Text: Mirror View Terrace Xie Yuanyuan
Editor|Xie Zhongxiu, Guan Shan
In the era of takeaway delivery of "everything", consumers only need to move their fingers to receive medicine without leaving home.
Since the beginning of winter, respiratory diseases such as mycoplasma, influenza A, influenza B, and new crown have spread rapidly one after another, and many people have unfortunately been hit, even many times. Taking influenza A as an example, the Meituan Health Index shows that since December, the demand for influenza A-related drugs in North China, East China, and the central and western regions has continued to rise. Compared with November, the overall demand for drugs such as oseltamivir and Sufuda in East China and the central and western regions has risen by more than 6 times for two consecutive weeks.
Many consumers who can only "lie down" at home have no choice but to take out their mobile phones and enter pharmaceutical O2O platforms such as Meituan and Jingdong to place orders to buy medicines.
Prior to this, in order to attract users to buy drugs online, platforms such as Meituan and JD.com launched an "involution" in terms of price and delivery time, shortening the delivery time from hours to half an hour, and the delivery time of some orders was once calculated in minutes.
Drug prices have also been knocked down. On these platforms, the price of drugs may be one-half or even one-third of that of offline pharmacies. Coupled with 24-hour drug delivery, free testing, online consultation and other services, the pharmaceutical O2O industry has achieved rapid development.
According to the "China Pharmaceutical O2O Market In-depth Research and Investment Prospect Forecast Report" by Zhiyanzhan Industry Research Institute, the market size of the pharmaceutical O2O industry has reached about 11.02 billion yuan in the first half of 2023, and the market size is expected to be about 40.892 billion yuan by 2029.
The prosperity of the pharmaceutical O2O industry is inseparable from the assistance of offline pharmacies.
The offline pharmacies settled on the platform have provided a lot of "ammunition" for platforms such as Meituan and JD Health. Among them, low-cost sales are the key to helping the platform acquire users. On social networking sites, you can see comments from netizens complaining about pharmacies "selling 40 yuan offline and 10 yuan online" everywhere. For these pharmacies, the internet platform has also brought more traffic and sales to themselves.
But at the same time, pharmacies sell at low prices online and pay commissions to the platform, which also leads to the compression of their own gross profit margins. In addition, in recent years, the O2O platform has also increased its investment in self-operated pharmacies, and JD.com has also opened a 24-hour physical pharmacy. This means that pharmacies will usher in a comprehensive competition from pharmaceutical O2O platforms.
In order not to be subject to the O2O platform, pharmacies also try to platformize themselves. Many chain pharmacies, including Yixintang and the common people, have begun to build their own O2O channels. At the same time, we actively open more offline stores and do some preferential activities from time to time to attract consumers to enter the store for consumption.
A dark war is raging between the two sides.
01 "Roll" to the night scene
The pharmaceutical O2O market has broad prospects, and all major platforms want to come in and "get a piece of the pie".
In order to seize the market, in the past two years, old players such as Meituan and JD Health have made rapid efforts, and platforms with traffic advantages such as Taobao and Douyin have also entered the game.
In September 2023, Douyin will open the pharmacy category in local life and try the pharmaceutical O2O business. Two months later, Douyin no longer restricts OTC drugs from being promoted by short videos/graphics. Prior to this, Douyin OTC drugs were only allowed to be sold in the form of commodity windows, Douyin Mall and other shelves.
JD Health, which has been involved in it for a long time, has also increased its investment in the business.
Previously, JD Health's focus has been on the B2C model of express delivery and 2 to 3 days delivery. In 2023, JD Health will begin to take more new actions in the pharmaceutical O2O business. This includes lowering the deduction points for the entry commission of cooperative merchants, adjusting the internal structure to open a special instant retail department, launching a no-threshold free shipping activity for drug purchases, and opening a night drug purchase scene.
For the pharmaceutical O2O industry, this is an incremental market.
The "2021 Chinese New Year's Eve Intermedication Industry Research Report" released by iMedia Consulting pointed out that nearly 90% of respondents have experience of getting sick or taking drugs at night, but more than 6 adults choose to "forbear" because it is difficult to buy drugs at night and inconvenient to buy medicines. In addition, more than 80% of users want to be able to buy medicines on instant delivery platforms.
The "gold mine" to be developed attracts more platforms to join it. Nowadays, when you open the pages of Meitu and Ele.me to buy medicine, you will find that they are marked with the words "24-hour pharmacy" and "24-hour pharmacy". In May 2023, "Taobao Grocery Shopping" will also join the all-day business army and launch a 24-hour medicine purchase service.
In order to develop the night-time drug purchase business, each platform encourages pharmacies that have already settled in to provide night-time services, and actively invites pharmacies that have opened 24-hour business to settle in. Ele.me is attracting merchants to settle in by issuing night business incentives and night order rebate policies. As of May 2023, there are 200,000+ pharmacies in Ele.me, of which more than 10,000 provide 24-hour business services.
Meituan also pays attention to the night-time economy. As of September 2023, Meituan has launched nearly 13,000 24-hour digital pharmacies in 319 cities in 31 provinces, municipalities and autonomous regions across the country, covering 1,467 districts and counties.
The platform "volume" to the night scene has also brought more revenue to pharmacies.
According to data previously revealed by Li Jinfei, general manager of Meituan's pharmaceutical business department, in the first half of 2023, the transaction volume of pharmacies that have opened 24-hour digital services will be 9.2 times that of ordinary pharmacies. According to official data, Meituan's 24-hour pharmacy completes more than 1.4 million orders from 9 p.m. to 4 a.m. every month.
However, pharmacies on the platform are not lying to make money.
At the time of the price war on the drug buying platform, whether it is day or night, offline pharmacies must act as the "ammunition depot" of the online platform, and low-price sales have become the task of entering pharmacies.
02 Low-cost drug "ammunition depot"
Low prices are seen by O2O platforms as a key element in the competition for consumers. At present, Meituan and JD.com have started a price war.
In November 2023, JD Health launched a free shipping campaign for drug purchases, hoping to attract consumers by not making up orders and free postage. At present, it covers 12 major cities in China, including Beijing, Shanghai, Guangzhou, Chongqing, Wuhan and Chengdu, with more than 10,000 participating stores.
Meituan has also launched a preferential drug purchase campaign on Double 11 in the past two years. During this year's event, in order to fight for low prices, Meituan bought medicine focused on multi-box subsidies, direct drops in explosive products, and launched a special area of "affordable and good drugs from 1 yuan", claiming that "no fear of price comparison is more cost-effective".
Even though Singles' Day has ended, Meituan's "multi-box subsidy" channel is still online. The channel also marked "low price on the whole network", and the subsidy cost of some drugs reached 76 yuan. In addition, JD and Meituan have also operated preferential activities such as direct drops, full discounts, and discounts for big brands for a long time.
Picture/Meituan's "multi-box subsidy" subsidy for buying drugs is as high as 76 yuan, source/Screenshot of Jingguantai
Even in non-active areas, the price of drugs is much lower than offline. Offline pharmacies are the "main force" to provide low-cost drugs for pharmaceutical O2O platforms.
Many netizens complained on the Internet, saying, "A 500ml bottle of normal saline in a physical store sells me for 29.9 yuan, which is 10 times higher than online", "The same pharmacy, buy 6 boxes of 330 yuan in the store, and buy 6 boxes online for 267 yuan", "Comparing the prices of online and offline, I finally know why there are more and more pharmacies".
Want Want also discovered this phenomenon when he bought antipyretics, "I thought I would buy a box when I passed by the pharmacy after work, but the price of the medicine was much more expensive than the one I bought online before." I searched the online price of the drug in this pharmacy, and the price of the same brand and the same specifications was nearly a dozen yuan cheaper." According to the data of Zhongkang Technology, the unit price of pharmacies is 69 yuan, and the unit price of pharmaceutical O2O is 35 yuan.
Figure/Comparison of online and offline prices of the same antipyretic drug sold by the same pharmacy, the online price on the left and the offline price on the right, source/provided by Want Want
After discovering that the price of the physical store was higher, Want Want felt that he had been cheated and said that as long as he was not forced to do so, he would buy medicine in the online store in the future.
Taro Yuan, who has worked in a pharmacy, also bluntly said that online is more cost-effective. "My previous company was both a physical store and an online store, and both channels were the same source of goods. However, because offline stores involve costs such as rent, staff, etc., the price is higher than online. If you want to spend less money, you can buy it online, after all, the control of online drugs is also very strict. ”
The two factors of low price and guaranteed quality have made more consumers pour into pharmaceutical O2O, and at the same time, they have also pushed more pharmacies to join platforms such as Meituan and Ele.me.
At present, "Taobao Food" has cooperated with more than 50,000 offline pharmacies such as Dingdang Fast Medicine, Laobaimin, Yifeng and Quanyuantang, Meituan has cooperated with more than 250,000 physical chain pharmacies, and Ele.me has cooperated with more than 200,000 merchants. A senior executive of a pharmaceutical company pointed out that by the end of 2022, more than 180,000 retail pharmacies had joined pharmaceutical O2O, accounting for nearly one-third of the total number of retail pharmacies in the country.
For pharmacies, online sales will compress sales profits, but this has not affected the enthusiasm of pharmacies to settle in.
Mao Mao, who also works in pharmacies, said, "The profits of physical stores are indeed higher, and the interest rate on selling drugs starts at 60%-70%, but this does not mean that it is not profitable to do online." Although the pricing of drugs in online stores is much lower, there are also more circulation, and the company as a whole is still profitable, and at the same time, it can also promote offline pharmacies. ”
Meituan's data also shows that the operating radius of pharmacies has been extended from 500 meters to 5 kilometers. In addition, brick-and-mortar pharmacies can also use the user data of these platforms to accurately recommend products and conduct marketing activities.
This also makes Meituan buy medicine and Jingdong buy medicine more confident in the price war. Minenet predicts that by 2030, the scale of retail pharmacies O2O will rise to 19.2% of physical pharmacies, and if online medical insurance is fully opened, the share of retail pharmacies O2O in physical pharmacies will rise to 32.1% in 2030.
This means that in the next few years, more pharmacies may become a weapon for the price of pharmaceutical O2O "volume".
But for pharmacies, the O2O platform is more like a double-edged sword.
03 Trapped in the pharmaceutical O2O platform
Pharmaceutical O2O is not all good for pharmacies.
With pharmacies providing a large supply of goods for the platform, more and more consumers' Xi of buying drugs has begun to migrate online. Zhongkang CMH pharmaceutical e-commerce-O2O market data shows that from January to September 2023, the growth rate of the O2O market will slow down compared with last year, but it will still maintain double-digit growth, with an overall growth rate of 31% in 2023 and a sales scale of 9 billion yuan.
Mao Mao also said, "In recent years, the business of brick-and-mortar pharmacies has not been very good, and many consumers have moved online. ”
Although the widespread influx of consumers into the O2O platform has brought new channel revenue to physical pharmacies, online revenue has not contributed much to the company due to the low price of drugs. This is also confirmed by the performance of Yifeng Pharmacy, Yixintang, and Laobaimin, which are listed chain pharmacies.
In the first three quarters of 2023, the sales of people's online channels reached 1.49 billion, accounting for 9% of revenue. In the first half of 2023, Yifeng Pharmacy's Internet business revenue was 911 million yuan, accounting for 9% of revenue. In the first three quarters of 2023, Yixintang's O2O business sales were 483 million yuan, accounting for only 4% of revenue.
On the one hand, this is due to consumers who are keen to use medical insurance, and on the other hand, it is related to the fact that pharmacies use various ways to increase the unit price of consumers entering the store.
"In offline pharmacies, consumers may be cured for only 10 yuan, but the clerk will recommend higher-priced drugs for the commission." Sometimes, they even recommend some health products that have nothing to do with the treatment of the disease, and these health products are very profitable. ”
Xi consumers who are reimbursed through health insurance have also contributed to increasing pharmacy revenue. Sanmao said, "For consumers who use medical insurance reimbursement, although the drugs sold in physical stores are more expensive, they will pay a large part with medical insurance, so they will buy drugs offline for a long time."
In order to continue to make huge profits from offline, major chain pharmacies are still adding stores and doing some preferential activities to attract traffic.
According to a recent report by Guohai Securities, the number of pharmacies in China is expanding steadily, with a growth rate of more than 5% since 2018, reaching 623,000 retail pharmacies in the country by 2022. At present, the number of stores of Laobaimin, Dashenlin, Yifeng Pharmacy and Yixintang has exceeded 10,000, reaching 13,065, 12,993, 12,350 and 10,008 respectively.
However, after the new policy comes out, the advantage of medical insurance card in offline pharmacies seems to be unsustainable. In November 2023, dozens of pharmacies have been included in the scope of medical insurance payment for pilot online pharmacies. This means that this type of consumer group that frequents physical stores will be diverted by online stores, including self-operated online stores on O2O platforms.
In the past two years, Meituan and JD.com have opened their own pharmacies to compete with pharmacies on the platform.
Although the self-operated stores adopt the B2C model of express delivery, the delivery timeliness is not so strong, but it also diverts some consumers who are not in a hurry to use drugs and have the need to stock up on medicines. According to the latest official data, the number of self-operated users of Ali Health Pharmaceutical has reached 77 million. Ele.me data also shows that 86% of consumers use online (B2C, O2O) as their main channel.
In order to cope with this situation, chain pharmacies that do not want to give up the Internet dividend choose to end up in person.
In recent years, many chain pharmacies, including Yixintang and Laobaimin, have begun to build their own O2O channels. Previously, the people said that they would develop online business through multiple channels such as private domains and WeChat mini programs. Yikang Pharmaceutical provides consumers with 24-hour order delivery service through its self-built APP.
At the same time, internet platforms have also begun to enter offline channels. In the past two years, JD Health has opened physical pharmacies in various places to grab the traditional pharmacy business. The two sides have moved from mutual benefit to competition and cooperation.
Resources:
"Capital Storm|Pharmaceutical E-commerce Encirclement and Suppression of Offline Pharmacies, Resignation of Executives of People's Large Pharmacies, High Debt", source: Bullet Finance.
*Maomao, Taro Yuan, and Want Want in the article are pseudonyms.