Digiworld : Why Digiworld also sells medicines?

Likewise distribution of ICT products, DGW will participate in distributing healthcare products in the orientation of providing market expansion services.

Following the announcement of the Owner of The Gioi Di Dong (Mobile World - MWG) about the probability of experimenting with pharmacy store chain in the near future, recently, The Gioi So (Digiworld - DGW) has also confirmed its involvement in the distribution of healthcare products.

Opportunity in the 13 billion USD market

Whereas MWG just revealed their intention to participate in the pharmaceutical business and has not exposed anything about partners that MWG will embark, then Digiworld already has specific preparation and roadmap. According to Mr. Doan Hong Viet, Chairman cum General Director of Digiworld, in early June, the company will distribute to market the first pharmaceutical product. Similar to the distribution of ICT products, DGW will participate in distribute healthcare products in term of providing market expansion services in all 5 services array (Market Analysis, Marketing, Sales, Distribution and Logistics, After-sales services). DGW will only embark with partners having good products, distribution channels, lacking of branding, in need of support to promote.

Challenge for DGW is that they cannot take advantage of 6,000 available sales points, then must establish separate networks for pharmaceutical distribution segment. In addition, although DGW will not be involved in distribution of drugs in hospitals but they also have to establish relations with health-sector authorities as well as a team of medical specialists who have skilled professional. This is completely a new field for DGW. It is estimated that DGW will spend 40 billion VND to invest in building staffs, selling points, warehouse improvement.

As confirmed by Mr. Viet, this investment is a one-off investment for long-term exploitation. DGW accepted highly initial costs. But DGW is experienced in channel organization, management and application of technology to advance dreadlessly towards healthcare sector. DGW also has expert in sales and marketing such as Mr. Tran Bao Minh. Besides, this industry is growing in an increasing pace. According to the BMI , Frost Sullivan and World Bank figures, in 2015, total costs of healthcare in Vietnam was 13 billion USD. Forecast to 2020, this figure will increase up to 24 billion USD.

According to Vietnam Association of Functional Foods, in 2000 Vietnam had just only 60 supplement products, by 2015 this number was 6,800. In particular, herbal and traditional products accounts for 70%. The attraction has drawn nearly 4,000 companies involved in functional foods business. As Mr. Doan Hong Viet assessed, healthcare sector has high fragmentation with many good products not knowing how to do marketing and promotion. Many production firms do not have resources to build their own distribution system. This is a chance for DGW and many companies to engage in the distribution of health products. In the coming time, DGW's objective in 2017 is to achieve 80 billion VND revenue from this new industry.

M&A Shortcut

DGW has stepped out of the comfort zone to extend new industries, from implementing cloud computing services to the distribution of healthcare products. This time, in the distribution of healthcare products sector, investors have more or less concern. The reason is, even well-known pharmaceutical companies like Traphaco, Dưomputing services,… had to undergo many changes and taken dozen of years to build a network of thousands sales points across the country. Meanwhile, DGW, a company has not ever stepped into pharmaceutical industry, sets a target to reach 20,000 points of sale in just 3 years (2017-2019). This is the reason why Mr. Doan Hong Viet informs, in advance, in the progress of generating resources, DGW will participate in this field cautiously as kind of do piecemeal method. The company will continue to develop another product only upon success of the last.

DGW also expects to promote merger and acquisitions (M&A), joint-venture activities, to shorten the path to enter the healthcar distribution industry. This is also the way which MWG plans to do. MWG's priority in M&A is 10-15 drugstore chain firms. Until the ripe time and encountered favorable condition, MWG will bring drug retail chain from 10-15 stores up to 500-800 stores. MWG will likely to embark on pharmaceutical chain, such as Phano, Pharmacity,… These pharmaceutical store chains are experienced in finding product sources as well as in sales management. But they have difficulty in deploying locations. MWG might concede a part of their locations to partners to located the drugstores in the 1,327 retail supermarkets of MWG, by the end of February 2017.

MWG's method will likely differ from the DGW as well as pharmaceutical companies. According to representative of OPC, the company has established its own retail network, with over 20,000 pharmacies. Meanwhile, Traphaco has delivered their products into 24,000 pharmacies which means it is already present in more than half of the total number of pharmacies in Vietnam (44,000 pharmacies). Mrs. Dao Thuy Ha, Head of Marketing of Traphaco informed, with this system, retail sales revenue of Traphaco accounted for 90%.

In the future, according to Ms. Tra Thuy Ha's sharing, Traphaco will also cooperate with many partners, both domestic and foreign to fully exploit their distribution channels. From the established retail system, Traphaco has invested in a new factory to increase 3 times production of both oriental medicines and pharmaceuticals. Traphaco, OPC,… are not intended to cede distribution to other partners. If there is, as OPC representative said, cooperation will consider in terms of customers, agents. But for the smaller companies, the common solution is to lean on distributors. The big pharmaceutical companies often do not distribute products with direct competition. This is the part of market that many companies like DGW exploits.

Source: Nhip cau dau tu