One evening in November 2014, Yang Wenlong and Feng Gang discussed the company's O2O model in the office. The secretary noticed that the two had passed the meal, so he went to the door of the office and rang the doorbell.
I didn't think about it, it was this "ding-dong" that made Yang Wenlong's thinking suddenly open.
"Dingdang fast medicine" not only became the name of the new company, but also showed the company's positioning, in this wave of digital pharmacy retail market, Dingdang fast medicine is a "fast" word, "28 minutes free drug delivery to home" has also become the company's goal when opening up the territory.
Whether it is initially relying on Renhe Pharmaceutical, or later from the construction of an underline pharmacy, Yang Wenlong is for this goal. But it was this "difficult" goal that made Dingdang Fast Medicine once in a dilemma.
At present, Dingdang Fast Medicine has had several rounds of financing. But after a round of burning money, the company is still shrouded in the shadow of losses.
Before founding Dingdang Fast Medicine, Yang Wenlong was more than 50 years old and was the actual controller of Renhe Pharmaceutical, a listed company. And Renhe Pharmaceutical was developing quite well at that time, with revenue of more than 2 billion yuan and net profit of more than 300 million.
For veterans, it is not only the energy that is tested, but also the acceptance of new things.
At that time, in 2014, the State Food and Drug Administration issued the "Measures for the Supervision and Administration of Internet Food and Drug Operations (Draft for Comment)", which intended to liberalize the sale of prescription drugs in online pharmacies, which meant that another pharmaceutical company's market was about to open. For traditional companies, the only way to keep up with this traditional model of subverting the traditional model of drug circulation is to integrate with the Internet.
Early birds have worms to eat. While some companies are still on the sidelines, Companies such as Alibaba, Taiantang, and Kang'enBei have begun to act, and Renhe Pharmaceutical is also among them.
This is no accident, after all, Yang Wenlong, this person, had this tossing and turning momentum when he was young.
Yang Wenlong, who majored in traditional Chinese medicine, was the first to work in a state-owned pharmaceutical company in Jiangxi after graduation, buying medicinal materials in mountainous areas. As soon as the market opened in 1997, he began to operate and contract independently, and in 2000, he established renhe group. On the 2019 Hurun Global Rich List, the Yang Wenlong family once won the third place in Jiangxi's local richest people with a net worth of 10 billion yuan with Renhe Pharmaceutical.
Renhe Group is also because of Yang Wenlong's changeable thinking, which has gradually transformed from a medicinal material supplier. With the help of the bombardment of TV advertising, renhe kelik, gynecology and other drugs produced by Renhe began to become household names.
Therefore, when a new round of changes came, Yang Wenlong immediately got into the car. On September 24, 2014, Yang Wenlong announced in Beijing that Renhe Group plans to enter the field of pharmaceutical e-commerce and begin to lay out pharmaceutical o2o.
From the traditional industry to the Internet field, it is the most difficult to change the concept. Feng Gang, who was dug up from within by Yang Wenlong and came from marketing, once said that the traditional sales model is relatively simple, and Internet sales are much more complicated. Yang Wenlong said that the second time to start a business, let himself from the original management thinking into a partner thinking.
At the beginning of the second venture, the team entered the rhythm of day and night, and tried to work the user's pain points.
How to achieve "fast"? o2o companies generally choose the asset-light model, and Dingdang Fast Medicine did the same at the beginning, not opening pharmacies themselves and only cooperating with offline pharmacies.
This pure platform model, although saving the cost of opening a store, but on the other hand, it is also contrary to the original intention of "fast", such as some pharmacies will feel that the order is too small to accept orders, some pharmacies do not open at night, sometimes online want to do promotions, offline pharmacies do not cooperate, which makes "28 minutes free delivery home" become a piece of paper.
As a last resort, in 2016, Yang Wenlong changed his business model and transformed to self-employment, laying out offline Dingdang smart pharmacies, and at the same time building his own pharmacy distribution system and building his own drug distribution team.
In order to achieve the promise of "28 minutes free delivery to home", Dingdang Fast Medicine has created its original "electronic fence" technology, through the ground network planning of offline cooperative pharmacies, to ensure that only one core store exists in the area where 28 minutes of free drug delivery to home. In this way, more than 50 pharmacies within the sixth ring road of Beijing can achieve full coverage.
As of June 13, 2021, the company has covered 14 cities and opened 302 smart pharmacies.
However, planning is planning, and there are still discrepancies when it comes to personal experience. Some users who have bought drugs on it told the city: "In fact, if you say that it will be delivered in half an hour or so, no one will wonder whether you are 29 minutes or 31 minutes." But your promise has zero and some neat, and it is inevitable that people will be provoked. ”
Another senior user of Dingdang Fast Medicine told the city that he began to buy drugs on it not long after the birth of Dingdang Fast Medicine, and over the years, his biggest feeling is that Dingdang Fast Medicine delivery has "slowed down".
"The most attractive thing about Jingle Fast Medicine was this 28 minutes, especially when there are children at home, headaches, brain fever, stomach swelling, and urgent need of medication, I care more about this minute and a half." To his disappointment, "the previous 28 minutes could have been delivered, but in recent times, it has become slower and slower." ”
After inquiry, he found that several deliveries were delayed by the delivery staff in order to fight for more orders to deliver together. Dingdang Smart Pharmacy (Hangzhou) Co., Ltd. Jianguo North Road Store posted on the Lagou network posted recruitment conditions show that "send medicine 7.5 a single, more work and more gains".
In order to make more money, the delivery man can only take more orders, and the best case is to deliver several orders at a time. However, in general, the delivery time is calculated from the time the computer receives the order, which causes the delivery time to exceed 28 minutes.
In addition, the prospectus found that the company's partner pharmacy would use itself or a third-party delivery partner to deliver the product, and Dingdang Fast Medicine did not have much control over this, so "the reputation of our platform and brand may be significantly adversely affected."
Whether the effect of "fast" has been achieved or not, there are many opinions, but the company's burning money is real.
On June 8, Dingdang Fast Medicine completed its latest round of financing of US$220 million, and subsequently, Dingdang Health Technology Group Co., Ltd. (hereinafter referred to as "Dingdang Health"), the parent company of Dingdang Fast Medicine, submitted a listing application to the Hong Kong Stock Exchange.
The listing has attracted much attention from Dingdang Health, but also put the company's financial performance on the surface.
According to the prospectus, the pharmaceutical and medical business has become a well-deserved revenue pillar of the company, mainly including fast medicine business, online diagnosis and treatment consultation, and chronic disease and health management.
Under the support of the advantage of "fast" drugs, Dingdang Health has achieved certain results. From 2018 to 2020, the company's revenue scale rose from 585 million yuan to 2.229 billion yuan, with a compound growth rate of 195%.
Originally, backed by the big tree of Renhe Pharmaceutical, Dingdang Health had the advantage of natural medical resources. Therefore, compared with several other digital retail pharmacy companies listed on the Same Hong Kong stock market, high gross profit has always been the company's advantage, which is about 15 percentage points higher than JD Health and Ali Health in 2018.
However, with the expansion of the business network and the growth of the types of drugs covered, the company's costs are also increasing rapidly, with a compound growth rate of more than 206% in the past three years, 11 percentage points higher than the revenue growth rate.
As a result, in the case of a relatively stable gross profit margin in the same industry, the gross profit margin of Dingdang Health is declining. As of the first quarter of 2021, the company's gross profit margin is only 30%, and the gap with competitors is narrowing.
The advantage is being chased, but the ability to make money has been surpassed. In 2020, Ali Health, which is also listed on the Hong Kong stock market, has turned a loss into a profit, and although JD Health seems to be a loss, it has been profitable since last year if it deducts the impact of changes in the fair value of convertible preferred stock.
In contrast, dingdang health has been established so far, because it has been in the stage of relying on expansion and relying on marketing to promote growth, so it has not yet come out of the shadow of loss. From 2018 to the first quarter of 2021, the company's cumulative loss was as high as 2.1 billion yuan. Even after deducting the impact of changes in the fair value of preferred stock, it still could not make ends meet in the same period, with a loss of 350 million yuan.
One of the reasons for the erosion of profits is closely related to the resources invested by the company in order to maintain "fast".
According to the prospectus, as of March 31, 2021, the company's delivery riders had more than 2,200 riders. In 2020, more than 30% of the sales expenses are employee costs. The company's sales expense ratio in the past three years has averaged 22%, much higher than the other two.
In the retail industry, daily operations require a lot of money to circulate. However, the company's main business is not enough to make ends meet, and its hematopoietic capacity is poor, and in recent years, it has relied on financing for blood transfusion.
According to the prospectus, Dingdang Health's subsidiary, Dingdang Fast Medicine Technology Group Co., Ltd., has carried out several rounds of financing since 2016, with a cumulative financing amount of about 2.8 billion yuan, and the investors mainly include TPG Asia Fund, Aobo Capital, Taikang Insurance, etc.
On the one hand, there is constant financing, and on the other hand, there is constant burning of money. It can be said that before the formation of sufficient scale and status, Dingdang Health seems to have no way back, but can only go all the way forward.
However, Dingdang Health's gradually declining revenue growth rate means that its expansion path is not easy.
Despite the pain of the road to expansion, the company still chose the familiar formula and put the method of breaking through on expansion.
According to the prospectus, one of the main purposes of the funds raised in the company's listing is to further develop the smart pharmacy network and enhance user growth and participation.
(Renhe Pharmacy online offline store)
However, unlike the o2o model of Alibaba Health and JD Health Platform, Dingdang Health belongs to the self-operated O2o, and the relative asset investment is more, making the pace of its expansion more and more heavy.
To put it simply, Ali Health and JD Health are adding a category called "drugs" on the basis of the original traffic, but Dingdang Health is holding the drug in its hand to find traffic, and how scarce the traffic is, needless to say.
Another use of the funds raised by Dingdang Health in this listing is to enhance services and business, such as establishing a professional framework for doctors and pharmacists. According to the prospectus, the company currently has 16 full-time and 58 part-time doctors, more than 800 external doctors cooperating with third-party medical institutions, and other medical professionals including 397 pharmacists.
This appeal of Dingdang Health is not difficult to understand, after all, in the pharmaceutical industry, doctors are the key to grasping the psychology of users, even if it is only to send a drug.
This has to do with what the drug users think. Although the delivery of medicine looks very similar to takeaway, as long as the food delivery can be eaten, if the taste is good, it is a plus, but the drug population obviously does not think so.
Zhu Zhu's mother told the city about her mental journey of buying medicines online: first determine what disease she got, if it is a cold, I must first distinguish whether it is a wind chill cold, a wind fever cold or a summer wet cold. Although the platform will have a doctor to consult, another question is, how to ensure the qualifications of this doctor?
Dingdang Health also mentioned in its prospectus that it may not be able to manage its full-time and part-time doctors, external doctors associated with the company and other medical professionals (such as the company's pharmacists) due to licensing issues.
On the other hand, Dingdang Health also has to face hunting from other participants.
Although the world of martial arts, only fast is not broken, but for the Digital Retail Pharmacy industry in which Internet medical companies and retail pharmacies are involved, it is advantageous to send fast, but the growth is even faster, otherwise it is likely to fall into the dilemma of being attacked in a competitive and dispersed market.
According to the prospectus, in the segment of the digital pharmacy market, dingdang health ranks first in terms of revenue scale, but its share is only 8.5%.
If you zoom in to the overall digital retail pharmacy market, Dingdang Health ranks third with only 1.2% market share. This is a significant gap with the market share of the top two of 11.4% and 7.7%. In addition, the fourth and fifth-place competitors are close behind with a market share of 1.1% and 0.9%, respectively.
That said, Dingdong Health still has a long way to go if it wants to take a step forward.
In 2008, when Yang Wenlong found that Renhe Pharmaceutical "couldn't move the goods", he did not panic. The survey found that many pharmacies under the guise of Renhe recommend other small brands to users in exchange for greater profit margins.
In this regard, the solution given by Yang Wenlong is to do terminal construction, let the salesman go to the pharmacy, promote and sell his own drugs, and take this opportunity to usher in a wave of new life in Renhe Pharmaceutical.
Presumably, when Yang Wenlong saw the outbreak of o2o and the transaction volume of the leader Meituan Network exceeded 46 billion yuan in 2014, the pride that surged in his heart was no less than when he was young. He also predicted that the delivery of drugs like takeaway is a future trend, but what he did not predict is that in this fierce market, it will not be easy for players to take every step forward.
(The interviewee in this article is a pseudonym)
References: "Pharmaceutical Veterans Start Again", Li Xiuzhi, "Chinese Entrepreneur"
(Author 丨 Huayu Wang Yihan Editor 丨Han Zhongqiang)