Challenges and Opportunities in the Dental Industry Amid Recurrent Pandemics: Insights from Industry Leaders

Amid the recurring waves of the COVID-19 pandemic, the dental industry has been experiencing successive rounds of fluctuations.

“In the first half of 2022, we faced significant challenges, particularly as cash flow began to tighten during the initial months with no revenue. Additionally, following the resumption of work and production, the number of new patients dropped significantly compared to the previous year,” the head of a Shanghai dental clinic told VCBeat. In a WeChat group for the dental industry with over 100 members that he joined, numerous administrators of dental clinics and hospitals expressed their concerns about the future.

It should be noted that,For many private dental clinics, under the pressure of ongoing expenses such as rent, labor, and marketing, if cash flow becomes tight, they either struggle to survive or are forced to sell their practices to stay afloat.According to multiple industry insiders, the dental healthcare services sector is experiencing a minor wave of mergers and acquisitions.

How Should the Dental Industry Respond to Challenges? What Issues Require Attention? What Are the Future Trends? To address these questions, VCBeat recently held in-depth discussions with leading players in the dental chain sector and investors who have long focused on the dental industry, exploring strategies for breaking through current bottlenecks and gaining capital insights.

The featured speakers for this session are Zhu Liya, Founding Partner and CEO of Meivie Dental Care; Sun Yan, Founder of the IDSO Dental Alliance and Vice Chairman of Happy Oral Healthcare Group; and Dr. Wang Xianzheng, Investment Director at Fortune Capital Intelligence.

Next, this article will provide a detailed discussion based on the guests' viewpoints and an overview of the industry.

In recent years, the dental healthcare services industry has experienced rapid development. Particularly bolstered by capital investment, dental chain enterprises such as Meiwei Dental and Happy Dental have drawn significant industry attention, propelling the dental sector onto a fast track of growth.

However, the outbreak of the pandemic in 2020 quickly slowed the development pace of the entire dental services industry. In VCBeat’s routine communications with dental service providers, the head of a single-practice dental clinic frankly stated that his clinic had been closed for one month, with preliminary estimated losses exceeding RMB 200,000. He mentioned that he had even considered permanently closing the clinic at that time.

The recurrent outbreaks in the first half of 2022 have further heightened anxiety among many dental service providers. Taking Shanghai, where the epidemic was particularly severe in the second quarter, as an example, numerous dental medical service institutions suspended operations for more than two months.

“Dental healthcare institutions indeed felt helpless during the pandemic, as they were unable to fully leverage their capabilities,” stated Zhu Liya, Founding Partner and CEO of Meiya Dental. She noted that cash flow and staff turnover have been testing the sustainable operations of these institutions.

Sun Yan, founder of the IDSO Dental Alliance and vice chairman of Happy Oral Care Medical Group, also observed that patient flow at a large number of clinics in the industry had declined by approximately 30%. “First-tier cities experience high personnel turnover, more concentrated pandemic outbreaks, and greater challenges in implementing control measures; consequently, dental institutions in these areas have been more severely affected.”

Beyond operational challenges, how are the specific business activities of dental service providers being affected?

First, oral healthcare services are divided into three segments. The first segment comprises preventive-care patients, whose primary demand is for low-cost, high-frequency services such as dental cleaning; this patient group has been significantly impacted by the pandemic.

The second category of customers consists of those seeking essential medical dental services, with primary needs including dental fillings, tooth extractions, and root canal therapy. This segment was relatively less affected by the pandemic, as demand for these services has continued to be met in the post-pandemic period.

The third category of customers consists of consumer healthcare clients whose core objective is to improve quality of life. Their primary demands include orthodontics, aesthetic veneers, and dental implants. While the average transaction value is high, purchase frequency is relatively low. This segment of demand is closely tied to economic development and has been significantly impacted indirectly by the pandemic.

It is worth noting that demand from patients requiring essential medical care has grown at a relatively steady pace, whereas preventive care and consumer-oriented dental services have been the primary growth drivers behind the rapid expansion of the oral healthcare industry in recent years.

As can be seen, within the business structure of oral healthcare services, both preventive care clients and consumer healthcare clients have been significantly impacted by the pandemic, in addition to those seeking serious medical treatment.

Additionally, Dr. Wang Xianzheng, Investment Director at Fortune Capital, told VCBeat thatThe slowdown in investment and financing activities caused by the pandemic has also constrained the development of the entire dental industry to some extent.“For some enterprises, there may currently be a certain gap between the demand for and supply of funds.”

How can dental healthcare service providers break through amidst these diverse challenges?

Dental healthcare service providers are seeking solutions.

“Since the onset of the Wuhan epidemic, we have been strengthening our internal capabilities,” Zhu Liya, Founder and CEO of Meiwei Dental Care, told VCBeat. She noted that as a company grows larger, its risk exposure increases. Therefore, whether expanding with new clinics or formulating growth targets, all initiatives must be undertaken within controllable parameters.

“The pandemic did indeed bring challenges, but it also presented us with an opportunity to diligently consolidate our core competencies. For Happy Dental Care, this means enhancing our talent development capabilities and establishing standardized protocols for our clinics,” said Sun Yan, Founder of the IDSO Dental Alliance and Vice Chairman of Happy Dental Care Medical Group.

So, how exactly is it done?

In Julia's view,Over the years, Meiwei has continuously accumulated expertise in standardized operations, supply chain optimization, management empowerment, and financial/data support. Most importantly, it has focused on building a comprehensive IT system to better empower dentists.

Specifically, Meiwei has developed an information system centered on enhancing management and operational efficiency—the “Wei Xiaomei Medical Cloud Intelligent Platform.” This platform integrates systems such as Hospital Information System (HIS), finance, supply chain, human resources, and Office Automation (OA). Through continuous iteration and upgrades, the “Wei Xiaomei” platform has become increasingly robust, capable of supporting refined enterprise management while comprehensively facilitating business coordination and data sharing across multiple organizations.

Not only that,On a fully shared digital-intelligence platform, Meiwei has achieved high-level integration of data across personnel, finance, and assets, forming a robust ecological closed loop., minimizing human intervention to the greatest extent, improving operational efficiency, reducing operating costs and management risks, enabling professional doctors who wish to start their own practices to focus on clinical work with greater peace of mind, allowing founding business partners to acquire more entrepreneurial knowledge, and providing them with broader development opportunities to maximize efficiency.

Leveraging its replicable standardization capabilities, Meiwei currently owns 16 brands and operates more than 200 dental medical institutions. Furthermore, thanks to Meiwei’s unique DSO model and its business partner mechanism, regional brand managers serve as the heads of new institutions. It is worth noting that retaining regional brand names helps maintain existing customer relationships and secure a stable patient flow, while also providing financial and resource support to these regional brands. This approach reduces operational risks for regional brands and enables broader development opportunities.

“Why is it difficult for many chain enterprises to operate in China? It is due to the issue of standardization.“Zhu Liya, Founding Partner and CEO of Meiwei Dental Care, stated that during chain expansion, if headquarters staff continues to grow and the management system becomes ‘too heavy,’ it will be difficult to achieve stable development; therefore, establishing a standardized system is crucial.”

Sun Yan, founder of the IDSO Dental Alliance, also stated that establishing a standardized system for outpatient service workflows and operational management has been a key objective of the IDSO Dental Alliance in recent years. Currently, the IDSO Dental Alliance is actively integrating digital technologies into the operational management of its clinics.IDSO Dental Alliance has built a digital and intelligent dental clinic, enabling the online management of customer information, medical issues, and administrative operations.

In practical application, the IDSO Dental Alliance model divides the entire customer lifecycle into 12 modules and identifies the core business scenarios for each module. Additionally, the IDSO Dental Alliance assigns unified codes to each business scenario and every piece of know-how, establishing over 800 internal standard skill codes and standardizing hundreds of disease types. This ensures that doctors across more than ten specialties can complete training, assessments, and patient consultations online.

Building on this foundation, the IDSO Dental Alliance defines every marketing service scenario with a standardized MK code. This ensures that even as the alliance expands to include hundreds of clinics in the future, all members maintain a completely consistent understanding of business scenarios and data during discussions. Ultimately, this process generates the MG series of management codes, which successfully implement the IDSO Dental Alliance’s operational philosophy across strategy, clinic operations, and personnel management.

Sun Yan revealed that this replicable, standardized digital model can enhance the operational efficiency of dental clinics. It is not only applied across all Happy Dental clinics but has also been made available to all members under the IDSO Dental Alliance. To date, the IDSO Dental Alliance model has been implemented in over 300 member clinics nationwide, helping these clinics achieve business growth of more than 30%.

An analysis of the pathways taken by leading institutions reveals that standardization, a strong emphasis on “healthcare + technology,” and effective empowerment of dentists are the key factors determining whether the oral healthcare services industry can achieve stable and long-term growth.

Oral health issues are garnering increasing attention.

Since 2007, the World Health Organization has stated that oral diseases have become an increasingly serious public health issue, with global oral diseases projected to affect nearly 4 billion people by 2022.

In China, the number of dental patients has been increasing year by year since 2010, reaching 700 million in 2019, accounting for approximately half of the country’s total population.Among them, the prevalence of gingival bleeding reached 87.4% and the detection rate of dental calculus reached 96.7% in middle-aged adults aged 35–44 years. On the other hand, oral diseases are increasingly affecting younger populations. According to the 2019 national statistics on oral diseases in China, the caries prevalence was 70.9% among 5-year-old children and 34.5% among 12-year-old children.

Behind the immense demand lies substantial market growth potential in the field of dental healthcare services, presenting significant opportunities for every innovative enterprise entering this sector.

In this process, Dr. Wang Xianzheng, Investment Director at Fortune Capital (Dachen Caizhi), identified three major trends worth noting.

First, the intelligence and automation of the dental industry will continue to accelerate. An increasing number of AI-driven and information-based devices, including intraoral scanners, are undergoing iterative upgrades and rapidly gaining widespread adoption.

“Dental service providers that excel in informatization and intelligentization are more likely to emerge as leaders. Additionally, as intelligent devices become more widespread, the barrier to entry for starting a dental business is also rising,” said Dr. Wang Xianzheng.

Second, the concentration of the dental chain industry will continue to rise steadily. Looking at the entire market, the vast majority of dental clinics are currently single-location practices or small chains with 2 to 5 locations. These enterprises have weak operational efficiency, poor financing capabilities, and low risk resilience, leaving them completely vulnerable when faced with sudden events such as the pandemic.

Due to their strong advantages in financing capabilities and brand scalability, large chain groups can raise funds through equity financing, debt financing, and internal capital allocation within the group when facing unexpected situations. As a result, they exhibit strong risk resilience and are able to achieve resource synergy.

Third, enterprises that achieve a higher degree of localization in the DSO model are more likely to emerge as leaders. The core function of a DSO is to provide clinics with support for non-clinical operations, including management, operations, finance, legal affairs, and training, thereby enabling dentists to devote greater energy to enhancing their clinical skills and treating patients. It is evident that its essence lies in empowering dentists.

Of course,On the journey of innovation, dental healthcare service providers must remain mindful that medical care remains their core essence.

Therefore, participants in the oral healthcare industry must remain patient-centric, continuously innovate, and embrace long-term value to achieve sustainable growth.