In recent years, many industries have experienced the baptism of closing.
The once glorious KTV has closed down 70,000 in just 9 years; Walmart, the giant in the retail industry, closed 140 stores; More than 1.35 million restaurants left the market last year.
There is only one industry that is rising against the trend, and that is the pharmacy industry.
As of 2022, the number of offline physical pharmacies has climbed to 643,900, and in 2023, the market size of retail pharmacies nationwide will reach an astonishing 539.4 billion yuan.
Although the number of bubble tea shops has also reached 500,000, it can only be reached in the face of the huge size of pharmacies.
Pharmacies are blooming all over the country, whether it is a first-tier city or an eighteenth-tier small county, you can see pharmacies almost every 50 meters, and there are at least three pharmacies at the entrance of a community.
Buy medicine and get eggs, recharge 100 get 500, various promotional activities, pharmacies are in full swing.
According to the data at the end of December 2023, a number of listed pharmacies have exceeded 10,000 retail pharmacies across the country.
The number of Ichishindo, which was first listed in October 2014, has increased from 2,389 to 10,255 in nine years, an increase of nearly five times in nine years.
Dashenlin, which has the fastest growth rate of stores, is spread across 19 provinces, with a total of 12,993 chain stores, with a year-on-year increase of 29.35% last year alone, becoming the fastest-growing chain pharmacy brand.
Yifeng Pharmacy has also maintained a rapid pace of expansion, adding an average of about 9 stores per day in 2023, reaching 12,350 stores by the end of last year.
The People's Pharmacy, which has the largest number of stores, currently has a total of 13,065 stores.
In the future planning, the People's Pharmacy plans to maintain the annual growth rate of physical stores at the level of about 25%, and it is expected that the number of new stores will reach about 3,500 every year.
Judging from the data, the "era of 10,000 stores" of pharmacies has arrived, but almost all pharmacies are constantly refreshing records, maintaining an optimistic attitude towards the future, showing a positive growth trend.
The expansion of pharmacies is not only reflected in stores, but also in the increase in categories.
Compared to 20 years ago, when you walked into a pharmacy full of medicines, the chain stores now have many more elements of life.
In addition to medicines, there are also "non-pharmaceutical" products such as medical devices, fast-moving consumer goods, health care products, cosmeceuticals and daily necessities.
The diversification of products makes pharmacies more like convenience stores, which can meet the needs of most consumers, and also adds more profit points to the expansion of chain pharmacies.
With the rapid development of the Internet, chain pharmacies are gradually penetrating into e-commerce, and the O2O model is rapidly emerging in the pharmaceutical retail market.
Many people can buy medicine at home at their fingertips, which seems to have formed a certain diversion of customers to traditional offline physical pharmacies.
However, in terms of the composition of sales revenue, brick-and-mortar stores are still the main source of revenue for pharmacies.
In the third quarter of 2023, the online channel sales of Laobaimin Pharmacy accounted for only 9% of the revenue, and the proportion of Yixintang was only 4%, which was far lower than the revenue of physical stores.
Obviously, despite the rise of online pharmacies, people are still more willing to go to physical pharmacies.
In recent years, pharmacies have expanded from stores to categories, from offline to online, what is the reason behind such rapid expansion?
With the advent of an "aging" society, the elderly population has increased, and frequent purchase and use of drugs has become the norm in the lives of the elderly, and the demand for drugs has also increased.
For seniors, brick-and-mortar pharmacies provide an opportunity for them to meet face-to-face with a pharmacist.
This type of communication allows them to ask questions directly about medicines and have a more intuitive and immediate experience to ensure that they get the right medicine for them.
In addition, most of the brick-and-mortar pharmacies are located in residential areas, and they can be reached within 15 minutes of walking from home to the pharmacy, which is convenient for the elderly to buy medicines at any time, which is more convenient than hospitals.
As far as young people are concerned, there is an increasing focus on health and wellness, and the demand for health supplements is increasing year by year.
Although it is convenient to buy medicines online, buying medicines and health products in physical pharmacies can ensure the quality and safety of medicines.
In addition, the convenience of offline physical stores to swipe medical insurance cards has also become one of the important reasons why people are willing to buy in physical stores.
The willingness of consumers is not enough to allow pharmacies to expand in a large area, and the main reason for the expansion of pharmacies is the promotion of capital.
As early as 2014, the state released a draft for comments on the sale of prescription drugs online, and keen investors smelled business opportunities.
As soon as the "separation of medicine" policy was announced, it immediately triggered a warm response from the capital market, and many capitals poured into the pharmaceutical field.
Especially between 2014 and 2020, the pharmacy industry experienced a period of extreme activity.
During this period, Hillhouse Capital took the lead in layout, investing US$75 million, US$97 million and US$1 billion in 2014, 2015 and 2020 respectively, making a large investment in BeiGene, which once lost 30 billion yuan, and has not yet exited.
In 2017, Hillhouse Capital founded Gaoji Medical, an industrial company focusing on the health field, and acquired tens of thousands of pharmacies by spending 10 billion yuan.
This massive acquisition shocked everyone in the industry.
Subsequently, the common people, Yixintang, and Yifeng joined the acquisition team, acquiring a total of 676 companies.
The saying "it is better to sell drugs than to sell stores" was widely circulated at the time and became a hot topic in the industry.
With the surge in the number of pharmacies, the purchase price has also shown a continuous upward trend.
At the same time, the common people, Yifeng Pharmacy, Dashenlin, Shuyu civilians also began to join the plan, the people once said frankly: "Compared with mergers and acquisitions, the company is more inclined to the asset-light franchise model." ”
By the end of 2023, there are 4,120 franchise stores in Laobaimin, 1,024 in Yifeng Pharmacy, 3,483 in Dashenlin, and 2,421 in Shuyu Civilian, accounting for 15%-30% of the total number of all stores.
In just 10 years, the number of pharmacies has grown rapidly from 100,000 to 200,000.
However, the pace of expansion of pharmacies has not stopped there.
In 2021, the government issued clear guidance for the pharmaceutical circulation industry.
The document sets a goal that by 2025, the mainland will aim to cultivate 5 to 10 retail chain pharmacies with annual sales of more than 50 billion yuan, and must demonstrate greater professionalism and diversification.
At the same time, the proportion of chain pharmacies in stores also needs to be increased to 70% to further promote the centralized and standardized development of the industry.
But I don't know if you have noticed that many pharmacies opened by individuals in the past have now become chain pharmacies.
By the end of 2022, the market share of chain pharmacies in mainland China was approaching 58%, and the number of stores had reached 360,000.
The model of chain pharmacies has also intensified the pace of expansion of pharmacies, driven by capital, some high-quality chain pharmacies have been pocketed, rapidly expanding from the region to all parts of the country, forming a wave of expansion.
The advantage of chain pharmacies lies in the ability to concentrate resources, form scale effects, and achieve complementary advantages in procurement, management, brand promotion, etc., so as to rapidly enhance market competitiveness.
For pharmacies, the gross profit margin is generally around 45%, and the net profit is maintained at about 7%-10% excluding the necessary daily expenses.
Is the crazy expansion of pharmacies really profitable? What do so many pharmacies do to make money?
Despite the large number of pharmacies and the fierce competition in the industry, pharmacies are still quite profitable.
Looking back at the performance data of the first three quarters of last year, it can be seen that among the listed head pharmacies, Dashenlin topped the list with a net profit of 1.174 billion yuan, with a year-on-year growth rate of 27.2%.
It was followed by Yifeng Pharmacy with a net profit of 999 million yuan, while Laobaimin Pharmacy ranked third with a net profit of 717 million yuan.
In the eyes of ordinary people, most of the profits of pharmacies come from drugs, but since the state opened the "dual channel" and the medical insurance can brush the overall account, the profits of drugs have also been compressed a lot.
In the past, the supply and demand of innovative drugs often presented a tight situation.
Such drugs are often difficult to obtain in hospitals, and pharmacies, as an alternative purchase channel, often discourage ordinary consumers from selling at high prices.
In 2018, a gentleman in Jiangsu Province said that after a commonly used drug for the treatment of pulmonary hypertension was included in the medical insurance, the cost was reduced from 3,000 yuan per month to 1,000 yuan per month, but the problem was that the drug was not available in the hospital, and the pharmacy was not included in the medical insurance, so he could only pay for it.
Such predicaments are not uncommon.
Soon after, in May 2021, the state introduced a "dual channel" policy for innovative drugs, that is, a tripartite agreement was signed between medical insurance institutions, hospitals and designated retail pharmacies.
In other words, the prescription issued by the hospital can be directly accepted at the designated pharmacy of the hospital, and consumers only need to go to the pharmacy and use the medical insurance to pay, and they can easily pick up the medicine.
It truly realizes the whole process of prescription issuance, drug purchase and cost settlement, which provides great convenience for consumers and effectively solves the problem of prescription outflow.
Today, after several rounds of in-depth negotiations between the National Health Insurance Administration and drug manufacturers, 346 drugs have been successfully included in the NDRL at lower prices.
These drugs cover a variety of therapeutic areas, including anti-tumor, rare disease, chronic disease, anti-viral, etc., which not only provides patients with more treatment options, but also further reduces the financial burden of patients.
The promulgation of the "dual channel" policy has led to the expansion of many DTP pharmacies backed by hospitals, specializing in providing high-end new specialty drugs and prescription drugs.
Since January 2024, there has been a new change in the medical insurance policy, and consumers can swipe the overall part of the medical insurance account when buying drugs in the unified pharmacy, that is, after swiping the previous year's account, they can also use the money in the unified account.
Although these policies are convenient, for pharmacies, the inclusion of drugs in medical insurance also loses the autonomy of pricing and reduces profits.
Compared with Chinese and Western patent medicines, what is more profitable is medical equipment, tonics, health products, cosmeceuticals and other ancillary products.
Guangdong's Dashenlin Pharmacy is known as the most profitable pharmacy, and the largest gross profit comes from ginseng tonic herbs.
Influenced by the region, Cantonese people love nourishment, pay attention to health preservation, the favorite is "ginseng", and putting a little "ginseng" in various soups is the daily life of Cantonese people.
In the early 90s, ginseng as a tonic was not limited by pricing, and a pound of ginseng could be sold for 120 yuan, which made ginseng Lin make a lot of money.
By 2021, the ginseng medicinal materials of Dashenlin will account for 17%, but the gross profit will reach 47% of all categories, which is far higher than the 7%-9% revenue ratio of the common people's pharmacy and Yixintang.
In addition, many pharmaceutical companies have crossed over into the cosmetics market, blowing a new "cross-border wind".
For example, Tong Ren Tang's Tong Ren Materia Medica, Yi Makeup, and Liyan Fang are mainly involved in lotion, cream, mask, essence and other products; Kangenbei's Cuifuli and Zierbin are involved in makeup removers for pregnant women; Ma Yinglong's Tonghua and Babao involve eye creams, lipsticks, lipsticks, women's perfumes, facial cleansers and other products.
The cross-border expansion of pharmacies to other categories has become a new model for pharmacies to make money.
Compared with American chain pharmacies, the chain rate of pharmacies in the United States has reached 90% in 2021, while the mainland is still at a low level and there is still huge room for development.
The enclosure behavior of leading enterprises in the industry is showing a growing trend, and the era of 10,000 stores may expand from 10,000 to 20,000.
The rapid expansion of pharmacies has undoubtedly intensified the competitive situation in the market, but at the same time, it has also promoted the development of the industry to a higher level.
With the improvement of market concentration, the head chain pharmacies will accelerate the pace of mergers and acquisitions by virtue of their advantages in brand, capital, management and other aspects.
It is foreseeable that the pharmacy industry will show more fierce competition in the future, but at the same time, it will also usher in broader development prospects.
In the next few years, expansion will still be the main tone of pharmacies, and the entire pharmaceutical industry may usher in a new pattern.
- End-
Resources:
Financial Breakfast: The influx of giants, why are pharmacies more "ferocious" than bubble tea shops?
39 Health Network: Why are there more and more pharmacies on the streets? What do pharmacies do to make money? Tell you the truth
Technology Geek Circle: 2024 Xiding Meeting丨Based on "people", explore retail pharmacy category opportunities from the perspective of customer groups
China Research Network: Analysis of the development prospects of China's pharmacy industry in 2023: The industry continues to refresh the scale of drug retail
The Paper: Nearly half of the innovative drugs cannot enter the hospital when they encounter the "three difficulties", and the "dual channel" policy may bring opportunities
Author: Jin Se