Sameer Maheshwari, founder-CEO, Healthkart, expects this health e-commerce portal to grow five-fold in five years, riding on its strengths of authenticity and the ability to assist customers effectively
Gurgaon-based HealthKart, an e-commerce portal for health products, outlines authenticity and assistance as its key differentiators. “Authenticity is a serious problem in the healthcare industry which is infiltrated with several counterfeits and parallel imports,” points out Sameer Maheshwari, CEO, Healthkart.com (Healthkart). Since spurious players crowd the online space through an unregulated marketplace, Healthkart, has put in place tight sourcing norms, brand partnerships and an inventory-led model to guarantee authenticity to its customers.
“Additionally, given our depth in the category, we are able to fill the much needed customer education gap that exists for health products via specialised customer support, much better than horizontal e-commerce players,” he adds. The company has partnerships with 300+ brands and does around 50,000 transactions per month. He believes that such differentiation will work in favor of the vertically focused player as the health market matures over time.
Healthkart also actively engages with its customers through product reminders, emails and more, to ensure that their health needs are taken care of while the portal enjoys top recall. In addition to its core team of 150, the company has around 100 people in customer support and 200 contract employees in logistics.
Stepping into a growth phase
In May 2013, the company raised an undisclosed sum, which was largely used to drive the next phase of growth for the company, including marketing initiatives, building working capital, enhancing operations and hiring teams. It also invested in two new divisions – HealthKart+, which is the generic drug search engine, and pharmacy marketplace and offline retail stores where HealthKart is experimenting to further strengthen its customer experience via an online/offline-integrated experience.
Based on a largely inventory led business model, the company maintains an inventory of 90 per cent of its products, sourced either directly from brands or their authorised distributors. “We currently have two distribution centers – one for the country’s north and one for the south region. The orders are shipped via logistic partners across the country. In any given month we ship to nearly 600-odd cities,” explains Maheshwari. Thirty per cent of the sales come from Tier-IV towns and makes for nearly 550 of the 600 cities it ships to every month. Customer demographics are spread across the spectrum, with a large chunk being 18-30 males and 35+ males and females. Nutrition supplements, sports equipment and medical devices are the core categories.
The company has two primary channels of customer acquisition namely digital marketing and referrals. For digital marketing, the company relies on organic brand traffic and paid traffic. “We invest in search engine optimisation for driving the share of organic traffic. For paid traffic, we leverage most online channels such as Google, Facebook and retargeting engines,” says Maheshwari. Referrals are sought through affiliate online channels and direct referrals from customers who are happy with the company’s service.
The gross margin model the company follows mimics any modern trade retailer, where HealthKart buys at a negotiated margin and sells at a markup. Additionally, several brands participate in marketing campaigns on the web property for which it is paid marketing fees. “Cumulatively, we operate at a 20 per cent to 25 per cent gross margin,” explains Maheshwari.
Understanding market dynamics
At a macro level, there are certain emerging trends in the e-commerce industry, the first of which is the evolution of three key models – horizontal, marketplace and vertical. Secondly, the increase in mobile traffic drives the growth of e-commerce adoption. While the market leaders are still evolving in horizontal and marketplaces, there is tremendous competition to capture customer interest. The emerging leaders are well capitalised and will lead an active fight eventually leaving two-three players in a steady state.
Amazon’s recent entry has spurred the competition in this segment. Unlike horizontals, for verticals, it is about creating differentiation and working towards the path to profitability. Currently, several e-commerce players are investing heavily in creating a differentiated offering for mobile consumers, which is driving the next phase of e-commerce growth. Now most of e-commerce companies are getting 30 per cent+ traffic from mobile penetration, up from 15 percent, in the last year.
“Our challenge is to be disciplined about our model and to invest resources in building differentiators which would lead to sustained growth and profitability,” shares Maheshwari. While horizontals are singularly focused on topline scale, HealthKart believes in balancing topline growth with sustainable margins, quality of customer acquisition and driving repeat transactions.
Currently, India’s e-commerce market is estimated to be nearly US $10 billion, of which e-tailing is close to US $2.5 billion to US $3 billion. While electronics, apparel, shoes and books make the bulk of the e-tailing market, health would comprise four per cent to five per cent of the total market. Health is an under-penetrated online category, with a much larger offline market, indicating that it would be a fast growing category online. “Our competition is largely category specific and a majority of this comes from horizontal players and a few niche players. We don’t have anybody of meaningful scale focused on health,” says Maheshwari confidently.
In five years, Maheshwari expects Healthkart’s size to have grown five-fold. He believes its growth drivers to be an exponential growth of e-commerce leading to core health category growth online and a growth of its online pharmacy via HealthKart+. He also anticipates an increase in the company’s physical retail footprint, which will capture the latent demand of the offline market. “In five years, we see ourselves as the de facto online destination in India for health products,” he concludes.
WHAT HARVARD BUSINESS SCHOOL TAUGHT SAMEER MAHESHWARI
A LESSON TO REMEMBER
More than anything else, HBS ingrained in me, a framework to evaluate business situations and take informed decisions amidst ambiguous situations. This framework has consistently helped in navigating day-to-day entrepreneurial volatility on which available data is often incomplete. Additionally, the leadership and organisational skills enforced at HBS has helped in scaling the organisation from a team of 4-5 to 250+ while maintaining a performance culture.
A LESSON TO UNLEARN
While a lot was taught at HBS, it is impossible to relate to certain things until and unless you experience them in real life. I believe the journey of entrepreneurship is one that is difficult to impart at business school. While there were quite a few courses, which got me acquainted with the mechanics of the process, enduring the process with an ability to maintain a professional-personal life balance is something I learnt from living life.
A FOND MEMORY
Harvard was an unbelievable experience of which I cherish every moment. Being back in college after a few years of work experience was an opportunity to reflect and develop the self. My best memories include the lasting friendships that were developed through a shared experience and the chance to meet some super talented and driven people, who had a desire to change the world. But the most fun I had was at the late night poker parties on Fridays, followed by trips to the diner for an early breakfast.