Genebox Disrupts the Consumer Genetic Testing Market with a Commercial Closed-Loop Strategy Amid Price Wars

As soon as 2019 began, Genebox entered the market with a RMB 9.9 genetic testing service, driving prices in the already price-war-ridden consumer-grade genetic testing market to an extreme low, much like a disruptor.

Since the market breakthrough in 2013, China’s consumer-grade genetic testing sector experienced a surge in 2015 and a major consolidation in 2017, leaving behind a group of companies with homogeneous products and uncertain futures vying for top market positions. Consequently, price wars became inevitable at that time.

In 2017, 23Mofang, a leading domestic consumer-grade genetic testing company, reduced the price of its “Ancestry + Genetic Health” genetic testing product from RMB 999 to RMB 499. In response, its competitor WeGene promptly halved the price of its own genetic testing product, also bringing it down from RMB 999 to RMB 499.

One year later, 23Mofang announced another price reduction, lowering the price from 499 yuan to 299 yuan, with product pricing now approaching manufacturing costs. According to a previous statistical analysis, when accounting for the costs of gene chips, analysis fees, and related miscellaneous expenses, the cost of genetic testing is at least close to 300 yuan.

After reviewing Genebox’s official sales platform, the “Genebox App,” VCBeat found that the RMB 9.9 price point is not Genebox’s standard product pricing, but rather a promotional bundle offer available during special campaigns. Li Zhi, founder of Genebox, told VCBeat that Genebox categorizes its testing content into nine major sections and periodically or intermittently launches flash-sale events for RMB 9.9 product bundles. The regular pricing tiers for Genebox’s standard testing sections are primarily RMB 38, RMB 68, and RMB 88, with the platform requiring users to purchase at least two sections per transaction.

According to real-time product sales data recorded by the Genebox App, users made over 100,000 purchases on the platform from its launch until October 25, 2019. Evidently, Li Zhi’s strategy of pricing below cost has proven successful in marketing, with Genebox capturing market share at a rate several times faster than its predecessors. According to Li Zhi, Genebox plans to surpass one million platform users by the end of 2020.

While Genebox is aggressively expanding its market presence, it has also delivered strong performance in the capital markets. Since its establishment in April 2018, Genebox has completed two rounds of financing, totaling nearly RMB 140 million. In its angel round, Genebox brought in Dashenlin, one of China’s four largest chain retail pharmacies, as a strategic investor, thereby enabling an “online + offline” dual-channel operation model. Furthermore, in the Series A financing round recently announced this October, the company introduced well-known investment firm Centurium Capital, which is also the largest institutional shareholder of Luckin Coffee.

VCBeat has learned that despite adopting an ultra-low-price strategy, Genebox places significant emphasis on refining its products. “We have undertaken extensive efforts to optimize our products and user experience. The most immediate impression users receive is the rapid turnaround time for results, along with accurate, scientific, and easy-to-understand interpretations,” pointed out Li Zhi. He noted that consumer-grade genetic testing serves functions distinct from those of clinical-grade testing, and users are relatively sensitive to waiting times. Consequently, Genebox has compressed the testing turnaround time to within 72 hours from when the laboratory receives the sample, significantly faster than the industry average of two to four weeks.

However, Genebox has not compromised on quality control in its genetic testing services despite offering low prices and rapid turnaround times.

According to Li Zhi, Genebox primarily controls the quality of collected saliva samples by monitoring DNA concentration and the degree of DNA degradation. Natural degradative enzymes and bacteria in saliva can compromise DNA integrity, leading to a sharp decline in DNA quality. Therefore, during sample collection, users are required to mix their saliva thoroughly with a stabilizer. After the samples are delivered to the laboratory for DNA extraction, they immediately undergo electropherogram analysis. Genebox’s proprietary AI-powered analysis system can predict whether a sample meets quality standards based on the electropherogram results before it proceeds to instrumental testing. Samples that fail to meet the criteria must be returned for recollection.

After passing quality control, saliva samples undergo a series of processes, including DNA amplification, hybridization, washing and staining, microarray detection, and data analysis. Genebox’s self-developed laboratory management system highly integrates these workflows. The highly automated experimental process not only enhances efficiency but also prevents staff from directly accessing user data, thereby safeguarding user privacy and security.

Li Zhi stated that Genebox’s adoption of self-built laboratories and an independently designed laboratory management platform is key to ensuring the accurate, rapid, and cost-effective delivery of genetic test results.

Establishing in-house laboratories is not the standard approach for genetic testing startups. “Setting up an in-house laboratory requires tens of millions in capital investment. In the early stages of market expansion, genetic testing providers often choose to outsource testing operations first, and only establish their own laboratories after several years when the business has stabilized.” Furthermore, building an in-house laboratory demands significant time and effort in the front-end interpretation of product results. Li Zhi admitted that Genebox’s initial plan was also to outsource its genetic testing services.

However, at this stage, domestic third-party genetic testing service providers lack the experience to process large volumes of samples in a short timeframe while still ensuring data quality. “Sending user samples out for external testing means losing control over data quality, which leaves the technical team feeling insecure.”

Currently, Genebox has established a standard laboratory that fully meets regulatory requirements and can handle saturated sample volumes, with the capacity to process 40,000 to 60,000 saliva samples per month. Li Zhi stated that as the company’s business volume continues to grow rapidly, it plans to continuously expand its production capacity.

Furthermore, Genebox Laboratory receives a large volume of saliva samples daily. After optimizing various stages and procedures within the laboratory, its technical team independently designed a laboratory management platform based on experimental workflows, leveraging AI technology to significantly reduce process turnaround time.

On the user side, Genebox applies internet product thinking to make content interaction design more user-friendly and seamless. Li Zhi told VCBeat that Genebox outperforms other existing products in key aspects of user experience, such as the comprehensiveness, readability, and scientific rigor of its content.

Currently, Genebox positions itself as a digital health management platform. Li Zhi points out that identifying and meeting users’ genuine needs is the market’s primary criterion for evaluating platforms and represents the core strength of the Genebox team. After nine months of continuous exploration during its startup phase, the team has gained a clearer understanding of entering the health management sector through specialized genetic testing products and services. This has led to the formation of a business model that uses low-cost genetic testing products as an entry point to systematically link customized, value-added health management services.

Li Zhi believes that rather than investing substantial capital and manpower in advertising on the market side, it is more effective to minimize product costs as much as possible, allowing users to experience the product at a low price. “Domestic consumers are highly price-sensitive; low prices provide most consumers with an opportunity to try the product, while scientifically rigorous, high-quality products can drive word-of-mouth marketing.”

However, achieving break-even while pricing products significantly below cost has emerged as a new challenge. The GeneBox team devised two solutions: first, users who access genetic testing services at a low introductory price can pay to unlock additional items of interest within the app; second, by integrating multi-dimensional health management services, personalized and customized health management recommendations are delivered to users based on their genetic test results. “Practice over the past few months has validated the feasibility and replicability of GeneBox’s business model.”

Since its market launch, Genebox has rapidly iterated its business model and service structure by closely tracking user needs through strong relational engagement. Li Zhi told VCBeat that the company’s product managers, market team, and marketing team—including himself—conduct regular one-on-one communications with dozens of users each week to solicit their feedback on the product, gather authentic demands for genetic testing services, and continuously summarize and refine these insights. By analyzing common user needs, the team designs the most efficient implementation pathways to meet these demands and delivers them in the form of enhanced product offerings.

At present, Genebox has launched three customized health management services, including personalized vitamins, tailored health check-ups, and customized insurance. “Behind each service lies a relatively complex supply chain system. As a platform provider, Genebox primarily delivers personalized health management solutions to users, while the supply chains for each service are provided by strategic partners.”

For instance, in its customized vitamin service, Genebox collaborates with Dashenlin, one of its shareholders. As a large retail pharmacy chain with e-commerce sales qualifications, Dashenlin’s robust channel capabilities have helped Genebox significantly improve its inventory management and bargaining power.

Genebox’s customized health checkup services are offered in partnership with iKang Guobin and Meinian Onehealth. Users can purchase personalized health checkup packages on the Genebox platform and then fulfill them at offline branches of these partner institutions. For customized insurance services, Genebox connects users’ individualized insurance needs with high-quality third-party insurance agents, without intervening in the sales process.

“As the interview drew to a close, Li Zhi emphasized that despite its rapid growth, Genebox remains a startup technology company, and its business model still requires continuous exploration and optimization. ‘We will continually track emerging user needs and provide more diversified services based on richer genetic testing results.’”