111, Inc. Co-founder Dr. Gang Yu Reflects on 1 Pharmacy's 8-Year Journey from Startup to Internet+ Healthcare Unicorn

1Drug.com is a truly “remarkable” presence in the “Internet + Healthcare” sector, enjoying an exceptionally favorable reputation among both industry peers and ordinary consumers.

Peer companies value its robust supply chain management capabilities, sustained ability to acquire and retain traffic, technological innovation prowess, excellent internal management, and comprehensive industry chain layout; general consumers favor its service capabilities, including the seamless “medical + pharmaceutical” experience and high-quality health content.

Certainly, 1YaoWang itself has also demonstrated significant innovation, including pioneering brand building within the industry, establishing an Authentic Product Alliance, creating e-commerce shopping festivals, and launching an internet hospital. Its “three-pronged” model—comprising a B2C pharmaceutical platform, an internet hospital, and a B2B pharmaceutical platform—has been widely discussed, deconstructed, and reshaped by industry insiders.

By July 2018, 111.com.cn had celebrated its eighth anniversary. Having evolved from a startup into an “Internet Plus Healthcare” unicorn, the company has accumulated extensive experience to share and holds high expectations for the industry. VCBeat (WeChat ID: vcbeat) interviewed Dr. Yu Gang, co-founder of 111.com.cn, to discuss the highlights and insights from the company’s eight-year entrepreneurial journey.

We interviewed Dr. Yu Gang at the Shanghai Zhangjiang office of 111.com, where Yihaodian had previously been housed in the same building. These two companies, Yihaodian and 111.com, represent the fruits of his serial entrepreneurship.

To borrow a popular concept from recent times, Dr. Yu Gang’s entry into the “Internet + Healthcare” sector constitutes a “dimensionality reduction attack” on the field. As the founder of Yihaodian, a leading e-commerce enterprise in China that pioneered the “online supermarket” model, he brings unparalleled expertise to this new domain.

Before founding Yihaodian, Dr. Yu Gang had already achieved considerable fame and success. In 1995, he founded Kale Technology in the United States, whose aviation management system was adopted by many major U.S. airlines. The company was acquired by Accenture in 2002.

Dr. Yu Gang also served as a tenured professor and visiting professor at the McCombs School of Business, The University of Texas at Austin, as well as Vice President of Global Procurement at Dell and Vice President of Global Supply Chain at Amazon.

A quote by Amazon founder Jeff Bezos is posted on the pillars of 111.com’s office: “Always Day 1,” meaning to always maintain an entrepreneurial mindset. “Day 1” refers to perpetually staying in the startup phase, characterized by strong ambition, a sense of crisis, robust execution capabilities, and the courage to innovate. In contrast, “Day 2” represents a state of complacency after achieving success, a mindset that can only lead to stagnation, decline, or even failure. Companies must always remain in the “Day 1” state.

Dr. Yu Gang served at Amazon from 2004 to 2006, and the “Day 1” entrepreneurial mindset has since become a core principle he consistently upholds.

1 Drug Network initially started as a sub-channel of Yihaodian before becoming an independently operated entity. In 2015, Dr. Yu Gang and co-founder Mr. Liu Junling left Yihaodian to devote themselves fully to the operation of 1 Drug Network.

Dr. Gang Yu (left), Co-founder of 111.com, and Mr. Junling Liu (right), Co-founder (Photo provided by the company)

“We are thrilled about the new venture we are about to launch: applying internet-driven thinking to the digital and mobile health sectors to address the challenges of difficult access to medical care and high medication costs faced by the Chinese public, thereby creating greater value for society,” said Dr. Yu Gang.

Dr. Yu Gang told VCBeat that his entry into the “Internet + Healthcare” sector was primarily driven by two factors. First, he observed mature industry development paths in other countries, particularly the United States, where the market size of “Internet + Healthcare” had already reached trillions of dollars, while China’s market was just getting started. Second, his previous entrepreneurial experience in e-commerce gave him great confidence in the “Internet +” model. Since this model had already established a solid foundation and standardized practices in sectors such as books and 3C products (computers, communications, and consumer electronics), it could be effectively transplanted to the pharmaceutical industry.

“Because we had already anticipated the industry and policy barriers inherent in the ‘Internet + Healthcare’ sector before embarking on this journey, and were fully prepared to tackle these challenges, we have not encountered any obstacle that felt insurmountable over the past eight years of entrepreneurship. On the contrary, each goal achieved has been a cause for celebration, as it brings us one step closer to realizing our vision.” This was Dr. Yu Gang’s response when asked about the differences in work experience between the ‘Internet + Healthcare’ industry and the traditional e-commerce sector.

Currently, 111.com refers to its three major business segments as the “three carriages”—the B2C pharmaceutical platform, the internet hospital, and the B2B pharmaceutical platform—providing services such as online pharmacy, internet hospital, and pharmaceutical distribution solutions, respectively.

111 Group’s “Three Carriages”

Over the past eight years of operation, 1 Drug Net has also achieved a series of “impressive” metrics.

Dr. Yu Gang summarized the five keywords behind 111.com’s (111 Group) sustained high-speed growth over the past eight years, which can also be regarded as the core competencies of 111.com: supply chain, traffic, technology, channels, and management.

In terms of supply chain, 1YaoWang initially collaborated with secondary and tertiary pharmaceutical distributors, later gradually establishing direct partnerships with primary distributors and pharmaceutical manufacturers. It has reached direct supply agreements with companies such as Eli Lilly, Pfizer, Johnson & Johnson, Tongrentang, and Dong-E-E-Jiao. Additionally, it has established operational and warehousing centers in East China, South China, North China, and Southwest China. This has enabled an efficient and transparent supply chain management model, capable of meeting users' fragmented and diverse demands.

In terms of traffic, 111.com.cn remains committed to developing its proprietary channels, building brand reputation through content services and professional consulting. Eighty percent of its traffic originates from owned channels such as its official website, mobile app, H5 pages, and mini-programs. The 111.com.cn app has long maintained the top position in the pharmaceutical e-commerce category. Underpinning this owned traffic is 111.com.cn’s precise user profiling, which enables highly targeted marketing and personalized services tailored to individual needs, resulting in a customer satisfaction rate as high as 97%.

In terms of technology, 111.com.cn continuously strengthens its technological innovation by developing a suite of systems including WMS, TMS, PMS, and OMS. It has built a comprehensive information system and integrated tools covering the entire spectrum from front-end supply chain to back-end after-sales services, thereby ensuring the efficient operation of its “Internet + Healthcare” service model. The company has also implemented numerous innovations in internal management, channel development, and brand campaign strategies.

In both the capital and user markets, 111 Inc. (111 Group) has achieved remarkable success. In terms of financing, 111 Inc. recently completed a new round of funding worth $50 million, led by Allsino Capital, a leading investment firm in the healthcare sector. Dr. Gang Yu also told VCBeat that 111 Inc.’s cumulative fundraising has exceeded RMB 1.5 billion. Based on this, the company’s overall valuation has reached “unicorn” status.

In 2016, 111.com launched its sub-brand “1 Yao Cheng” to venture into the B2B pharmaceutical e-commerce sector. Since its launch, the platform has experienced rapid growth. Dr. Yu Gang told VCBeat that 1 Yao Cheng’s business now covers 30 provinces, municipalities, and autonomous regions across China. To date, more than 100,000 chain pharmacies, independent pharmacies, clinics, and hospitals use the platform for procurement.

From the perspective of development trends in the pharmaceutical distribution and retail sectors, “Internet + Healthcare” is an inevitable path for industry growth, and 111.com (Yi Yao Wang) is positioned at a highly favorable industry juncture. First, intensive development is a shared characteristic of the pharmaceutical distribution and retail industries. Against the backdrop of policy, industrial, and technological factors, mergers and acquisitions, scaling up, and the development of “Internet + Smart Healthcare” will be the main themes in the coming years.

From the perspective of development trends in pharmaceutical e-commerce, the industry is currently in a phase of rapid expansion. According to statistical data from the Market Order Department of the Ministry of Commerce, incomplete statistics indicate that the total sales volume of pharmaceutical e-commerce companies with direct reporting reached RMB 73.6 billion in 2017, among which B2B business accounted for RMB 69.3 billion and B2C business for RMB 4.4 billion. The corresponding figures for 2016 were RMB 61.2 billion, RMB 57.6 billion, and RMB 3.6 billion, respectively, showing year-on-year growth across all three metrics in 2017 compared to 2016.

Dr. Yu Gang believes that the keyword for the next stage of “Internet + Healthcare” development should be integration, encompassing the convergence of online and offline channels, B2B and B2C models, self-operated and platform-based businesses, medical services and pharmaceuticals, as well as technology and distribution channels. Only through comprehensive integration can the advantages of technology and the capacity for industry innovation be fully leveraged to facilitate industrial transformation and upgrading.

1Yao.com is dedicated to “empowering” the industry. Its technological tools and service systems are not only used internally but also extended to industry partners through collaboration and services, thereby “empowering” the sector, building an Internet-plus pharmaceutical and healthcare ecosystem, improving operational efficiency, reducing distribution costs, and enhancing the accessibility of high-quality products and services.

“Over the past eight years of entrepreneurship, we have consistently pursued value creation—creating value for the industry and for society. This is our vision and mission, and we will remain steadfast in this commitment,” concluded Dr. Yu Gang.