Amazon Takes on Healthcare E-Commerce — Are Businesses Prepared?

Updated on June 5, 2019
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Amazon has taken over just about every other industry and its next target is healthcare e-commerce, estimated to have a market value of approximately $11 billion by 2023. One could even say that Amazon is in the midst of it, as they already made major moves in 2018. 

Earlier in the year, Amazon acquired online pharmacy PillPack, which manages multiple prescription medications for customers by pre-sorting, packaging, and delivering medication. This is significant because the pharmaceutical supply chain is ripe for disruption due to complexity and middlemen. PillPack simplifies the supply chain; improves the experience; and lowers the costs for patients, payers, and manufacturers. 

The company has also been said to be experimenting with becoming a B2B supplier. Like in pharmaceuticals, the healthcare B2B supply chain is over complicated and rife with middlemen: manufacturers negotiate with distributors, and distributors supply group purchasing organizations that negotiate for hospitals. 

Amazon has said that it can differentiate the experience for customers by “creating a better interface” and tech to integrate into existing systems and processes. Although, it has been reported that Amazon is yet to deliver on better pricing, the company believes it can offer customers a better experience: a differentiator it has cultivated across all of the industries that it has disrupted. Individuals like to purchase from Amazon because the company has managed to streamline and personalize the experience so much that it’s difficult (or simply less efficient) to go elsewhere.  

However, while Amazon is making its way into varying pieces of healthcare businesses, it has yet to take over healthcare e-commerce, which creates an opportunity for medical manufacturers and wholesalers to either cooperate with Amazon—by selling their products on Amazon’s platform—or reconsider their e-commerce approach to be ready to compete with Amazon. 

Medical e-commerce is expanding. In the last five years, the online medical supplies sales industry has grown by nearly 12%, with a revenue of $3 billion in 2019. Within that same timeframe, 10% of new businesses have begun selling online in the industry. 

For companies who want a piece of that pie, the first step is to make sure their customers can purchase their products online. Recent research shows that B2B medical supply customers are researching and purchasing more online. According to our data, 21% of B2B buyers currently buy their products and supplies both online and offline, but nearly 70% would prefer to make between three-quarters and all of these purchases online only. The drive is influenced by buyers’ desire for key information online, such as: pricing information, product details, inventory availability insights, and access to invoices and quotes online. 

Manufacturers and wholesalers should also be prepared to offer e-commerce on whatever device their customer is shopping.  More and more B2B buyers use mobile and voice for ordering. B2B consumers are increasingly younger and more digitally-savvy. According to a recent Google report, “The Changing Face of B2B Marketing,” 42% of B2B customers use mobile devices during the purchasing process. As the buying process changes, technology, such as voice, AI and M2M, is enabling B2B companies to deliver a new and more convenient buyer experience, similar to that of Amazon. 

Finally, healthcare industry suppliers’ business models still rely too heavily on distributors and the human touch of sales representatives. For big suppliers, the added cost that comes with sustaining this model is pricey, but manageable. For their customers, however, especially smaller hospitals and practices, this is a much more exorbitant cost and much more unsustainable. The middleman needs to be removed in order to lower the inflation of end-product cost and to maximize efficiency and margin. Distributors in the healthcare space often have little foresight into orders and inventory needs — which means that common supplies like saline and sutures are often in stock, but specialized medical supplies and tailored-to-customer products are tougher to get your hands on quickly. By opening a direct channel between the buyer and the manufacturer, they can remove the possibility of customers going elsewhere to make a purchase because an item is too pricey or out-of-stock. 

Tim Beyer is the CEO and President, North America of Sana Commerce. Sana Commerce is an e-commerce platform that serves the unique needs of B2B companies who want to grow using e-commerce

Beyer holds a B.A. in International Business administration and two master’s degrees in finance and investment (MSc) from the Rotterdam School of Management, Erasmus University. Tim Beyer is often requested to guest lecture at various educational institutions in the Netherlands and abroad on topics like international entrepreneurship, cross-cultural management, market entrance strategies and scaling up.