Quick medicine delivery: Startups gear up against giants Flipkart and Swiggy

Healthcare company Taskar, which has been offering pharmacy, lab and clinic services at affordable costs since 2020, created Medino’s, a separate service for quick delivery of medicines, three months ago. The company owns 103 stores – what it calls healthcare malls – that operate as dark stores for quick service.

“We have been delivering medicines within 30 minutes since 2022, but as there has been a wave of quick commerce, we decided to create a separate brand for the quick service. We started Medino’s (like Domino’s), which offers delivery of medicines in 30 minutes or free," CEO Prasoon Pal told Mint.

Former Zomato executive Aman Priyadarshi recently started Plazza, a 15-minute medicine delivery service in Bengaluru, after observing glaring gaps in the segment.

“Medicine delivery continues to be a hurdle for many. Everyone ends up growing tired of looking for quick, convenient options and then walks into the pharmacy. The entire process takes hours," Priyadarshi told Mint.

 

Syed Hussaini, founder of Medstown, was developing its processes for two years and said it came to a concrete model and started delivering medicines within 30 minutes in September. The Hyderabad-based startup uses its fleet to deliver medicines from local pharmacies.

While Medino’s is in discussions to raise $12 million, Medstown is closing its seed funding round this month, according to the founders of the two companies. Plazza has started discussions with investors for capital, Priyadarshi said.

Competitive battleground

“Convenience-led medicine delivery is ultimately a capital and execution game because competition is bound to rise, given the obvious supply-demand gap," the Plazza co-founder said.

Pal of Medino’s expects the funding to fuel the growth momentum and plans to expand to over 400 stores and increase its presence from the existing 15 cities to 22 cities. Medstown, currently present in Hyderabad, plans to expand to 20 additional cities after getting the funding.

The quick delivery of medicines is becoming a competitive battleground, with major companies like Swiggy, Zepto, Flipkart, Tata 1mg, and Apollo entering the space. While Swiggy and Zepto are leveraging their expertise in rapid logistics, healthcare players like Tata 1mg and Apollo are using their infrastructure and credibility to integrate faster delivery options.

Zepto and Swiggy have an edge over pure pharmacy retailers like Pharmeasy and Tata 1mg as far as quick commerce for pharmaceuticals is considered. The latter have fewer or no inventory items, apart from medicines, to increase their average order value (AOV) and ultimately offset or reduce delivery and logistics costs, according to Abhishek Maiti, director - industrial goods and services at 1Lattice.

However, Maiti added that any company, big or small, that makes the process of prescription checking and patient identification more efficient through automation and standardised procedures can scale up quick commerce for medicines rapidly.

 

“Startups can also differentiate themselves by focusing on specific customer needs such as delivering medicines tailored for chronic conditions, providing personalised care packages, or offering unique digital services (teleconsultation and instant prescriptions). Small players can focus on innovations like economical teleconsultations and process checks to capture significant share," said Maiti.

Plazza gives its offline pharmacy franchises greater control over the order-taking and delivery processes, which serves as an advantage over running scattered warehouses across the city, according to the co-founder.

Not all startups will survive in the cash-guzzling segment. Sanil Bhatia, co-founder and CEO of ESCA Consumer Health, who piloted a 15-minute delivery service for medicines in Bengaluru for six months through his venture, relymeds, said there’s a real opportunity for a small player to come and build in the space. Bhatia closed his startup after realising it would take time to raise funds – and this is a segment that needs deep pockets, particularly with the entry of the bigger companies.

“If a smaller player can come in and run this business in a capital-efficient way and can solve for selection regulation and a good product, the market will respect that," he said.

Unit economics

For q-commerce companies, commissions (post-discount) in certain pharma categories are lower than in FMCG categories. Moreover, the frequency of purchases for over-the-counter drugs is lower than for groceries or FMCG, said Rishav Jain, managing director at Alvarez & Marsal.

“Having said that, on a marginal cost basis, if this increases the gross order value then it can add to the absolute gross profit per order, which flows down to operating profit," he said.

Maiti explained that managing packaging, distribution and storage (PDS) expenses, which may be higher for quick commerce to facilitate faster delivery, and fulfilment costs is the key to attaining profitability.

“Discounts typically make up 15-20% of AOV (10% is standard for offline pharmacies), COGS (cost of goods sold) for pharmaceutical products make another 60-70%, 5% of AOV is attributable to payments gateway costs and PDS expenses, and fulfilment fetches another 10%. Additionally, there are also marketing costs and return/refund costs," he said.

 

Last year, Tasker did business of ₹2 lakh in its quick commerce vertical, but turnover in quick commerce was ₹1 crore in the past three months, according to Pal.

“The AOV is ₹1,000 and we are earning ₹106 on each order," he said.

Hussaini of Medstown said had 1,200 orders in the past two months, each with an average value of ₹800-850. The company makes money on commission per order. The unit economics, according to Hussaini, are on break even at the moment because this is a business of volumes, and the company is not into huge volumes at the moment.

Regulatory, operational challenges

Plazza’s Priyadarshi said its current AOV hovers in the range of ₹650-700, in line with the AOV of a large offline pharmacy, which will boost the ability of the startup to make and retain high margins. Moreover, Plazza wants to gain meaningful market share in smaller pockets first, the co-founder said.

Tata 1mg delivers medicines within 30 minutes in Gurgaon and parts of Noida and is looking to expand to more cities in the next few months.

“Given that our medicine deliveries happen through our retail stores as well as in partnership with Big Basket through their dark stores, we have an advantageous economic proposition which is also scalable," Gaurav Agarwal, co-founder of Tata 1mg, told Mint.

The bigger challenge for everyone is to take care of the regulatory challenges and operational risks such as the delivery of wrong medicines, according to experts. As for smaller players, the end game could be becoming a category leader if they can offer a good service or becoming an attractive target for acquisition by bigger companies looking to consolidate their presence, Maiti said.