The Hindu Business Line : Drug retailers plan to network to stay competitive

In response to the emerging competition from large retail chains, the 6-lakh-odd drug retailers in the country are planning to network themselves in order to arm themselves with better bargaining power.

The All India Organisation of Chemists and Druggists is implementing the networking plan, under which a special purpose vehicle (SPV) would be set up in each State and all the drug retailers in the State will become its shareholders. Alongside, all the druggists would also be linked-up with software.

The organisation expects two significant benefits out of this — a huge bargaining power in procurement and better inventory control leading to cost reduction and stock management.

Pharma Chains

Sources in the organisation told journalists here today that on the one hand there was the emergence of pharma chains such as Apollo, Subhiksha and LifeKen. On the other, retail chains such as Wal-Mart are getting into India in a big way. The question is: Will the small, street-side pharmacist be able to withstand the competition from these large chains?

The response is the networking. With software link-up, a centralised stock room will be able to supply just the right kind and quantity of drugs needed by the retail outlets. This will result in the outlets being able to hold smaller inventory while still being adequately stocked-up.

Pharma Trade

The pilot leg of the project has been implemented in Maharashtra, which has the largest (18 per cent) share of the Rs 50,000-crore pharma trade. The SPV with a paid-up equity of Rs 50 crore has been set up. The SPV has been equipped with facilities such as a corporate headquarters.

Though the SPV's board of directors will comprise representatives of the trade, its operations will be handed over to professionals — Ernst & Young in the case of Maharashtra.

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