The online pharmacy market seems to be a promising long-term growth story. After some regulatory delays and starting issues, this segment is showing explosive growth, with much more to come. At least this is the pitch. Hearing the pro arguments, much makes sense and seems to be the logical path forward. As it is not possible to invest in physical pharmacies for most of us, is the online pharmacy market leader in Germany maybe a good pick to get a foot in the door?
Summary and key takeaways from today’s Weekly
– Redcare (formerly Shop Apotheke) is riding the e-pharmacy wave in Germany as the market leader but faces structural challenges, despite low market penetration.
– Rx is heavily regulated with razor-thin, capped margins; non-Rx is a brutal pricing battlefield.
– Valuation looks tempting on price-to-sales, yet the business model offers limited pricing power, high customer-acquisition costs, and ongoing regulatory overhang.
It took years of protests and blockades from physical pharmacies, regulatory delays, a boom and bust cycle, and plenty of investor patience. But European online pharmacies finally seem to have gained traction.
Especially, and this is today’s core focus, in the German market.
Redcare Pharmacy (ISIN: NL0012044747, ticker: RDC), once known as Shop Apotheke, is the German market leader with 14.2 million active customers per the just-closed Q1 2026. Yet the market penetration in the entire pharmacy market is still low, significantly trailing brick-and-mortar pharmacies.
Online pharmacies seem to be a huge growth story in a vastly under-penetrated market. Growth rates are strong and above the segment’s expansion rate, at least on the top line. After an initial phase of growing and scaling, shareholders should be rewarded, right?
The problem is, the market does not seem to really buy it.
After having watched the space for years, and after having dug into the numbers, history, and structural realities, I remain on the sidelines.
Here’s why.
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From Cologne Startup to MDAX Contender
Shop Apotheke, respectively nowadays Redcare Pharmacy, is not a new company that suddenly came out of nowhere. It traces its roots to 2001, so it is already a quarter century old.
It started when a local pharmacist here in Cologne, Germany, my home town, launched an online store. So it once was a “kölsche company”. Today, the firm has its headquarters in the neighboring Netherlands and the stock has a Dutch ISIN.
What started as a side project grew into one of Europe’s largest e-pharmacies.
The real catalyst came in 2004 when Germany legalized mail-order sales of non-prescription (OTC / non-Rx) medicines. Although we focus today mainly only on the German market, the company is also active in several other Western European countries.
Shop Apotheke went public in 2016 and rebranded to Redcare in 2023.
The stock chart shows that it has been a truly wild ride, starting from 28 EUR, reaching about 250 EUR at its peak, only to collapse, bounce back threefold, and collapse yet again.
And here we are at 45 EUR as of writing, after the Q1 2026 results.
There’s a reason for this — the regulatory environment is a blessing and a curse.
Germany’s pharmacy sector is one of the most protected in Europe. Stationary or brick-and-mortar apothekes have long enjoyed local monopolies, strict ownership rules (including limitations how many pharmacies one person could own), and government-determined, i.e. fixed pricing on reimbursed prescription drugs.
So, no best-pricing or the winner takes it all.
Online players for long wanted to join, but faced years of pushback, hard lobbying, fear mongering about lost jobs and a dying of stores the old grandma couldn’t visit anymore, and even court battles.
The big promised catalyst for online or e-pharmacies — mandatory electronic prescriptions (“e-Rezept”) — was postponed multiple times. This back and forth has sent affected stocks up in anticipation of a breakthrough only to get slapped again. Smaller pilots and tests then began in 2021–2022.
The full nationwide rollout dragged into 2023 and beyond, also in part due to technical issues and the lack of appropriate infrastructure. Insured people needed new plastic cards, but also doctor’s offices needed specific certified card readers.
When e-Rezept finally launched, the hype was quick and real.
Bulls, unfortunately including myself in the early stages, spoke of a major structural shift and disruption in a rusty market. Online pharmacies were already selling non-Rx meds and drug-store stuff like personal care products or supplements. But the real kicker was supposed to be chronic patients ordering repeat medicines they need on a constant basis online with convenience and even financial bonuses.
Quasi a perpetual subscription service.
There were many bigger online pharmacies at the beginning, but with time practically only two big ones are left today after waves of buyouts and consolidations. Our Redcare Pharmacy, and DocMorris (ISIN: CH0042615283, ticker: DOCM), a Swiss company with a spectacular history of its own. But not today.
Just that DocMorris grew especially inorganically through acquisitions (and slower on its own), while Redcare quickly capitalized through extremely aggressive (and at times annoying) marketing via mainly tv commercials with domestic celebrities. It gained the upper hand and became the market leader, all while driving its one strong brand Shop Apotheke that still exists.
The company changed its name, but the online shop kept it.
Fast forward to today, starting from 2023, sales experienced a major boost, and they are still growing at strong double-digit rates. On an annualized run-rate basis, based on the first quarter 2026, sales surpassed 3 billion EUR, so Redcare is not a small company anymore.
e-Rezept was a major sales accelerator.
Since e-Rezept officially launched, the stock soared for a second time through 2023 and 2024, on the narrative of “online taking big share quickly in a 50 billion+ market”. According to this source (see here), the German pharmacy market today has even a size of 70 billion USD or give or take 60 billion EUR, growing annually by 3–4%.
Below, we can see Redcare total sales grew +18.4%, significantly above market. Broken down into segments, it was +10.2% for the bigger non-Rx segment (c. 62% of total sales), and +35.5% for Rx (c. 38% of total sales). Germany grew Rx with +55%, but they did not give a specific number.
We only know that the DACH region, including Switzerland and Austria, generates the bulk of sales and is profitable, while the international segment with countries like Italy is not, yet.
It is tough an am imperfect art to determine the exact market share, but taking Redcare’s total sales for the DACH region of 693 million EUR, and annualizing it to 2.8 billion EUR, the market share would be around 4%.
Little surprisingly, retail pharmacies still dominate the German market. Their physical locations offer immediate availability (at least in theory, I often needed to come for a pick up later), personal advice from on-site pharmacists, and in some cases emergency service — clear advantages for many customers.
Online pharmacies, on the other hand, are the emerging channel built on convenience and home delivery. They appeal especially to younger mobile buyers and those seeking discreet purchases (as far as one can call it discrete).
In that sense, there should be room for all of them.
Subscriber numbers are expanding quickly. Check.
Sales are rising, outpacing the market. Check.
Then… reality starts to bite.
The second ride did not even reach the previous hype, despite clear top-and headline performance. There’s a big but which is keeping shares down. Growth has been undoubtedly strong, but not transformative enough to offset razor-thin margins and heavy spend for logistics and customer acquisitions (commercials, Rx rebates).
Multi-year losses, and in the case of DocMorris also hefty dilution, have been painful for long-term holders. Both companies are guiding for long-term adjusted EBITDA margins of 8%. And they also strongly focus on adjusted EBITDA.
At the latest here investors should be cautious.
Even not thinking further for now, even if they reach these 8% some time — whenever this would be the case. What does really reach the bottom line? After depreciation, interest on debt and taxes, maybe 3–4%?
This is what I mean by razor-thin margins. And it is only the future goal.
Today, it looks like this.
Bulls say, once they have scaled, logistics costs will be spread over more orders and parcels, lowering per-piece costs. Makes sense. Similar regarding upfront marketing costs for customer acquisitions and “setting up” the meds subscriptions for chronic needs.
But this falls a bit short.
Let’s assess both business segments — Rx (prescriptions), i.e. the growth story, vs Non-Rx (non-prescriptions, free-to-order).
These are two fundamentally different businesses, making the investment case tricky.
Prescription (Rx) segment
- Highly regulated fixed reimbursement prices. Pharmacies earn a modest fixed fee or small markup per script — not a juicy percentage of the (often high) drug price. Pharma manufacturers pocket most of the value. Not the distributors who are just the last-mile touch point.
- Redcare (DocMorris, too) uses cash bonuses and convenience to win share, which further compresses margins. And, what if patients go back to brick-and-mortar when bonuses end?
- The result: structurally low gross margins on a large and growing part of the business. Higher average drug prices do not flow through proportionally.
- Regulatory risk is permanent. Any change in rebate rules, co-payments by patients (currently under discussion), cold-chain rules, or ownership laws can hit the business directly. Higher patient co-pays, for example, increase price sensitivity and the cost of competitive bonuses, because the co-pay does not go to the pharmacy.
Non-Rx (OTC, beauty, wellness, etc.)
- No price caps. But full retail competition.
- Sharks everywhere: amazon, drug stores like dm-drogerie (now expanding online), Rossmann, local players, partly supermarkets, and cross-border sellers. Brick-and-mortar did not have to compete internationally.
- Low switching costs, minimal to no real moat, and constant pressure on pricing and promotions.
- Marketing spend is heavy to acquire and retain customers. Mixed-basket orders help, but the segment remains vulnerable to pricing wars.
One structural advantage worth noting, and a bonus for both segments, there are barely any returns. Online shops commonly are plagued by returns, driving costs. In this business, the share of returns is almost negligible with just about 1% of sent parcels. So return costs are not the issue.
But there’s something else I absolutely do not like. The platform approach, offering an established online shop for smaller third-party sellers, sounds nice in theory. However, it is one of the most annoying things to put everything into your cart to then realize at the end that you will receive three different parcels with just a few items in each, where you in the worst case have to pay three times delivery costs.
This is what I finally concluded.
I might be wrong of course, but this reads like a perpetual pricing-war type of business with questionable scaling ability, and one or the other sounds-nice-on-paper thing.
Without a doubt, Redcare has shown operational progress — customer numbers are rising, mixed-order rates improving, some margin leverage on scale is visible.
Yet the mix shift toward lower-margin and highly-regulated Rx combined with the competitive intensity in non-Rx keep the overall business far from the “easy disruption” category.
If at all, Redcare could be disrupted itself.
dm announced “only” to enter the market of prescription-free, pharmacy-mandatory meds, but who says it stops here? This was already a shock, increasing competition.
As a positive, Redcare scaled Rx so far without huge dilution.
Share count increased somewhat, but they did not conduct a major equity raise since the Rx launch in 2023.
On the other hand, Redcare has about 330 million EUR in gross financial debt.
Cash looks comfortable with 203 million EUR amid solid growth prospects.
But, operating cash flow is still weak.
Not to mention free cash flow. Assuming investments into logistics are soon finished and Capex reduced, FCF would be much closer to operating cash flow.
This does not solve all the other issues, though.
If in the worst case, growth suddenly comes to a standstill, it can get uncomfortable.
On Wednesday, Redcare reported a bit better than expected numbers, including some solid new customer wins to 14.2 million active customer (+1.1 million year-over-year).
Also, the guidance is for rising adjusted EBITDA margins, pushing this “operating earnings” figure disproportionately stronger than the top line — sales grew +18.4% for the entire company, of which Rx in Germany jumped +55%. Even non-Rx accelerated a bit from +5% to +9%.
My issue is, I do not know if growth will stay at this pace, and, more important, how profitability will develop. The current adjusted EBITDA margins improved from 1.3% to 1.7% — extremely thin ice.
It only needs some regulatory changes or new competitive fronts, and the stock is ready for another big setback. As briefly touched upon, there are currently discussions to increase the co-pay for insured patients to take some burden from the public insurers that are struggling financially.
With this in mind, I cannot form a reliable path forward.
Redcare currently has a market cap a tad below a billion EUR and an EV of c. 1.1 billion EUR. Sales of more than 3 billion EUR sound great. The low-looking price to sales ratio of 0.3x might even be too high for this ultra-low margin business, though. At a hypothetical net margin of 2% — where they’re still far away from — the PE would be 15x, implying some modest growth.
But in my view, it is built on very shaky ground, while projecting free cash flow is beyond my capabilities at this stage.
I guess I will continue to monitor the sector.
But not more, at least for now.
Conclusion
Redcare (formerly Shop Apotheke) is riding the e-pharmacy wave in Germany as the market leader but faces structural challenges, despite low market penetration.
Rx is heavily regulated with razor-thin, capped margins; non-Rx is a brutal pricing battlefield.
Valuation looks tempting on price-to-sales, yet the business model offers limited pricing power, high customer-acquisition costs, and ongoing regulatory overhang.
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