Selling alcohol and medicine online in 2019: how hard can it be? - Hitecher
Легко ли будет в 2019 году продавать алкоголь и лекарства интернете?

Selling alcohol and medicine online in 2019: how hard can it be?

by Pavel Trufanov

Do you think that managing a crypto business is the hardest thing to do in 2019? Try selling something else online. What about good old alcohol? After all, prohibition ended a long time ago, demand is high, and lots of people want to work and make money. Unfortunately, it’s not that simple

Selling certain items — such as medicine and alcohol — requires a special license. Today, this might be a problem for online stores facing an underdeveloped regulatory framework and competition from offline chain stores.

That’s right, these problems aren’t exclusive to crypto. What can you do, when regulation can’t keep up with the rapid development of technology and the service sector. This is normal. In politics, the thumb rule of system administrators works well: if it works, don’t touch it. New laws or amendments to old ones are usually developed when there is a serious society or industry problem. A particular legal precedent serves as a catalyst in this situation.

For example, let’s take a look at the Russian online market, where regulators often have trouble keeping up with supply and demand.

One of the most-discussed news from last week was a complaint from Rosalkogolregulirovanie (RAR) towards Yandex.Market’s new alcohol section, introduced to the site in 2018. The federal service claimed that the company broke the law against advertising and selling alcoholic beverages. Yandex disagreed with RAR, because the service neither advertises nor sells alcohol: the catalog merely displays information about beverages, their prices, and stores where they can be reserved and later picked up. The Federal Anti-Monopoly Service (FAS) also did not find any violations.

The issue of selling alcohol or over-the-counter medications online has several interested parties, which means that there are also several different opinions.

There is official data confirming that online retailers are interested in entering a new niche. For example, Group-IB analysts estimate a 2.1 billion rubles’ worth of illegal alcohol sales in the Russian Internet in 2018 alone. This is why the Association of Internet Trade Companies (AITC) is urging the State Duma to improve existing laws governing online sales.

Now, imagine how those who earn money from selling alcohol and medications would see this issue! Online sales are much more profitable than their offline equivalent, allowing you to save on renting retail spaces, which enables you to sell items for less. This powerful competitive space will inevitably drive further increases to the price of medications, as part of the sales go online.

The alcohol market can be divided into inexpensive beverages for the average consumer and elite alcohol that most consumers would rather buy in specialized stores. But when it comes to medication, pharmacy chains are serious worried about some of their sales going online, forcing them to increase prices on medications.

Pharma leaders hope to impose conditions that will soften the blow. But I think many of you would agree with me that some of their solutions are rather questionable, for example: allowing home delivery only for customers who are incapable of physically visiting a pharmacy.

Of course, other concerns expressed by pharma companies are quite reasonable: for example, the fact that medications need to be stored in special conditions. And yet delivery time usually isn’t long enough to affect the medication. And these conditions need to be fulfilled in regular pharmacies in the same way they should be controlled in the storage facilities of online stores.

One way or another, pharmacies will have a rough time: even if they start selling products in their own online stores, they will be displaced by leaders in the online retail space such as the Russian Ozon, which has already opened two pharmacies offering medication delivery services.

Government agencies present another challenge, although they include both supporters and opponents of online sales. For instance, the Ministry of Health completely disagrees with a bill on remote alcohol sales that was released by the Ministry of Finance in 2018. The issue is that officials responsible for healthcare believe that this law intervenes with the government mission to reduce nationwide alcohol consumption. Officials recently passed a cut-down version of the bill, which allows manufacturers and wholesalers to sell low alcohol drinks online, starting from January 1, 2019. It’s quite likely that online sales of drinks with higher alcohol content will be legalized in a year or so. And yet retailers will only be allowed to join this market in 2022, at the very earliest.

By the way, you can easily order tobacco products from specialized online stores — I tried it myself. But most sellers prefer payment upon delivery, with the courier asking the buyer to present their passport. I think that this issue will be solved sometime in the future, as soon as politicians and market players figure out the situation with alcohol and medications.

Anyway, something tells me that there is no perfect regulatory document that could satisfy all stakeholders. Global trends prove that the future belongs to giants like Amazon that offer a large variety of products on a single website, with the option of at-home delivery or at least delivery to the closest pickup point. Quite simply, this saves time for customers.

By the way, you can order wine and beer on Amazon. What’s more, the premium service Amazon Prime offers rapid delivery of strong drinks, such as rum, whiskey and vodka. Naturally, international retailers have to adjust their policies to the laws in each country where they are present.

In countries where online alcohol sales are legal, more than a fifth of customers prefer to order online. And for those of you who want to lecture me on the harm of ‘getting the nation drunk’, let me clarify that these aren’t an additional 20-25% of alcohol consumers, but people from the total number of alcohol consumers, who believe that buying online is more convenient for them. Although this argument might be questioned — for example, by the Ministry of Health in Russia.

If your goal is to reduce the popularity of alcohol consumption, you can probably achieve it by limiting advertising of these products. But either way, licensed online sales will probably contribute to customer well-being, because it will make illegal sales unprofitable.

In the end, I think, only chain stores will suffer, as they will be forced to transform their business models or give up a piece of the pie to the new market leaders — online retailers.

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