They have always been retailers of medicines and other pharmaceutical products. In addition, chemists are increasingly becoming an important trade partner for consumer product companies.
For, beside medicines, most of them stock packaged and health foods, juices, beverages, cosmetics, personal and home care products. This makes them an attractive trade channel for most fast-moving consumer goods (FMCG) companies.
According to estimates by market research agency Nielsen, the contribution of chemists to an FMCG company's sales is likely to grow to 20-25 per cent in the next few years from eight to 10 per cent now. "Part of the reason for this," says Ranjeet Laungani, vice-president, Nielsen India, "is because this channel is growing in excess of 20 per cent per annum. It is currently the fastest growing traditional trade channel for FMCG companies."
Other traditional trade channels such as grocers and general stores are growing at 13 per cent and 18 per cent a year for FMCG companies, he says.
Relevance of traditional trade
Another reason why they’re an important and growing channel for FMCG companies is the dominance in the country of traditional trade in distribution of consumer products. It is unlike international markets, where the retail segment is dominated by modern trade. The latter, in India, constitutes six to seven per cent of sales for an FMCG company; in urban areas, the average is about 10 per cent. Traditional trade contributes the rest.
With the rise of chemists as a channel within traditional trade, companies are excited. "Chemists as a trade channel for FMCG products are an interesting avenue because they offer more display area. Also, the profile of shoppers coming there is different from general trade. You can also push premium products, which you can't in the case of general trade," says Krishna Mohan, chief executive officer, sales, supply chain & human capital, Emami Ltd.
George Angel, executive director, sales, Dabur India, says: "Selling through a chemist outlet does add credibility to the sales exercise because consumers tend to take them seriously. In that sense, they act as key influencers."
In categories such as healthcare and over-the-counter (OTC) products, Angel says chemists are pivotal. "As consumers are increasingly shifting to self-medication and tend to visit a doctor only for serious ailments, they value the advice of chemists in the context of OTC products. Chemists quite often are better informed and educated when compared to a regular grocer or trader. They give practical suggestions to consumers regarding specific healthcare issues and, hence, influence OTC purchase in a big way," he explains.
Chemists increasingly are also offering free home delivery, resulting in repeat purchases by customers.
However, all this comes at a price. While the margin for traditional trade as a whole is 10-15 per cent, chemists are slowly but steadily beginning to organise themselves and demand more.
Depending on the display they provide for products and even the recommendation, they make to customers, chemists are said to be demanding a margin of 15-17 per cent. Both Angel and Mohan declined to get into specifics on this issue.