.

There are also startups and online marketplaces, such as QuickMeds, introducing similar methods of pharmaceutical distribution. With the recent migration to online changing consumer behaviour, questions are being raised around the future of pharmacies and the long term outlook for traditional bricks and mortar pharmacists.

Customer experience

There are several benefits to using an online pharmacy for consumers, from pricing to speed. However, the biggest driver is convenience. The pandemic has highlighted the necessity of having access to products and services with minimal social contact.

Online delivery offers consistent access to medication delivered directly to those shielding or self-isolating.

Whilst customers can complete prescription orders online using a pharmacy’s online service, Amazon has a proven track-record of prioritising speedy deliveries for customers. Amazon’s logistics experience will help avoid delivery mistakes, an important consideration when supplying patients with complex needs.

Amazon Pharmacy uses the widely-adopted functionality of buying on Amazon that
consumers are familiar with.

Customers will still want access to advice and insights from trusted pharmacists, and online pharmacies will have to match this aspect of customer experience to compete. There are several aspects of customer experience that online pharmacies can replicate, and others which are more challenging. Customers may still want to speak to someone when receiving their first prescription for advice.

For some, they will want this to be in-person, but could we start to see video consultations or even text-only chat functionality at the point of purchase address even this personal part of the buying experience?

Other aspects will be impossible to replicate online. However, for over-the-counter and
repeat prescriptions, the convenience and discreteness of online delivery benefits many customers.

Buying behaviours

Consumers are expected to maintain the buying behaviours they adopted, especially if it is a more convenient option. There has been an accelerated growth in e-commerce of up to 4-6 years since the pandemic hit.

There are obvious advantages for patients who are housebound, and for those who don’t have access to a wide range of pharmacies due to living in remote locations. This also reduces the time and effort involved for customers in going from one pharmacy to another to get the prescribed brand or drug in the event that their pharmacy has run out of stock.

With online marketplaces laser focussed on delivering fast shipping, the ease of the entire purchasing experience for consumers is why this industry is being disrupted. It is expected that by 2025 the global online pharmacy market size is likely to cross revenues of over $131 billion.

Opportunities

There are also benefits for manufacturers in allowing their products to be sold online. The
continuing shift to online retail brings with it the increasing likelihood of being able to reach a wider range of customers.

Amazon’s logistics simplify complex supply chains. Distributing via online marketplaces
is a profitable venture for pharmacists, as it leverages existing consumer distribution
networks in turn reducing supply chain and transport costs.

Consequently, drug manufacturers could sell non prescribed drugs directly to consumers,
and Amazon may negotiate better prices, as well as potentially offer discounted rates
to attract customers to Amazon Pharmacy. This creates additional threats to traditional
pharmacists.

Building trust

There are a few potential risks to online pharmacies. There have been previous
fraudulent pharmacies operating online, without a license, supplying medicine which is diluted, out of date or fake.

Taking medications from these sites can be dangerous for consumers’ health and
consumers should always check The General Pharmaceutical Council’s internet pharmacy logo scheme to identify legitimate online pharmacies.

There is also the challenge of trust. It may be difficult for Amazon Pharmacy to initially gain
the trust that traditional pharmacists have built with consumers after providing reliable services in-store for decades.

Disruptors in this space will also need to gain trust from customers who weren’t already
converted to online. Nonetheless, consumers are increasingly using Amazon’s Pharmacy offering. Over 50 per cent of those polled in a 2017 study, are interested in refilling prescriptions through an Amazon digital pharmacy.

Future of fulfilment

In summary, the future of fulfilment in pharmaceuticals lies in the convenience that consumers find in purchasing their drugs through marketplaces. This is not to say that it will prove the death of bricks and mortar chemists, however it does pose a threat and is disrupting the industry in its current form.

Customers will ultimately have a more efficient and reliable process for ordering
prescriptions, leveraging marketplaces’ logistics networks.

The challenge for marketplaces will be in disrupting long-term relationships between drug companies and pharmacies, and persuading customers to shop differently. Customers will value the advice that an in-person pharmacist provides, and online marketplaces will have to gain this trust.

Consumers are, however, already purchasing medications and health supplements on Amazon, so traditional pharmacies should be prepared.

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