Over-the-counter (OTC) brand: organizing your distribution channel

Are you launching or developing a parapharmacy brand, and wondering what the distribution options are? You've come to the right place: here, Sidely explores the different channels available to distribute your products, and helps you evaluate the pros and cons of each.

We will start by exploring the traditional channels of physical sales, before turning our attention to e-commerce. We will compare the potential of different distribution channels and study the winning techniques of an optimized multi-channel strategy.

The challenges of the distribution channel in parapharmacy

The distribution channel represents all the stages through which a product passes to reach the final consumer. 

In the parapharmacy sector, this channel is crucial because it influences not only the visibility of the product but also the perception of its quality and legitimacy.

‍Unlike medicines, parapharmacy products do not require a medical prescription and can be sold in points of sale as varied as pharmacies, parapharmacies, specialized stores, or even online sales platforms.

‍For a parapharmacy brand, the choice of distribution channel is therefore highly strategic. A well-adapted channel ensures that products are accessible to the targeted audience, while respecting quality standards and market expectations. It can also play a decisive role in brand image management, competitiveness, and customer loyalty.

Thus, understanding the specificities of the various existing channels is essential for developing an effective and consistent distribution strategy.

Physical points of sale: traditional distribution channels

Pharmacies and parapharmacies are the most common physical points of sale for parapharmacy products.

‍These establishments enjoy high credibility in the eyes of consumers. The latter appreciate being advised by qualified healthcare professionals who can offer personalized recommendations, an asset for brands that rely on trust and customer loyalty.

‍On the other hand, manufacturers who opt for these distribution channels generally must reduce their margins, as the points of sale must also make a profit on the retail price.

However, distributing products in pharmacies and parapharmacies involves some notable differences that you must master to define your distribution strategy.

Selling your products in pharmacies

Pharmacies, although health establishments, also sell cosmetics, skincare products, or dietary supplements. They account for nearly 80% of the parapharmacy market turnover, making them essential for any brand wishing to achieve comprehensive market coverage.

But market growth is attracting new types of players, pushing pharmacies in particular to extend their offer to online sales, where players like Pharma GDD are establishing themselves as leading e-tailers. In addition, to counter mass retail, an increasing number of independent pharmacies are creating their own brands and offering their own parapharmacy products at lower prices.

Selling your products in parapharmacies

Parapharmacies also represent a lucrative market segment for brands of skincare, hygiene, beauty, or well-being products, and attract a health-conscious clientele.

Supermarkets have thus integrated parapharmacy chains into their shopping arcades, as well as parapharmacy aisles in their stores, offering brands two additional, or even complementary, types of distribution points. Moreover, E.Leclerc, Monoprix, Carrefour, and Auchan are capturing a growing share of the online parapharmacy market through their e-commerce platforms.

However, one must remain aware that when a parapharmacy product sells well, retail chains do not hesitate to launch substitute products under their own private label (PL).

Although mass retail constantly tries to increase its market share, some independent parapharmacy chains have established themselves as key players in this sector. Parashop is a good example, continuing to offer laboratories significant development prospects with specialized points of sale and a loyal clientele.‍

The different types of retail businesses

Finally, if you are targeting pharmacies and parapharmacies, you must know the different types of existing structures in order to deploy adapted prospecting strategies.

• Independents: these points of sale are managed by a single owner or a small group without affiliation to a national brand or banner. They enjoy great autonomy in the choice of products, suppliers, prices, and marketing, and can differentiate themselves more easily in their area. About 95% of French pharmacies are independent community pharmacies.
  The remaining 5% are divided among different forms of organization:

• Franchisees: a franchise agreement gives these points of sale the right to use the name, logo, and management methods of a brand, in exchange for fees and compliance with centralized guidelines. This is the case for Tanguy Parapharmacie, Cap Vital Santé, or Parapharm.

• Integrated: in this model, the points of sale belong to a group or a brand, often in supermarkets. The integrated parapharmacy is characterized by centralized management, supply through a central purchasing agency, and coordinated marketing strategies. Auchan is a prime example.‍

• Cooperatives: E. Leclerc, however, operates on a more specific cooperative model, made up of independent members who own their stores.

Intermediaries

While prospecting integrated and franchised stores can facilitate the establishment and pooling of commercial agreements, each point of sale must be developed and monitored over time. As for independents, a personalized approach is required from the very first sales contact. Of course, there are outsourced sales force agencies, but that does not solve the issue of expenses!

However, there are centralized purchasing structures that can allow you to target high-volume sales more quickly.

Wholesaler-distributors

To facilitate procurement, i.e., the supply of medicines and parapharmacy products, pharmacies generally go through wholesaler-distributors.

These intermediaries organize the pharmaceutical distribution between laboratories and pharmacies. They buy in bulk and handle delivery to the points of sale.

‍Generally originating from pharmacist groupings, with the historic mission of preventing stockouts, these mega-structures deliver to pharmacies in less than 24 hours. The best known are CERP, Giphar, and OCP.

‍Wholesaler-distributors are certainly the best approach to obtaining large orders (sell-in) without scattering your sales efforts. They actually capture about 80% of pharmacy purchases! This figure should be put into perspective, of course, as it primarily concerns medicines and not parapharmacy.

‍However, the requirements to be listed by these distribution giants deter many small brands, as wholesaler-distributors are generally interested in manufacturers with existing brand awareness or proven commercial potential.‍

Other forms of groupings and centralized purchasing

Retailers also sometimes group together to pool their purchasing power and benefit from better rates. Different models exist: buying groups, centralized listing agencies, associations, or cooperatives. Identifying and prospecting these structures can help sell your products in larger volumes, provided you agree to appropriate discounts.

⚠️ Depositories are not distributors. You can commission them for the storage and delivery of your products, but their mission is not to expand your distribution channel or find new markets. They are mandated intermediaries, not wholesalers who buy your products.

⚠️ In-house Pharmacy (PUI): unlike community pharmacies, healthcare and social welfare institutions with an in-house pharmacy (Pharmacie à Usage Intérieur - PUI) procure most of their medicines directly from manufacturers, their depositories (see above), or operators (see below). In the case of public institutions, these purchases follow a public bidding procedure.

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Specialty stores

Finally, there are other types of physical points of sale with significant sales potential, whether they are independents or national networks.

‍Organic and natural stores: banners like Naturalia or La Vie Claire offer well-being and parapharmacy products, often focused on natural, organic, or eco-responsible formulas, attracting a customer base concerned about ingredient quality.

‍Cosmetic boutiques: chains like Sephora or Marionnaud, although mainly oriented towards cosmetics, also offer parapharmacy products, especially in dermocosmetics (skincare for sensitive skin, anti-aging, etc.).

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E-commerce in parapharmacy: the different channels

Despite the overwhelming dominance of community pharmacies - and therefore physical sales - digital is experiencing the highest growth rate in the parapharmacy field. This already flourishing industry is often referred to as e-parapharmacy. These digital channels allow you to reach a wider audience, especially young consumers, who appreciate the convenience of online shopping.

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E-commerce site: the direct-to-consumer model

By selling your products directly to final consumers from your own website, you give yourself the means to fully control your pricing policy and brand image. Most importantly, you keep 100% of the profit margin, since there is no intermediary in this direct sales channel. We can therefore speak of a short (or ultra-short) circuit. 

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Of course, this approach is not without its drawbacks: in particular, it forces you to assume all marketing and distribution-related costs.

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Marketplaces: being everywhere consumers shop

Major e-commerce platforms such as Amazon and Cdiscount are also interesting distribution channels for parapharmacy products. These sites offer significant traffic and a massive audience.

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However, the competition is fierce! To succeed on these platforms, you will need to master e-commerce best practices, such as creating detailed product descriptions, setting up targeted advertising campaigns, and managing customer reviews.

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Specialized parapharmacy e-commerce sites

Finally, there are specialized platforms for online parapharmacy sales, such as DocMorris. Collaborating with these sites can be an effective way to promote your products and reach a target clientele already interested in self-medication or well-being products.

As always in indirect sales, you must accept that the intermediary will take a cut along the way.

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Comparison of distribution channels and circuits

As we have seen, the marketing channels in parapharmacy are as numerous as they are different from one another. Establishing your distribution network therefore requires studying each of them in light of your sales and marketing strategy.

The table below summarizes the advantages and disadvantages of the main distribution channels.

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Internal criteria for choosing your distribution channels

The pros and cons of each of these channels must be weighed against your brand strategy. At this stage, it can be useful to review the fundamentals of your positioning and your marketing vision.

Here are some typical lines of reasoning when comparing strategy and channels: 

1. Brand positioning: pharmacies and specialty stores reinforce a high-end image, while e-commerce and marketplaces allow you to reach a wider audience.

2. Target audience: younger consumers often prefer online shopping, while older segments favor pharmacies for safety and advice.

3. Distribution costs: they vary depending on whether they involve bulk or grouped deliveries to physical points of sale, or individual deliveries to the end consumer. However, these costs must be compared with the associated unit profit margins;

4. Brand image: pharmacies and specialty stores make it easier to control brand image. In contrast, marketplaces limit control by placing your products alongside those of competitors.

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Optimizing your multi-channel distribution strategy

Consumers are increasingly looking for flexibility and convenience. That is why adopting a multi-channel distribution strategy can maximize your visibility while meeting the diverse expectations of your different customer segments.

Sidely suggests 5 key areas of focus to strengthen the brand experience.‍

• Consistency of customer experience: ensure a uniform experience across all channels (pharmacies, e-commerce, marketplaces) with an attractive and pleasant presentation of your products;

• Stock synchronization: use real-time management tools to prevent shortages and manage inventory across all channels;

• Logistics optimization: adapt logistics according to the channel: fast delivery for e-commerce and availability in physical points of sale.

• Performance analysis: use analytical tools to evaluate sales and adjust your strategy based on the results obtained.

• Personalization and segmentation: offer specific promotions or services per channel (in-pharmacy advice, online discounts) to better meet the expectations of each customer group.

A well-coordinated multi-channel approach enriches the customer experience and strengthens your success. The implementation of these guidelines is called retail execution. It is the discipline that transforms vision into operational excellence!

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Alternatives and niche markets

Throughout this article, we have explored the distribution channels most commonly used by traditional laboratories and brands.

But your company might be looking for a differentiated approach, a specific target, or simply a more unique point of entry.

We will therefore conclude our reflection with some additional ideas to seek growth off the beaten path! 

• Beauty and care: beauty salons and hair salons are ideal venues for distributing cosmetics and skincare products. These establishments are highly frequented by a wellness-conscious clientele, and selling your products there can expand your distribution network.

• Hospitality and tourism: hotels and resorts represent an interesting market, particularly for body care and wellness products. Guests of these establishments are often looking for high-end products.

• Public procurement: public tenders for supplies issued by institutions such as hospitals can offer growth potential for your parapharmacy brand. Your products may be part of standing offer agreements that can generate recurring revenue. To this end, consider searching for advertisements to validate this point, and if necessary, train yourself in responding to public tenders.

• Beauty and wellness boxes: these subscription services allow new consumers to discover your products. By collaborating with companies that offer boxes, you have the opportunity to reach customers who might not have discovered you otherwise. 

• Vending machines: generally placed in high-traffic areas such as train stations, vending machines can be adapted for the distribution of essential products (such as sunscreens or hygiene products, etc.). Contact the companies managing them to explore distribution options.

In conclusion...

The variety of distribution channels in the parapharmacy sector offers many opportunities for brands. But each option must be studied in light of the advantages and disadvantages it generates.

‍Between direct and indirect sales, short and long channels, physical sales and e-commerce, the pharmacist's medical expertise and the global traffic of marketplaces, the field of possibilities is vast, and impacts the strategy, positioning, and resources of the company alike.

Unless targeting a specific or niche market, brands commonly opt for a multi-channel approach, and the challenge is then to harmonize the customer experience to build - or consolidate - the brand image.

‍And if you succeed in distributing in pharmacies and parapharmacies, the adventure is just beginning, as you must then optimize the listing and merchandising of your products in the points of sale.

‍But for that, there is Sidely!