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When asked about their shopping experience and knowledge of the internet or mail order
pharmacies most Britons generally have to admit having no experience at all. In fact,
only 3% of UK consumers have shopped at an internet or mail order pharmacy before,
according to a survey conducted by SEMPORA Consulting in 2008. For more than ten
years since the inception of the first internet pharmacies in the late 1990s, the UK image
of these pharmacies has been more or less dominated by reports of illegal US websites
promoting the sale of Prescription Only Medicines (POM or "Rx") without prescription or
offering counterfeit versions of lifestyle drugs such as Xenical (weight loss) and Viagra at
discount prices. At the same time, the online and mail order pharmacy market in other
European countries has witnessed the transition from a niche market to an acknowledged
and trusted professional sales channel that can no longer be ignored by pharmaceuti-
cals and OTC manufacturers.
Driven by repeated three digit-growth rates in some European mail order markets – yearly
Internet pharmacies
sales in the biggest mail order pharmacy market, Germany, are expected to hit the thresh- growing substantially
old of € 1 billion in 2010 – as well as the success of big mail order players like DocMor- across Europe
ris (turnover 2008: € 220 mil.) or Sanicare (€ 170 mil.), market participants in the UK arebeginning to recognize the huge market potential of this new sales channel. >What are the reasons for the recent success of internet pharmacies
across Europe?
The growth of internet pharmacies follows a general consumer trend from offline to online
sales that can be witnessed in almost all industries. In fact, many market experts had pro-
jected even higher growth rates for the online pharmacy business, but while customers
are generally well disposed to buy consumer goods via the internet they have been more
cautious when it came to drugs. In the UK, when asked about their purchasing prefer-
ences for medicines, 38% of consumers participating in a SEMPORA survey in 2008
stated that medicines were too personal or sensitive to be bought online impact of NHS
However, reservations are decreasing as more and more consumers place first trial orders Decreasing UK consumer
for cheap non-sensitive OTC-products and start to appreciate the easy and convenient reservations to buy
purchasing process. When asked about their shopping experience, those consumers who medication online
had purchased online from an internet pharmacy give these transactions a very positiverating:Generally, internet pharmacies build on five key benefits which have continuously gainedimportance in consumers’ purchase decisions in recent years: Do you know
Have you shopped
any internet/mail order
at an internet/mail order
how satisfied
pharmacy before?
were you?
Consumers’ level of agreement
Consumers’ level of agreement
Consumers’ rating
not satisfied
very satisfied
Very positive rating for
purchases in UK internet

Higher convenience: Patients do not have to leave the house to buy their med-
Key benefits of
ication but can choose to order via telephone or online. The majority of internet internet pharmacies
pharmacies employ a team of trained pharmacist staff who take and control allorders.
Increased choice of suppliers: Patients purchasing medicines online can easily
compare and choose from the portfolios of a broader choice of potential ven-
dors compared to their local community pharmacies.
Generally lower prices for non-Rx-products and ability to compare prices from
a large range of suppliers. Bigger packs are substantially cheaper than in local
community pharmacies and are therefore particularly attractive for patients suf-
fering from chronic diseases long term or chronic illnesses.
Increased privacy and anonymity, since purchases do not require physical
contact to the pharmacists processing the order. This is considered particu-
larly important for drugs related to sensitive problems such as hair loss, obesity
or erectile dysfunction.
Broader product range: Since online / internet pharmacies have no restraints
on inventory size, they are able to have a broader product portfolio compared
to traditional community pharmacies, including a broad range of alternative med-
>Successful transition from niche players to professional
and trusted sales channel
Building on these competitive advantages, internet pharmacies also had to overcome a
number of significant consumer concerns concerning the online purchase of medicines.
These general aversions to distance selling of medicines were compounded by a per-
ceived lack of professional advice and inadequate customer service of some of the early
movers in the market:
Main reasons for not shopping at an internet/mail order pharmacy
Consumers’ level of agreement
Little/no consultation or pharmacist advice Medicines are too personal/sensitive to be bought online Unsafe shopping process (credit card details, etc.) Lack of pharmacist advice
is a key reason for not pur-
Source: SEMPORA Consulting Survey, 2008; base: n = 504 chasing medicine online
Compared to their service offering at the beginning of the new millennium, internet phar-macies therefore had to adopt a more professional approach in terms of overall customerservice, shopping and logistics processes. Notably in the German market online phar-macies made a transition from “no-frills” low cost pharmacies to professional andcreative internet companies with a fully fledged marketing and sales programme behindtheir website: customer loyalty programmes, co-branding activities with pharmaceuticalmanufacturers, marketing and sales co-operations with big retail banner groups or evenmedicine pick-up stations at high street retail outlets – most market players have triedand implemented effective new methods to attract and retain valuable customers. Almostall players have set up considerable call centre facilities, which enable consumers to place Improved service offering
orders and get consultation and advice by trained pharmacists on the telephone. As a is needed by most pharma-
result of frequent test calls by the pharmacy associations as well as the influence of con- cies in order to increase
sumer protection groups, any new internet pharmacy entering the market nowadays will consumer trust and accep-
have to offer at least the same standards that are already applied in the market. I N S I G H T S
Furthermore, bearing in mind the public concerns about drug safety, all of the big Euro-pean players are adhering to a number of safety standards in order not to risk bad press,i.e. no dispensing of drugs that have not been approved by the national authorities, nodispensing of Rx-drugs without prescription as well as no selling of cheap foreign copies.
>Historic growth inhibitors for internet pharmacies in the UK market
Whereas the German market is considered to be the most developed of all EuropeanInternet pharmacy markets, UK market players initially had to overcome a number ofcountry specific growth inhibitors. In the UK the first Internet pharmacy began operationsin November 1999 with the opening of Pharmacy2u.co.uk. From a historic perspective,Internet pharmacies are basically an extension of offline mail-order pharmacies. As theUK pharmaceutical profession had so far managed to more or less block all mail-orderpharmacies from the UK market, the UK population had very limited experience with dis-tance sellers of medicines. UK consumers in general paid very little serious attention tothe new sales channel in the first five years of the new millennium. This was also due to aforementioned broad press coverage of “rogue” US Internet phar- Why internet pharmacies
macies providing – often fake – pharmaceuticals including powerful pain killers, narcotics haven’t taken off in the
or anti-depressants to UK patients without prescription. At the same time, the key advan- tage of online pharmacies – better and easier access to medicines – was at first notconsidered as relevant in the UK: 79% of the public already have a pharmacy withinone mile of their home; 47 per cent even have a pharmacy within 500 meters of theirhome. Moreover, the high market share of pharmacy chains in the UK market had already ledto an aggressive competition in the UK pharmacy market – and thus also to lower OTCprices. Compared to Germany, where most internet and mail order pharmacies enteredand grew the market with a discount strategy and positioned themselves on price againstthe more expensive brick pharmacies, a discount online pharmacy model appeared lessattractive in the UK market. >Recent success of UK internet pharmacies
Despite these historic growth inhibitors, the UK market share of internet and mail orderpharmacies has recently grown. The success of major players in other European coun-tries with significantly higher pharmacy density (Germany: 3,800 inhabitants per phar-macy; UK: 4,700) has led to a number of online pharmacies entering the UK market. Atthe same time, consumer trust into the new sales channel is rising. Both developmentshave been supported by the UK government which has initiated a number of actions toincrease public acceptance and facilitate the foundation of internet pharmacies. All legit-imate internet pharmacies must now register their premises with the Royal Pharmaceu-tical Society (RPSGB) and can apply for the RPSGB “Internet Pharmacy Logo”, a visualtool to help the public identify trustworthy internet pharmacies. It is expected that internet sales will gain a share of 3-5% of overall pharmacy sales within Potential of 3-5%
the next three years. key growth area will be the non-prescription segment with 10% of pharmacy sales online
overall UK sales of "pharmacy" (P) medicines – and "general sales list" (GSL) medicinesexpected to be generated online within 2012. The online share can already reach up to50% in specific OTC-categories like weight loss or erectile dysfunction where customersappreciate increased privacy and anonymity.
>Key success factors for internet pharmacies
With the online market growing and no market player so far gaining an unassailable mar-ket position it is expected that more online pharmacies will enter the market in the nearfuture. It will be essential for all market players to find a clear and distinct brand andservice positioning within the even more competitive UK market environment. In this con-text market experts project a general trend to more disease focused internet pharmacies,i.e. pharmacies that focus their portfolio and related online service offering on defined Clear positioning needed
However, key success factor for all players will be the growth of the overall brand aware-ness as internet / mail order pharmacies continue to have very low awareness among UKconsumers. According to a 2008 SEMPORA survey fewer than 10% of respondents wereable to name an internet / mail order pharmacy. > Management agenda for manufacturers
In order to profit from the current growth of internet pharmacies and prevent earlyacting competitors to reach a commanding market position in the new sales channel,drug manufacturers are faced with a number of urgent challenges. Management actionsfor 2010 include… The analysis and segmentation of the brand portfolio according to each brand’srelevance to an online sales channel and the respective growth opportunities.
The identification and segmentation of all potential internet sales partnersaccording to defined criteria (e.g. size, growth opportunities, potential servicesfor manufacturers, trustworthiness, pricing level, etc.).
Pharmaceutical managers
The integration of internet channels within the overall brand marketing, sales and must react now in order to
secure their market share
The overhaul of the discounts & allowances system (trade terms).
in the online channel
The development and launch of partnership programmes and category manage-ment concepts for top internet pharmacies.
t.brodtkorb@sempora.com+44 (0) 20 31 78 46 12

Source: http://www.sempora.com/fileadmin/fm-dam/Insights/UK/Insight_VSGB01_S13_UKPharmacy.pdf


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