From brick-and-mortar parapharmacy market to online experience

- Portia Crowe

Welcome to Entrepreneurial Journeys, a podcast from Ardian for anyone curious about where growth is happening around the world. Each week, we speak to the people behind innovative companies building the future. I’m your host, Portia Crowe.

When you think of a pharmacy, what do you picture? Probably a brick-and-mortar shop with a friendly face behind the counter, ready to answer all your questions. It’s a centuries-old business, and most pharmacies — while vital — haven’t changed much over the years.

In France, pharmacies and parapharmacies — which sell all the non-medical products you’d find in a typical pharmacy, from diapers to walking sticks — are highly trusted institutions. The pharmacists who work in them are expertly trained and provide important advice and guidance to customers.

You may think it’s not a well-suited industry for the online world. Not everyone agrees.

In this episode of Entrepreneurial Journeys, I speak to Loic Lagarde, the chief executive of the online parapharmacy Santediscount. The company, based in Toulouse, France, was launched in 2008 with the aim of adapting the parapharmaceutical industry for the digital, 2.0 world. Ardian, through its Growth activity, invested in 2017, and since then, it has become the industry leader in France, with sales increasing six-fold.

But how did Santediscount manage to successfully translate something as age-old as a brick-and-mortar parapharmacy into an online experience? Lagarde started by telling me why the industry was ripe for digital disruption.

 - Loic Lagarde

So let's come back to 2008, where the two founders were still students in the pharmacy university, and they realized something -- that they both are part of the culture of the pharmacists in France. Their parents, both of them, owned a pharmacy already in Toulouse. And they were, however, thinking ahead. They were realizing that the online world, whether they like it or not, will have an impact in the pharmacy world. And they both believed that there was strong interest from the consumers in what the pharmacists have to say, in what they can offer as an advice in the physical shop. So they decided that for pharmacies to be relevant in the future world, they will have to be present on the online world. They would have to be present and actually make sure that the quality of the advice lives on in a different setting, which is a website. So that's why they started Santédiscount.com, because they thought that for the pharmacists to be relevant, it will be up to them to actually make themselves relevant again.

- Portia Crowe

Both the founders came from multigenerational pharmacist families that own brick-and-mortar pharmacies in Toulouse. So they know the industry inside and out, which is important in France, where pharmacies play a bigger role in society than in other countries. There are roughly 22,000 physical pharmacies in France.

- Loic Lagarde

A good pharmacist in the physical world will know by heart the name of 500, 600 of his consumers. The interesting thing is, how does technology help you to know and to be helpful to a million consumers? And while keeping the same quality of advice.

- Portia Crowe

Santediscount sells nearly 60,000 products made by 1,500 brands - So in order to accompany their customers best, Santediscount decided to put up on its website a phone number through which customers in need of advice can directly dial a pharmacist or para-pharmacy expert.

- Loic Lagarde

From the get go, it was very important for us to think about the user experience, we want them to feel that they are in a world where they could ask questions to a pharmacist, they could have access to that quality of service that they could expect in the physical world. And so at the beginning, it was very much about, ‘how do we show them that they can actually ask questions?’ So that's why we were, I think, one of the first websites to put our phone number up front on the homepage and it’s a free phone number you can call any time you like.

But that wasn't enough for us. So we decided to go further and we've developed a lot of IP around, ‘how do we push the right content to the consumers so we can guide them in the process and we can guide them proactively?’ And so that's why we spent a lot of time and investment in data — data mining — so we can understand and forecast what the behaviours of those consumers will be, and provide them something that is actually useful to them.

- Portia Crowe

Lagarde is hyper-focused on giving customers the best possible user experience. But he’s also focused on his brand clients, whose products Santediscount sells. He explained how Santediscount can help them — both online and offline.

- Loic Lagarde

We have a big advantage compared to the physical world -- is that we can follow a consumer throughout his history with the product because in the physical world they only have, like, what somebody purchases, but they know nothing about that person in the end. What's really interesting is to see how people move from families of products, how they move from, like, having a baby in their life and where they find the products for their baby. And to make sure that since now we have like close to 10 years of data for some consumers, we are able to see how time is an important factor in the behavior of consumers. And we are the only ones that are able to see it.

On top of that, we provide something that's impossible in the physical world to provide, at least at scale -- is what is the first product that people will put in the basket? Because this is the product that actually decides the entire purchasing behavior and all the products that are going to be purchased with that product. And so it's a key information to have for a brand because they may not be the best and brightest products in the pharmacy, but if they can prove that they are the products that actually people really care about, they come to and actually start the purchasing journey in a pharmacy with that, that's key information for them to actually push more of those products, even in the physical world.

- Portia Crowe

For Lagarde, fighting against the commoditization of parapharmacy products is crucial in order to maintain the quality of products essential to people’s health.

- Loic Lagarde

I think it's a danger for us to fall in the trap of saying that the products that we're selling are just another type of products. And let's just, like, replicate what Amazon is doing and we'll be fine. In the end, Amazon is selling commodities. We aren't. We cannot sell the products that are important for you, for your health, the same way you sell socks online. You need to have an extra layer of quality of content to guide the people, because those are products that are actually very technical sometimes — you need to understand the product that is actually right for you.

So, yes, we need to be very careful about the quality of experience that we're pushing out there.

- Portia Crowe

Before joining Santediscount, Lagarde studied at MIT in Boston and then worked for Google in San Francisco, and he carried that experience with him when he chose to join Santé discount. 

- Loic Lagarde

One thing stuck in my mind from Larry Page actually was: our job is to make sure that we do everything we can so that technology does what technology does best and humans do what humans do best. That means that we need to make sure that humans spend their time talking and interacting with other humans, because that's what we're very good at and that's what a computer will never be able to do.

Another thing that I brought back from Silicon Valley was this thinking, this idea that anything is possible, that you can actually build amazing companies wherever you are. And that's something I really wanted to do in France. I really thought why should it only be in the US? Why couldn't we build something that is ambitious that really wants to push the envelope on, like, the e-commerce business?

- Portia Crowe:

The COVID-19 pandemic has been both challenging and rewarding for Santediscount. Sales grew 30-40% faster than forecast during the first lockdown, as customers took to the internet to find much-needed products. The company doubled the size of its logistics workforce and introduced night shifts to meet demands.

- Loic Lagarde

The first lockdown was, for me, the proof that we are selling products that are important to people — this is the products that they need, this is a first-need basis type of products. Those are products that they need in everyday life: diapers for your baby, food supplements for the elderly. Those are the things that you need to go and get because it's important for you. And so the fact that people could not go out and were afraid to just prove that, OK, they were forced to find new solutions, so they came to us. They will keep on buying from us because they've found that it's an easy solution.

We had to readapt, redo our processes, rethink our sourcing of workers at that time. And so there was a lot of, like, changing the engine of the plane while we were still flying. But in the end, we made it through. And I think it was a great experience for us in terms of, like, understanding what's really important and what are the next steps for us to actually deliver even greater value to our customers.

- Portia Crowe

Looking ahead, Lagarde expects growth to continue at a fast clip.

- Loic Lagarde

When I first talked to Ardian, I think it was three years ago, and even before that, when I joined in 2016, we believe there is room to create a website that has a turnover of 100 million euros in France. And I think we are pretty much set up to do that this year in 2021.

The very surprising thing about us is that we are a 10 year old company and we’re still at the very beginning of our story and of our journey. Why? Because the penetration of the online world for para-pharmacy products is very low in France — it’s like around five percent. And of course, we can imagine it to go up to 20 percent, because that's something we already seeing in other countries that are very close to ours. So that's why I think that I've got to like at least a threefold to fourfold increase just mechanically that is about to happen, because the market will grow and you have more and more consumers thinking every year that, ‘Gee, there must be somebody who will sell those products online.’

I would say that you have a very interesting things happening right now in Germany, where you have like a lot of push for lower regulation on the products you can sell online. And so I think for chronic diseases to have that ability to buy those products through, of course, the proper channels is an interesting one and something that already exists in other countries like the US, for instance, where mail order has been around for decades.

I think we are just scratching the surface about what we can do and what we should do to help consumers.

- Portia Crowe

Thanks for tuning into Entrepreneurial Journeys, a podcast from Ardian.
Listen on Apple Podcasts, Spotify, Deezer, or wherever you get your podcasts. If you liked this episode, don’t hesitate to leave a comment on Apple Podcasts and talk about it with your friends and colleagues. Until next time!