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1mg business model: How does it work and make money

By Abhishek Goel 19th April 2022

1mg, is an Indian online pharmacy delivery with several income sources and has a unique business model. So, how does 1mg make money? What are their sources of revenue? Is it beneficial to use 1mg? If you have the same questions, this 1mg business model blog is for you.

1mg business model

The idea and the business model of 1mg

People buy clothes, shoes, food, groceries, and other stuff online; why can’t they buy prescriptions online? People now prefer to shop online. The plan was to make all medicines available while also dealing with the expense of the medications. 

Investors quickly expressed interest in their concept, and the business obtained $6 million in capital to put it into action and upgrade the technology.

1mg offers its consumers services such as diagnostics, medicine, preventative healthcare, and online Q&A. Aside from that, they feature native adverts for pharmaceutical businesses on various platforms. 

In the last year, the firm has opened pharmacies in 600 towns and expanded its product line to include homeopathy and Ayurveda. Across segments, the firm competes with Netmeds and Practo.

How does 1mg work?

Why not shop for needs like medication online if you can buy clothing, food, and electronics? This is where the 1mg business model, a HealthTech business, enters the scene.

1mg.com appears to be a typical e-commerce store selling pharmaceuticals. In other words, it is a medicine delivery app. But there’s a lot more to it than that. 1mg business model works with certified pharmacies around the country to deliver medicine to your home.

Here’s how an order is fulfilled by 1mg:

  • You go to the app and place your order.
  • The representatives from 1mg go to the nearest partner pharmacies.
  • The pharmacist picks up the products in your order.
  • The order is delivered to your home by a 1mg agent.

Customers have gained trust in 1mg as a result of its branding and dependability. As a result, 1mg is available in 1000+ locations and has completed 25 million orders since its beginning.

Along with the relationship, they also work with businesses to administer healthcare for their employees, work with insurance companies to provide affordable treatment to patients and offer online diagnostics, among other things.

How does 1mg make money?

To begin with, the 1mg business model has 5 major revenue streams as of 2020. Below is a list of all the 5 revenue sources with their respective explanations:

  • Diagnostics and laboratory testing
  • Online medicine ordering and delivery
  • Consultation with a doctor
  • Partnerships in healthcare
  • Subscription-based care plans

Now, let’s find out how a pharmacy delivery app like 1mg makes money.

Diagnostics and lab testing

1mg revenue model

As a user, you may order a lab or diagnostic test using their web portal. The 1mg representative comes to your home to collect the sample and charges a nominal fee for the service. The sample is subsequently delivered to one of the connected labs for analysis.

You pay a defined charge for each test, and 1mg receives a predetermined commission for facilitating the transaction. The remainder of the commission is earned by the lab.

Currently, the majority of 1mg’s revenue comes from online diagnostic tests and lab testing.

Online medicine ordering and delivery

The aim of the 1mg business model is to make medicines more accessible to everyone. Therefore, they intended to address the issue of vital medications not being available in local pharmacies, and stores.

However, this area of their business hasn’t taken off as well as they had hoped, and it earns a smaller but still considerable amount of money (38cr in FY 2019). 

Doctor consultation

1mg consultation

From honoring prescriptions to producing prescriptions, 1mg advanced the value chain by linking patients to partnering doctors, such as Practo, via the Ask Doctor button. One may choose the doctor’s specialty, attach lab tests, and 1mg will link you to the doctor depending on your question and then follow up with the doctor. Refer to the 1mg FAQ page for additional information.

Partnerships in healthcare

Instead of focusing exclusively on individual consumers (patients), 1mg teamed up with a wide variety of employers. For this, 1mg worked with insurance carriers to provide reasonable healthcare plans to company employees. It is a win-win situation for everyone in the system.

Subscription-based care plans

1mg how does it work

Every B2C firm wants a lifetime devoted consumer, and not unexpectedly, large pharmaceutical corporations seek this through doctors. A migraine patient, for example, will require medications on a frequent basis, and if the patient subscribes to 1mg’s subscription plan, the perks, such as free delivery, discounts on testing, and early discounts, give adequate value to the patient. In exchange, 1mg receives repeat business.

A few years after starting operations, and especially after gathering enough customer purchase insights and building a formidable brand for themselves, 1mg began selling products under the “1mg brand” (private labeling) through Delhi Mediart Private Limited.

The website of 1mg features 59 goods under their brand, which range from protective face masks to curcumin (turmeric) tablets. Due to the fact that price is managed in-house, there are attractive deals on certain items. The crazy number of items offered under the 1mg brand is listed below.

Also, read 8 best pharmacy delivery apps

1mg co-founders

Prashant Tandon is an IIT-Delhi and Stanford University graduate who formerly worked for McKinsey, Hindustan Lever, and MapMyIndia before co-founding 1mg.

Gaurav Agarwal, the second creator of 1mg, is also an IIT-Delhi graduate who previously worked with Farmville-Zynga and Netapp.

Vikas Chauhan attended Somaiya College and is the founder of Fresh ‘n’ Daily, a marketplace for home delivery of daily household items similar to BigBasket.

1mg funding

In two years, the firm has raised around 37 million dollars from six investors in five rounds.

Series A: In the initial round of funding, 1mg received $6 million from Intel Capital, Omidyar Network, and Sequoia Capital.

B: In the April 2016 Series B round, 1mg raised 16 million dollars from current investors Omidyar Network and Sequoia Capital, as well as new investment Maverick Capitals.

C: The firm secured $15 million in this round of investment from HBM Healthcare Investments AG, Sequoia Capital, and Maverick Capitals.

Marketing strategy of 1mg

Further, let’s talk about their marketing strategy. 1mg’s marketing approach focuses on local and internet promotion of its services. Its digital marketing activities generate a weekly growth rate of 1% on social platforms and a weekly growth rate of 5.13 percent on-site traffic. In comparison, there are 1.7 million startups on the internet.

In the digital domain, their primary focus is content marketing. They use their understanding of the healthcare sector to provide genuine medical advice on their website by publishing articles and blogs (health resource center). Because these articles are viewed by hundreds of millions of people, they concentrate on Ayurveda in both English and Hindi.

Final thoughts

Until 2019, e-pharmacies functioned in a grey area since there were no rules governing this much-needed mode of medicine distribution. However, after COVID-19, things kicked into high gear, with reports indicating a 2.5x rise in households using pharmacies services. 

The number of homes using e-pharmacies is only estimated to reach 70 million by 2025. Based on India’s potential and the constant innovation strategy, 1mg is well-positioned for growth. 

If you are looking to start your own medicine delivery app, then this might be the right time for you to begin. The pharmacy delivery industry, as per the reports, will boom and more players will enter the market. 

So, if you are keen to launch your pharmacy delivery app, Jungleworks hyperlocal stack would be the right choice. This end-to-end stack will take care of the ordering, delivery, and customer engagement for your e-pharmacy or medicine delivery business. Book a demo today.

Know how Jungleworks can help you setup your own medicine delivery app Get in Touch

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