Marketplaces — disruption & the new normal

I joined NMDPL in May 2009. Fresh from my stint in a consulting firm, I decided to take on the business development role of personal health devices. We had just partnered with a leading Japanese home health care product firm to market, distribute and service their products in Kerala.

The old sales channel of selling via surgical shops simply wouldn’t work. The brands hardly mattered for them. Consumers had little or no knowledge of the products. They merely had to contend with the brands peddled by surgical shops. So all that mattered for this sales channel was the margin. Quality, warranty, service, demo had no value for them.

We set out marketing these products to the pharmacies. They were extremely skeptical of the products and the business. A complaint in the equipment would cost them a customer who regularly buys medicines. We had to convince them of our sales and service support. We showed them the profits they would gain by adding this product line in their shop. We conducted demo camps across the state. We had a team which would personally attend to service calls and in time, trained the staff at the pharmacies into giving demos and doing minor service on the equipment. I personally covered 2,500 pharmacies across Kerala, stuck posters, hung danglers, mapped the sales routes, classified the pharmacies and trained my staff.

Sales picked up from less than Rs. 20,000/- per month to Rs. 7,00,000/- per month in two years. We added a baby care company in our portfolio and together the pharmacy line had started contributing over 11–12,00,000/- per month.

Happy Ending?

In September 2011, I got a call from a customer asking for a demo. My sales staff visited his home and found that the item was not sold by us. The customer while initially claiming that he had purchased it from a nearby pharmacy confessed to buying it on ****kart. We gave him a demo but asked him to contact ****kart for any future issues. He enquired how much that product would cost. The price was Rs. 2,400/-. He said he had received the product at Rs. 1,100/-.

The revelation was a shocker for us. Our landed price after customs and transport was Rs. 1,480/-. We invoiced it to the retailer at 1800 plus tax. How would ****kart be able to sell it at 1,100/-? Surely this was not a genuine product. The Japanese manufacturer had a standard pricing for all distributors irrespective of the quantity off take. We immediately raised this issue with the company, sending screen shots of the pricing. The company feigned its inability to stop other sellers from selling online.

The problems started from there, a healthy business which I had built from zero had started to crumble. The future was online — the writing was on the wall.

Our service, ensured that sales did not dip. In fact, we registered a 40% growth in April — August 2012. But more and more people were comparing prices online. Retail outlets too started to question their margins. Why should they not buy online and re-sell?

During a sales meet in August 2012, It slipped from top management that they had invoiced Rs. 3 Crore of stock to ****kart at a significant discount. That gave them the leverage to push for ridiculous growth of 100% y-o-y. Suddenly sales to population ratio of Japan had to be realized over night in India. If ****kart could do it, why not you? They promised separate product models for online and offline trade and we would now have to buy the goods from India, work at razor thin margins and offer significant discounts to have a pricing parity with what ****kart was offering.

I could either work on somehow preserving what I had built and toiled for in the last three years or move to greener pastures. We did that by moving to hospital devices. We had the foresight to have a rule in our company that 40% of sales should come from newer brands every year. We decided to withdraw completely from home care devices & pharmacies. It fared well for us. It allowed us to search for newer categories and newer business verticals.

The decision to quit the business I had personally built over last three years was the toughest I had to make. It had a huge emotional toll on me. But see the disruption that a marketplace caused within one year.

Could they have handled the offline /online channel conflict better? May be , may be not.

Are we as a business on safer grounds just because we have moved to hospital devices? No. Why? because we need to break down our activity into various roles that we play to sell the product and keep the customer happy and then question real hard why technology cannot do it better.

It can be product discovery, product experience, technical clarifications, logistics, demo, service, reverse logistics and payment. Tell me one function which cannot be taken over by technology. A demo video completely removed the need for us to send our engineers to client site. A service helpline and videos and checklists can significantly reduce physical service calls.

The next wave of disruption is not far. We decided to be the disrupt this time rather than wait for someone else to disrupt our business. Doctor’s Bazaar is our way of doing that.

Doctors Bazaar (www.doctorsbazaar.com) is an Enterprise platform for Medical Devices which performs Networking, Interaction and Marketplace functions. It aims to connect thousands of Medical Device Companies with millions of Hospitals, Clinics and Doctors around the world. Improving product discovery, product — therapy fit, global procurement and servicing solutions for Medical Devices. Try out the site at https://doctorsbazaar.com/