Prescription medicines (restricted to pharmacies)

Non-prescription medicines (restricted to pharmacies)

General retail (e.g., Cough & Cold, Vitamins, Minerals, Lozenges, Pain Relievers, etc.)

The costs involved are primarily inventory costs with COGS accounting for about 65% of sales revenue (dependant on retailer's prescription / OTC product sales mix). The indicative cost structure is shown in Exhibit 1.

Exhibit 1

Source: IBIS, G5251, 24 May, 2005. p. 16

The ability to manage and control stock is vital to the success of a pharmacy (KordaMentha, 2006). Hence, having systems in place to manage real-time inventory can bring down costs significantly. While such systems are already present in urban and most semi-urban areas where stock points are close by, for rural markets stocking is still essential since the re-ordering happens only once a month. Retailers in both urban and rural areas do not carry inventory beyond a week unless large incentives are given. Hence, the inventory burden is largely borne by the stockists.

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* Contributed by: -
Ramkishan Rajan has completed his Bachelor's (Mechanical Engineering) from College of Engineering, Trivandrum, and is a marketing enthusiast with specific areas of interest in Marketing of high technology products and consumer behaviour.
M. S. Diana has done her Bachelor's (Computer Science) from IIT Chennai, and has a strong analytical approach to marketing. Her specific areas of interest include marketing strategy and brand management. She is also majors in operations.
Both are currently students of the PGDM Programme (Batch 2006-08) at IIM Kozhikode.