How did Aermed begin?

Aayush Jindal and Aishar Kumar = Check worked for Bain & Company as Associate
Consultants. They had a lot of domain expertise in the Ecommerce and the healthcare space
after dealing with various projects in the same field. Since they were heavily involved in such
projects, they also understood the amount of money that was being spent by Indian Citizens
especially by those who were chronic patients of diabetes and blood pressure like his parents
and the other co-founders parents. They also understood that the market was huge with no
particular niche player dealing into medicines for chronic patients. Once they settled down on
the idea, it took Aayush and Aishar to convince two of their batchmates from IIT Delhi and
IIM Calcutta Put names to join the enterprise they were about to begin. Once the 4 member
team was in place, they interviewed a lot of customers (Chronic Patents) , Online E-
Commerce Purchasers, doctors, medical professionals. After they understood the Delhi
market pretty well they started developing the right product to launch in the market.

Aayush says they conceived the idea of Aermed in August 2015 when the competitive
landscape was very different. They only competitor back then was 1mg which was more of a
Hyperlocal player and not as a e-pharmacy which it was originally meant to be. 1mg had
been in the market for almost 4 years and was not growing as it was expected and hence
diversified into other forays apart from medicines. He also says that Netmedz ( Now a 50
Million $ funded startup ) had just started back then. The ecosystem also had a few small
players which they did not consider as their competition. He also talks about how flawed the
system in terms of logistics was and was solely focused on increasing the top line for
valuation purposes. However there was an immense amount of potential that was available in
the market.

Seeing the market and overall problems, the team decided to start off as an app to manage the
health of the people out there. They started off as a disease management tool. Not only could
one order medicines and book their lab tests but they could also record their sugar levels,
maintain a diet plan, learn about exercises that can be done, get health assistance and get
reminded of the medicines that you need to take daily.They wanted to be a single application
in the market that you could land to for all your chronic medical problems and have solutions
for the same. In contrast to a fitness company like Okee or Healthify me have an all together
different target group of customers. They focus on the millennials and the youth and help
them maintain and motivate a healthy lifestyle. Counting steps, Exercise, sleep, heart beat
rate and other features. The above proposition might be valid for this set of consumers but
might not be for those who are chronic patients. Chronic patients for example a diabetic
patient might find all these features secondary but primarily will want to measure how much
his sugar level is, the dietary component of his meals, whether he is taking his medicines or
time or not, visit to the doctor, is he doing his 6 monthly medical check up or not, blood tests
and the same has been shown the doctor. Such are the priorities that chronic patients needs
and was the main idea of how Aermed was going to be like in the market. A mobile
application catering to the above needs of the chronic patients based on a subscription model
where they would annually charge Rs 1000 from the patients and take care of all their needs
as per the chronic disease. To start this off, they developed the mobile application and tried to
sell the same through doctors. They again went to the market and convinced them about the
idea. The ones whom they could convince they also tied-up with them however Aermed
could not sell a lot of subscriptions as they had planned. He says the major reason for this
was the lack of technical awareness in the age group of people 45 and above. He quotes the
term Mobile Application Friendliness of these age groups was not that great. He says that
the consumer mindset is very simple, they shall not focus on their health and its management
but will take their medicines and not avoid the Gulab Jamun in the evening. He compares the
mindset of the 45+ age citizens and the millenials in general he says When our generation
18-40 starts getting diabetes, the youth would be more aware and more careful and they
would want to track all such things. The health conscious mindset of these consumers is
extremely high and do not want to be deemed else because of the health conscious youth
society we are in right now. He says 5 years down the line there will be a greater demand and
usage of the disease management tools and mobile applications because of the growing trend.
They eventually figured out about the need for transactional part only for the current chronic
patients. Buying medicines at discount, convenience of receiving the medicines at home,
getting lab tests done without having to go to labs nearby at discounted rates and getting their
lab samples picked from home and reports directly sent to their doctors/email was the key
features that a chronic patient at this time wanted. Aayush spoke that it was not only
convenience but also but savings that played an important role in the decision of the
consumers in choosing an e-pharmacy.

Another factor that led to Aermed create a fantastic product was their bootstrapping that was
done for 10 months. The bootstrapping phase was decided into two phases

1) Non Revenue Bootstrapping

2) Revenue Bootstrapping

Non Revenue Bootstrapping

The Non- Revenue Bootstrapping phase was from October 2015- January 2016. This was the
time during which the product development took place. The product was earlier a disease
management application and was then pivoted into an online pharmacy. During this time it
was the product that was changed and was suited to the best user experience if possible. They
also developed a strong backend system that helped them separate themselves out of the other
competitors in the market.

The Backend System

The backend system is a unique integration of various supply chain components and faults
the duo had understood and also from their colleague who had worked with Hindustan
Unilever Limited as an Assistant Sales Manager, The backend system is focused on
operational efficiency. The team had begun working on sustainability of their backend
systems which enabled them handle orders of all size and quanitity that could range from 10
orders in a day to 1000 orders in a day. Such was the backend tech system that had been put
into place. The system worked in a manner that Aermed itself became a chemist unlike other
players in the market who had tied-up with local chemists and purchased orders which were
received from their customers and then deliver the same within a short span of time. The
competitors had zero inventory management which helped them deliver medicines in a
shorter span of time than Aermed. Aermed had tied up with more than 50 distributors in
Delhi NCR and managed their inventory to ensure that they could obtain medicines in a span
of time in that day. Aermed promises a delivery time of 24 hours and 100% fulfilment rate of
medicines that no other competitor has been able to do they proudly say. Once the order is
placed and the distributor having the particular medicine is understood from their inventory
management system, the beat of the delivery boy is created who makes sure that all the orders
in a particular area/beat are covered in the shortest amount of time and is back for the pickup
of the next order that is processed. This helps them achieve operational profitability without
any hiccups at any given point of time. Even during Demonitization when they witnessed a
10x growth, where people started stocking medicines for month and placed large value
orders, there backend system functioned perfectly without any problems. In comparison, the
competitors do not function the same way. There systems do not manage scalability as
Aermed does. They rather increase their on ground workforce to make sure that there is order
fulfilment.

Average Order Value

The average order value of most of the other competitors in the market is around 500Rs
whereas Aermed has an average order value of Rs1700-Rs1800. The reason behind this is the
sale of the OTC products at competitors platform while Aermed focuses on sale of chronic
medicines on their platform. The OTC medicines include products such as sanitary napkins,
sexual wellness products, baby products and grooming products that form a major part of the
order in the competitors orders.1mg and other competitors do not charge delivery fee which
helps them gain more consumers from the market at a lower average order value. The average
order value is one of the key reasons why Aermed has been able to break even in terms of
operations. They make sure that they accommodate all customers on the platform despite
their order value. If the order is below Rs 500, a delivery fee is charged from the customer.

Brand Loyalty

Aayush Jindal talks about how the market is maturing and why discounts are not just a key
factor behind repeated consumer purchases from Aermed. Aermed focuses on its service as a
key factor in terms of order purchases. Out of the 150-200 orders that they have everyday,
atleast 20-25 orders of the same is ordered by people above the age 65. Since these customers
are not technically aware of such means, Aermed started their hotline number and whatsapp
messaging services where orders can be placed by both the means. None of the competitors in
the market are doing this. Aayush also spoke about how only 5-6% of the customers still
come on to their platform only because of the discounts. These customers are those which are
not loyal to any of the players in the market. Since the market is flooded with numerous
counterfeit medicines, customers also prefer Aermed because it assures genuinely of products
on its platform. He also talks about just the first order is what the consumer takes to decide
the platform that needs to be worked upon post which the ensuring of repetition rate is not an
issue. They key factors in deciding this is the application interface and the service delivery.
So overall there is neither Zero Brand Loyalty nor complete brand loyalty. Service, trust ease
of ordering and delivery lead time plays a crucial role in building consumer loyalty is what
Aermed is focusing on.

Early Adopters

Aermed started its 6 months tenure of bootstrapping revenues in the period of January 2016.
They started off with about 10-15 orders a day and started growing thereafter. The team
spoke about how their earlier marketing efforts were a combination of both ATL and BTL
marketing activities. The advertised in newspapers, radio, leaflets while also focusing on
convincing patients outside hospitals and clinics to try their products

The Current Problem

Aermed raised an undisclosed amount from investors which has helped them sustain a highly
competitive market. However as the funds cease they are left with three choices with them

1) Either raise a fresh rounds of funds at a higher valuation

2) Formulate an exit strategy by selling their stake in the organization to a bigger player
in the market leading to a consolidation in the market.
3) Shut the operations

Raising Funds

Raising funds has become a difficult proposition for Aermed, Aayush Jindal says. The
entire ecosystem funding took a beat once the investors lost trust in the functioning of the
ecommerce players in the market when the valuation of the Indian ecommerce giant
Flipkarts valuation was drastically reduced in 2016. The amount of funds that were
raised by Indian Med-Tech start-ups in 2015 was nearly 60 Million$ while the same came
down to just 29.6 Million$ as stated by Tracxn, a Chennai based organization that
maintains the track of the funding of the organizations in the country. Aermed is actively
seeking funds for the future at a higher valuation to expand ahead in the country.

Exit Strategy

Aayush also talks about how they wish to be a part of the industry that is able to
revolutionize the medical industry in India giving the digital initiatives launched by the
government. However Aayush says that the market is going to be dominated by 3-4
players in the market over the few years. He gives the example of the online grocery
industry where most of the small players were either bought or shut their operations and
the market is currently operated by just two major players, Grofers and BigBasket both of
which have now revamped their models considering the shortage of funds they are facing.
Aermed feels that an exit strategy like a buyout would help them focus on the future of
the online medical industry which is currently marred by numerous legal discrepancies
and grey areas existing in the operations of the organizations. They also feel that the
market is not a winner take it all market and will always competition with the advent of
newer technologies and consumer markets maturing in terms of online purchases.

Shut Operations

Aermed feels that even if they shut operations they shall not be facing any issues. Since
the team of 7 is absolutely young and have their careers at stake, they feel that the
opportunity cost available to them is extremely high and would not be emotionally upset
despite the shutdown. The major reason being is the kind of sophisticated work
experiences that they team possesses, they are bound to get back to the corporate market
after shutting the operations.