Pharmacy chains challenge giants of mobile devices and electronics distribution

In Vietnam, Mobile World (MWG), FPT Retail (FRT), Digiworld (DGW) are three largest distributors and retailers of telephone and electronics. 

However, the retail market of technological products is projected to become saturated; all three firms are expanding to the same market - pharmaceutical retail.

While Mobile World chose to invest in Phuc An Khang pharmacy chain, FRT set up Long Chau pharmacy chain and Digiworld is promoting the distribution system of Kingsmen-branded functional foods. 

According to BMI, the overall market value of the pharmaceutical industry of Vietnam is estimated at $5.3 billion, an attractive market.

According to market analysis companies, food and pharmaceutical retail market in Vietnam is still fragmented and dominated by traditional retail modal or usually referred to Mom-And-Pop stores.

With the experience of chain management, electronics retailers and distributors such as Mobile World, FPT Retail or Digiworld have a big advantage when they enter the pharmaceutical industry.

Rong Viet Securities Corporation commented that FRT’s Long Chau chain is taking steps in the right direction. FRT is also the most active firm in the effort to restructure the pharmaceutical chain.

However, the development of pharmacy chain, in general, will still face many difficulties. Medical expenditures are being funded from social healthcare insurance, private insurance and out-of-pocket. Notably, social healthcare insurance amounts to 70 per cent. Therefore, pharmaceutical retail only amounts to 30 per cent, equivalent to $1.6 billion, for which FPT Retail and Mobile World are aiming.

The retail market is fragmented and shared by nearly 57,000 pharmacies nationwide. In theory, this is the ideal environment for the retail pharmacy chain to develop.

However, in Vietnam, healthcare insurance tends to account for the majority of drug expenditures. The thing that health insurance covers medical expenditures in public hospitals or private hospitals have their own pharmacies will limit the growth potential of the retail pharmacies.

On the other hand, countries as India or the Philippines where health insurance accounts for small proportion of medical expenditures are considered an ideal environment for retail pharmacy chains, it cannot guarantee success. For instance, although India has a vast number of 900,000 pharmacies, small retail pharmacies account for 86 per cent of revenue because they are located at every single corner in India.

This is also what is happening in Vietnam. Retail pharmacies are still dominating the domestic market. Vietnam is one of the countries with highest pharmacy-per-capita density in the world.

Meanwhile, the idea of building pharmacy chains is not new. Although, pharmacy chains like My Chau or Phano have operated for 10 years, their presence and influence are very blurry.

Long Chau pharmacy chain is considered the main motive for growth in the next four years of FRT with the expectation of opening 400 pharmacies. However, it is not simple to achieve this target. Even successful pharmacy chains in the world such as Mercury (Philippines) or Raia Drogasil (Brazil) have taken a long time to reach this milestone. Finding the right place to replicate the success of the first stores is not easy.