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How Amazon Pharmacy will disrupt the Pharma Business

By Aastha Malhotra 18th January 2021
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Following years of speculation and buzz, on 17th November 2020, Amazon finally ventured to the retail pharmacy sector with the launch of Amazon Pharmacy. According to the company, Amazon Pharmacy allows customers to complete their pharmacy transactions via the Amazon app or through Amazon’s website. The pharmacy marketplace includes the following process: set up your secure pharmacy profile and add insurance details, get your prescriber to send your current or new prescription directly to Amazon Pharmacy for the fulfillment, select a payment option before checkout, and confirm your order.

At the time of launch, Amazon Pharmacy offered online pharmacy services only in the United States, with over 50,000 participating pharmacies. Also announced during the launch was a proposed helpline staffed by certified pharmacists and a discount program for uninsured customers. With an e-commerce giant like Amazon stepping into the online pharmacy rink, the retail pharmacy sector braced for impact, and stock prices for many competitors like Walgreens, Rite Aid, CVS Pharmacy, and GoodRx dropped in the range of 9% to 20%.

Curious about how Amazon Pharmacy works and ways to compete with it? We have put together the perfect guide for you.

The Amazon Pharmacy Origin

News of Amazon stepping into the retail pharmacy business first broke in 2017 when the e-commerce giant acquired Whole Foods Market and entered the brick-and-mortar grocery market. Many industry experts took the Whole Foods acquisition as a sign that Amazon would soon jump to the online pharmacy business in some way, and this led to a fall in the stock prices of many leading US-based drug chains. In 2018, Amazon acquired PillPack, an online pharmacy, further hinting at a prospective move to the retail pharmacy sector. A year later, the company officially launched Amazon Pharmacy in a move that was described as Amazon’s broadest push into the healthcare business.

Why Did Amazon Enter The Pharmacy Sector

According to Doug Herrington, senior VP of North American consumer at Amazon, “As more and more people look to complete everyday errands from home; pharmacy is an important and needed addition to the Amazon online store.” Here’s a look at some reasons why Amazon decided to foray into the retail pharmacy sector.

  • The current pharmacy supply chain in the US is highly convoluted, features unnecessarily complex business models, and is hampered by middlemen. With Amazon’s acquisition of PillPack, the company owned a much loved online pharmacy brand with a dedicated customer base and their penchant for superior customer experience. In a market as layered as a retail pharmacy, the coming together of PillPack’s exceptional pharmacy services and Amazon’s robust last-mile delivery and fleet management practices was the perfect union.
  • Cash pay prescriptions amount to over $250 million annually, and Amazon is best suited to capitalize on it by providing their cash-paying customers with heavily discounted prices through PillPack. Given that cash-pay prices vary from one pharmacy to another, it serves as a great testing ground for Amazon to launch its pharmaceutical products.
  • Most retail stores like Target, Walmart, and Costco have dedicated in-store pharmacies that offer customers unparalleled convenience. With Amazon’s acquisition of Whole Foods, they will also set up in-store pharmacies in Whole Foods and reinforce PillPack’s mail-order pharmacy business. The e-commerce giant also has the option to partner with retail pharmacies or build their independent retail pharmacy.
amazon pharmacy

What Makes Amazon Pharmacy Special

There are a few advantages specific to Amazon that make Amazon Pharmacy a true standout. These include:

Loyal Customer Base

There is a tremendous amount of value and loyalty associated with the Amazon brand. The company’s constant innovation, personalization, and razor-sharp focus on customer service have made it a market leader with a valuation of close to $1 trillion. With over 310 million active users and 100 million Amazon Prime users, Amazon Pharmacy has a leg up in terms of both the number of customers and actionable insights based on customer behavior.

Medicine Home Delivery

If there’s one thing Amazon is renowned for, it’s its stellar delivery services. The company boasts a wide-scale shipping and delivery network that can ably support its pharmacy supply chain ambitions. To top it off, approximately 45% of US households live within a few miles of an Amazon fulfillment center, making deliveries faster and more efficient.

Discounted Drug Prices

Given that Amazon has to spend far less money than other retail pharmacies on both marketing and delivery; it can afford to offer drugs at discounted prices and bring in a lot more customers. The company’s ability to offer cash-pay customers with drugs at lower prices and their upper hand when it comes to negotiating with drug manufacturers and health insurance companies make it a true market leader.

Unparalleled Customer Experience

From the point of sale to the actual delivery and post-delivery support, there no other company quite like Amazon. Powered with the ability to create superior customer experiences and personalization at levels that are hard to replicate, Amazon is a powerhouse in every sense of the word. The e-commerce and tech behemoth is powered by cutting-edge technology that puts customers at the center.

Measures Pharmacy Businesses Can Take To Compete with Amazon

By now, you would be wondering if it’s even worth entering the retail pharmacy business with Amazon Pharmacy being such a massive presence. The answer is an absolute yes! Here are some measures pharmacy businesses can take to compete with Amazon:

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  • Better Marketing: There’s nothing like a focused marketing campaign to bring in more customers and increase your market share. Instead of creating generic marketing campaigns that target no one, in particular, expand your horizons and craft curated marketing copies that address the needs of specific groups of customers.
  • Market Research: Nothing beats good old+fashioned market research where you can get real, actionable insights into customer behavior, their expectations, and more. Once you have these insights, it’s much easier to address the customers’ needs and create or modify your services to meet these specific needs.
  • Go Hyper-Local: It’s always advantageous to start small, experiment with your offerings, and learn from your mistakes before you go bigger. By targeting your local market first and building a strong customer base, you can ready your business for bigger expansions.
  • Power Delivery Management: As a retail pharmacy business, the only thing in your control is the delivery of the drugs, and that should be your main priority. From a well-managed delivery fleet to route optimization and planning, good delivery management software can offer you all the tools you need to run your online pharmacy with efficiency and accuracy. Tookan is a delivery management software designed to help you make your delivery operations faster, cost-effective, and time-saving. Some features that set Tookan apart from the rest include end-to-end route planning, real-time tracking, geofencing, and automated dispatch.

Power your online pharmacy business with Tookan’s delivery management software and take advantage of our top-notch features designed for all your business needs. With Tookan, you can automate your delivery operations and focus on growing your business. Get in touch with our experts today to learn more about Tookan and its best-in-class features.

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