Frost & Sullivan’s has produced an analysis, healthcare eCommerce market in North America, Forecast to 2022. The report examines the key trends and developments in healthcare eCommerce with specific focus on the eCommerce market for pharma drugs and medical devices in North America. It also provides market projections, opportunity analysis by supply chain participants, strategic imperatives, and industry best practices or case studies for both segments.
Meeting the expectations of tech-savvy millennial
The report notes that tech-savvy millennial population have come to expect a high level of user experience (UX). As a result, the healthcare industry has begun to digitise products, services, and commerce models. The industry is setting up personalised UX/user interface (UI) enabled eCommerce platforms and websites. These sites are expected to be the preferred digital channels for browsing and ordering medical devices and supplies. This will not only improve access, quality, and affordability of healthcare, but also promote predictive, preventive, and outcome-based care models. The overall benefits of supply chain optimisation and improved UX are expected to result in an eCommerce channel that will reach $200 billion at a compound annual growth rate (CAGR) of 15 percent by 2022.
According to Kamaljit Behera, Industry Analyst, Transformational Health at Frost & Sullivan: “Drug and device OEMs and distributors should prioritise their eCommerce strategy. This is based on the maturity of their buyer/market. This also requires a mix of available digital tools for educating, researching product information, and order and payment management.”
The Amazon impact
“The convergence of healthcare with IT and retail industries has opened the market up to non-traditional players. These new players are disrupting the existing business channels and future revenue streams. For example, Google, Amazon, Facebook, Apple, and Microsoft (GAFAM) in the West. Baidu, Ali Health, and Tencent (BAT) in East will continue to make further headways in the healthcare industry,” noted Behera. “Amazon will have a particularly impact on emerging home or individual care concepts like telehealth, telemedicine, and direct-to-consumer (D2C) commerce.”
Key trends in healthcare eCommerce
Some of the most prominent trends and growth opportunities in the healthcare eCommerce space include:
- Hospital buyers are more willing to repurchase from a B2B digital marketplace. However, the marketplace must offers transparency, personalisation, and competitive pricing for stable medical devices, implants, and consumables.
- Selling, general & administrative (SG&A) expenses accounting for 35 percent to 40 percent of the overall healthcare industry cost. This creates a need for an efficient eCommerce distribution model by automating sales representatives’ routine and tactical works.
- Development of business models that support the integration of product sale and service functions (maintenance, repairs) in the eCommerce channel. Furthermore, the integration of eCommerce channels with a variety of tools. This includes, customer relationship management (CRM), business intelligence, and social relationship management (SRM) tools will help standardise the purchasing process.
- eCommerce platforms provide robust account management functionalities and integration with warehouse and fulfilment software. This will provide real-time inventory updates and delivery status to customers.
- Apart from drug or device types and purchase volumes, factors such as market positioning, target end users, and reimbursement playing a critical role in eCommerce channel selection and success.
- Retail pharmacy, consumer devices, and medical supplies segments present a scope for large profit pool disruption by eCommerce. There are several centralised contract management platforms such as OpenMarkets, Amazon Business, DST Pharmacy Solutions, and Global Healthcare Exchange (GHX). These digital marketplaces are viewed both as an opportunity and threat by groups of purchasing organisation and pharmacy benefit management.
- eCommerce will solve the large medication adherence challenge. It presents an opportunity to increase transparency in drug pricing, a problem plaguing the US healthcare system for decades.
Enterprise Times: What this means for business?
Amazon’s philosophy has been to create a rich transactional platform that supports a vertical ecosystem of interrelated products and services. It now appears that the healthcare sector has become the latest ‘victim’, hit by the tsunami known as Amazon. Retail was the first industry to be disrupted by the Amazon business model. According to US analysts, Amazon’s new ‘urban grocery stores’ could serve as a springboard for expansion into outpatient medical-care services. As more services move online, Amazon will be ready to compete with hospitals and health systems on brick-and-mortar playing fields.
As Frost & Sullivan suggest, Amazon will have an impact on emerging homecare concepts like telehealth, telemedicine and D2C commerce.