Bad headache and seasonal flu. Empty prescription drawers and emergency re-fills. Condoms and pregnancy tests. Congested aisles and daunting queues. Health and safety risks. Beauty and wellness shopping.
You guessed it — consumers are turning away from the physical supply chain in favor of pharmacy delivery service. E-commerce pharmacies are taking the pain out of drug store shopping by accepting orders online and delivering them directly to the patient's home or a convenient click-and-collect location.
Your online pharmacy delivery service leaves more to be desired
It's a blessing in disguise though — online pharma industry needs to be ready to compete in this fast-growing market. If you are in this type of business or you want to start an online delivery service, you're facing several questions at hand.
- How do you connect your physical retail with the online storefront in a unified shopping experience?
- How do you provide a flawless, delivery-first shopping experience on par with growing consumer expectations?
- How much do you charge customers for deliveries and what shipping methods do you include?
Table of contents
- E-commerce pharmacy delivery business — what's in it for you;
- Four aspects that make pharmacy deliveries highly contextual;
- Four best delivery methods for your online pharmacy service;
- Should you offer free shipping? The do's and don'ts;
- Use A/B testing to set a profitable delivery pricing model.
Why you should offer a pharmacy delivery service
Pharmacy businesses have increased their e-commerce presence in the retail space, and the number of people who order medicine online will continue to grow. Pharmacy deliveries experienced massive pandemic-induced growth, as shown by data from the US-based CVS that saw online prescription orders increase 1,000% during the early stages of COVID-19.
The global pharmaceutical e-commerce market size is projected to reach $177 billion by 2026 and $260 billion by 2029. It's a huge business opportunity, albeit not without some unique last-mile and delivery pricing challenges for online pharmacy retailers. As fast and convenient as it is, pharmacy delivery services come with many nuances that call for excellent delivery orchestration and consumer delivery offer.
What makes pharmacy deliveries — even more — contextual
When shopping online, consumers are paying for convenience, which largely includes the delivery experience they expect. Customer preferences change seasonally — during summer vacations and end-of-the-year holidays — and daily. It all depends on the locations, life schedules, family status, and parallel shopping experiences.
No matter the expectations though, they can rarely admit e-commerce deliveries fit their locations, schedules and seasonal life patterns. And if online deliveries are contextual, pharmacy deliveries are even more so — here's why.
Product and price variety
Each online pharmacy purchase is unique — not only because of the special nature of deliveries but also the product catalog, to begin with.
Pharma retail offers a wide range of products from over-the-counter and prescription drugs to every day essentials and medical supplies to skincare and cosmetics. Average Order Value (AOV) can likely be anything from 5 EUR to 100-200 EUR.
That's great news for website conversions and less so for the net costs of pharmacy delivery service. If the pharmacy offers free home delivery or doesn't charge a profitable delivery fee, small orders with low margins inevitably hurt the bottom line, especially amid the tough economic climate and cautious consumer spending.
Pharmacies rely on same-day delivery
Pharmaceutical deliveries are time-sensitive for two reasons.
First, they require special handling and delivery. Medicine and skin care products must be stored and transported with particular care in order to avoid the adverse effects of weather, temperature, humidity and light.
Second, consider an urgent cold and painkiller order, the elderly, or patients with high-risk conditions who rely on pharmacies for a prompt prescription delivery service. Pharmacy delivery business needs to make it as easy as possible to get the medication consumers need whenever they need it.
What matters here is a short delivery time — same-day delivery, one-hour delivery — and appropriate delivery options, such as home delivery and pick up in store. It hardly makes sense to store prescription delivery in the uncontrolled conditions of a mailbox or parcel locker for quality, privacy and safety reasons.
Traditionally, e-commerce retailers depend on massive, remotely-located distribution warehouses.
In this case, most online orders require a few hour drive by a delivery truck across the country, which realistically amounts to delivery within at least two working days for the end consumer — more with the weekend or a public holiday, as well as in sparsely populated areas. It also generates unnecessarily high order fulfillment costs for you as a retailer.
Pharmaceutical laws and regulations
Online pharmacies are required to verify the identities of patients before they're able to purchase prescription medications. That's a natural thing to do when you're dealing with health products and must comply with associated regulations, but it may also be placing an additional burden on consumers and the pharmacy delivery service if not implemented efficiently.
Offer these pharmacy delivery methods
- Regular home delivery;
- Instant home delivery;
- Store-to-door delivery;
- Click and collect.
Enable personalized home delivery
Home delivery method includes any type of delivery at the consumer's residential or commercial address.
In the context of a pharmacy delivery business, your customers need to answer the door and receive the goods personally, with the exception of contactless drop off. Focus on convenience. Offer home delivery that fits your consumer's life and urgency the situation requires.
"Online pharmacies make it really hard for the end consumer to understand when will they get the order, what will the deliver options be, how much does it cost? All while drug deliveries are often urgent and sensitive."
Anders Ekman, Chief Business Development Officer and Co-Founder of Ingrid
First, display accurate, specific delivery times early on. Pharmacy doorstep delivery can take anything from several hours to overnight delivery.
When you accurately and clearly present delivery information for every purchase — including delivery times, price and available carriers as early in product consideration as possible — consumers can contextually tailor the whole experience to the specific shopping cart and their preferences.
Second, enable home delivery services during the day, in the evenings and on weekends. Emergencies are likely to arise outside of regular working hours, so it's crucial to integrate with innovative carriers to deliver each online purchase in the shortest time possible.
Some Swedish delivery companies, for example, distribute packages together with the morning newspaper during the night, while others offer deliveries late in the evenings, between 7 and 10 PM.
Integrate with q-commerce carriers
Essentially, it's the same home delivery method, except for a much shorter delivery time. The concept of quick commerce, also known as on-demand delivery, came about years ago and plunged forward as a result of the pandemic — originally, a convenient urban food delivery that takes as little as 30 minutes.
One of the key measures of profitability for a q-commerce company is the volume of orders it delivers within an hour. What happens during off-peak hours, outside of lunch and dinner time? Not much. Instant delivery companies have been experiencing a rough time. Naturally, they're looking into new ways of making money, and one of these ways is to deliver groceries and e-commerce orders — including medicine.
"Now the next frontier of super-fast delivery is here — medicines to your door in 30 minutes."
In late 2021, German Mayd launched in Berlin with a pharmacy delivery app that allowed consumers to use pharmacy delivery service to their homes. They've started off with non-prescription drug delivery and later expanded to prescription medication alongside a regulatory change in Germany in early 2022, which enabled patients to validate prescriptions online. Mayd was said to be the first European service for instant prescription deliveries, but it certainly won't be the last.
Use physical stores as micro-fulfillment hubs
More and more online retailers are beginning to rely on an omnichannel retail strategy that work as a strategic advantage in an extremely competitive environment. 'Omnichannel' means sales across multiple channels — physical shops, web, mobile devices — in a seamlessly connected, unified experience.
"Limiting yourself to one or two platforms and lacking the seamless integration [...] can be detrimental to your long-term growth."
Besides, rumor has it that micro-fulfillment will be one of the fastest-growing trends in logistics throughout the 2020s. Micro-fulfillment means fulfilling orders in small-scale warehouses that are located in densely populated areas — like capital cities, for example — much closer to the customer. Your existing pharmacy store would be one example of that.
Pick up in store, or click-and-collect
If your online store works alongside brick-and-mortar stores, let your customers opt for an in-store pick up. Customers can place an order online and pick it up at a local pharmacy at a convenient time and dodge the inventory issues, which tend to arise with prescription drugs, after they've already spent time standing in a queue.
You can equally rely on your physical retail locations for the same- and next-day delivery to consumers, when delivery drivers pick up packed orders from a pharmacy within the city. Not only are store-to-door deliveries faster, but fulfilling online orders directly from your local pharmacies can be a way of reducing your CO2 footprint. Research in fact shows that the last-mile supply chain made possible by local fulfillment centers could lower last-mile delivery emissions by 17–26% by 2025.
Build a data-driven pricing strategy tailored to your pharmacy delivery service
Setting the best order of carrier services, delivery prices and free shipping threshold can be challenging, especially without any data insights. Not if there's a way to experiment with your delivery configuration.
Should you be offering free shipping?
Now, it's one of the most popular delivery tactics in e-commerce to offer free delivery on all orders. We’ve seen this time and time again — for many e-commerce retailers, it still seems like a must in order to stay competitive. It doesn’t mean, however, that it’s the best solution for your pharmacy delivery service.
What if your customers started paying for delivery? Not only could it be translated into an income that can cover the shipping costs but could also leave you with a profit.
"There's a 'sweet spot' where paying for delivery might mean selling fewer products but still earning more."
Anders Ekman, CBDO and Co-Founder of Ingrid
Set a free shipping threshold
One frequent rate structure would be to set a free delivery criteria for a certain shopping cart value, combined with a fixed delivery rate. It's challenging in case of the pharmacy delivery service though, considering the product catalog and the variety of product prices, especially without any data insights.
If you’re using a delivery platform like Ingrid, you could easily A/B test your delivery offering. The idea is to encourage your consumers to add more to their cart in order to reach free delivery. Here's how it works.
A/B test different delivery methods and price points
How much can you charge for deliveries? What about offering free home delivery? Find out what your customers prefer — and how it affects the bottom line — by A/B testing your delivery options.
In simple terms, checkout A/B testing — also known as split testing — is a method of determining which version of the delivery checkout resonates more with the target audience. Your web visitors are shown two or more versions at the same time, which helps you check which checkout configuration they prefer and which option impacts your business metrics the most.
A/B testing helps you understand consumer behaviour in a data-driven way and validate the assumptions before making important business decisions. When done right, A/B testing allows you to improve the shopping experience for your customers — which drives conversions and repeat purchases.
Delivery checkout A/B testing example: Kronans Apotek
Kronans Apotek has over 320 pharmacies throughout Sweden — from Skåne in the south to Lapland in the north — with quick e-commerce deliveries all across the country.
Together with Conversionista!, the no. 1 consultancy for growth and experimentation, Kronans Apotek identified three business challenges in relation to the delivery pricing strategy and sustainability:
- Low order value purchases were found to affect the profit margins;
- Product revenue margins weren't enough to cover the costs of deliveries;
- Online shoppers faced little incentive to choose greener delivery options.
What's next? Conversionista! created a set of hypotheses and started experimenting with the built-in A/B testing functionality of Ingrid Delivery Checkout. They replaced the pre-selected free delivery option with a greener delivery method, presented at the top of the delivery checkout. Then, they explored five — A/B/C/D/E — delivery cost combinations to identify which price would give the best conversion outcome.
Pricing experimentation paid off. Kronans Apotek minimized low value orders that had a negative impact on profit margins and helped their customers make more sustainable delivery decisions.
Despite the 14% reduction in conversion rate — which in fact eliminated low-margin orders — Kronans Apotek saw a 25% increase in greener delivery option, 11% net margin revenue boost, and a 2% increase in total revenue.
"We've been really good at optimizing the delivery experience from checkout to when the customer gets their products. We now also have phenomenal tools to reliably control the customer offer at all times based on our business goals."
David Wolgers, Head of Product Management at Kronans Apotek
Start experimenting with profitable pricing for your pharmacy delivery business
By building an effective, data-driven delivery strategy that includes multiple delivery options that fit people's life — every time, at every purchase — online pharmacies can scale, optimize their checkout experience, and increase shipping revenue.
Book a demo to see how Ingrid Delivery Platform will improve the delivery experience for your customers and help you make profit on delivery.
Just what the doctor ordered.