Amazon's next big move — disrupting the online pharmacy industry with Amazon Pharmacy - The Average Joe

Amazon’s next big move — disrupting the online pharmacy industry with Amazon Pharmacy

November 19, 2020

You better be scared when Amazon comes after your business.

On Nov. 17, Amazon announced their entry into the pharmacy business with Amazon Pharmacy — officially letting consumers purchase prescription medication directly on Amazon.

US pharmacy chains, CVS and Walgreens, fell over 8% while GoodRx, a prescription discount provider, fell over 20%.

(Learn moreCurrent challenges in the US pharmacy market)

Retailers worst nightmare — Amazon

Amazon wants you to buy everything from its shopping platform and that’s a scary thought for retailers.

  • Low price… Amazon is willing to compete with low prices by using cash from its other profitable businesses — remember that time it crushed Diapers.com by undercutting its prices.
  • Distribution… It’s hard to compete against Amazon’s fulfillment network which offers global reach and 1 – 2 day shipping.

In 2018, Amazon acquired PillPack to expand into the $312b US pharmacy market. PillPack gave Amazon a pharmacy license in 49 states, pharmacy fulfillment centers and pre-existing relationships in the pharmaceutical industry. But Amazon Pharmacy isn’t without its challenges:

  • Fending off existing pharmacies like CVS and Walgreens that have made it difficult for patients to transfer existing prescriptions to PillPack.
  • Replicating the in-person pharmacy experience online and convincing its customers, which tend to be older, to purchase online.

Amazon’s too good at failing

Just another day of disruption for Amazon, whose unspoken goal is global domination.

But even for Amazon, not all of its new products succeed — just take a look at their products that you’ve likely never heard of… e.g. Fire Phone, Flash Sale Site — MyHabit, Amazon Destinations, etc.

Jeff Bezos, CEO of Amazon, famously called Amazon “the best place in the world to fail”. By launching lots of products, failures or not, the company increases its chances of building billion dollar businesses like it has done with its cloud business (AWS), subscription service (Prime) and Amazon Marketplace.

For investors… A drop in the bucket

PillPack’s recent sales numbers are not disclosed but it was known to have made $299m in 2018 and was projected to reach $1.2b in 2020.

Even at $1.2b in sales, it’ll represent less than 0.5% of Amazon’s total revenue. The business will have to grow significantly to become a significant portion of Amazon’s business.