Rongguan E-Commerce Secures Nearly RMB 10 Billion in Total Funding and Surpasses RMB 50 Billion in Annual Transaction Volume, Leading the 'Internet + Healthcare' Sector

Recently, Rongguang E-commerce announced the completion of its C1 round of financing, amounting to hundreds of millions of yuan. This round was led by Ping An Ventures and Huagai Medical Fund, with existing shareholders Fosun Ruizheng and Trustar Capital participating as follow-on investors. This marks the largest financing deal in the pharmaceutical e-commerce sector in 2017.

Concurrently with the announcement of the substantial financing, Rongguang E-commerce also disclosed that the platform’s gross merchandise value (GMV) reached RMB 22.4 billion in 2016 and exceeded RMB 50 billion in 2017.

Massive financing coupled with super-large-scale performance has made Rongguang E-commerce a star enterprise that has attracted significant attention in the “Internet + Healthcare” sector.

Prior to this announcement, Rongguang E-commerce had maintained a low profile in the media, with rare coverage in news outlets.

VCBeat (WeChat ID: vcbeat) interviewed its founder, Yao Xiaofei, on the occasion of Rongguang E-commerce’s announcement of financing, to discuss issues of concern to the market.

Rongguang E-Commerce Series C1 Financing Announcement Ceremony; Yao Xiaofei, Founder of Rongguang E-Commerce, is third from the left.

In the male-dominated business world, Yao Xiaofei, Chairwoman of Rongguang E-Commerce, may be considered an “outlier.” Her labels include returnee from overseas, workplace elite, beautiful CEO, and entrepreneurial goddess. However, only through close contact does one discover that beneath the halo, “professional” and “capable” are the most apt descriptors of her qualities.

Yao Xiaofei studied abroad during her secondary school years, later attending the University of Warwick and the London School of Economics and Political Science, where she earned a Bachelor’s degree in Accounting and Finance and a Master’s degree in Information Management.

She previously interned at the UK Space Agency and investment firms, and later served as a Senior Finance Manager at Procter & Gamble in the United Kingdom. During her studies and early career, Yao Xiaofei regularly returned to China, where she witnessed the rapid development of the Chinese economy and the internet sector. In 2011, she formally resigned from her position in the UK and returned to China to launch her own venture.

“When I returned to China and saw the towering skyscrapers in Beijing, Shanghai, and Guangzhou, the fast-paced strides on the streets, and the vibrant vitality everywhere, I wondered what we could contribute to the development of this era, so as to do justice to our youth and the knowledge and experiences we have gained over the years,” said Yao Xiaofei.

By the end of 2012, during the peak of internet entrepreneurship, Yao Xiaofei was immersed in a vibrant startup ecosystem. Her first venture primarily focused on enterprise informatization services, including e-commerce and e-commerce operation outsourcing for pharmaceutical companies, which naturally led her to deepen her focus on the “Internet + Healthcare” sector.

Reflecting on this journey, Yao Xiaofei said, “When we founded our first company, we were dedicated to providing top-tier informatization solutions for outstanding enterprises in China, aiming to enhance operational management efficiency and optimize decision-making mechanisms. This included offering e-commerce platforms and third-party operations services for large brand enterprises, thereby building core competitiveness in the internet era. It was during this process that our deep-rooted connection with the pharmaceutical industry quietly took shape.”

During this process, Yao Xiaofei gradually delved deeper into the pharmaceutical industry. The more she learned about the sector, the more she realized that the integration of pharmaceuticals with the internet was significantly lower than in other fields, particularly in the area of pharmaceutical distribution. This led her to consider whether internet tools could be leveraged to serve pharmaceutical distribution and enhance its efficiency. Thus, Rongguang E-commerce was established, with its primary focus on “Internet + Pharmaceutical Distribution.”

Yao Xiaofei stated, “This time, what we observed was not merely outdated operational models and low efficiency in one or a few enterprises, but rather that the entire pharmaceutical distribution industry still relies heavily on manual labor in its actual operations. This includes relying on personnel for word-of-mouth store visits, disseminating marketing policies, and handling fragmented payment collection and management decisions. More importantly, we identified the elongated and inefficient supply chain across the entire channel. We recognized the urgency of healthcare reform and saw the existing problems and significant room for improvement in each key element of drug ‘safety, efficacy, affordability, and accessibility.’”

“I have come to truly appreciate that this industry differs from the home appliance, real estate, and automotive sectors we previously engaged with; yet it is fundamentally tied to the health of every individual, serving as a cornerstone livelihood industry.” This realization solidified Yao Xiaofei’s resolve to deeply cultivate her career in the pharmaceutical industry.

Once the experience was confirmed, Rongguang began to "recruit talent and build its team." The founding team of Rongguang E-commerce comprises both internet veterans who have experienced complete internet product life cycles and industry insiders with years of deep expertise in the pharmaceutical sector. These two perspectives integrate with and complement each other.

Unlike other internet entrepreneurs seeking to disrupt their industries, Yao Xiaofei’s original motivation for founding her startup stems from a lasting reverence for the pharmaceutical industry. She stated that due to the nature of its products and service systems, the pharmaceutical sector is highly specialized, and entering it requires a deep sense of respect and awe.

Rongguang E-commerce is positioned as an integrated service platform for the full circulation of the pharmaceutical industry. It features four core platforms: the pharmaceutical B2B websites “My Medicine Network” and “My Kangkang” pharmaceutical O2O platform, as well as the SaaS-based “Feijia Cloud” smart pharmacy management system and the “My Clinic” mobile service platform.

It can be said that Rongguang E-commerce’s product ecosystem covers all levels of pharmaceuticals and medical services, connecting pharmaceutical manufacturers, commercial enterprises, retail outlets, clinics, and individual consumers.

B2B e-commerce platforms for pharmaceuticals are a key focus of Rongguang E-Commerce. Yao Xiaofei aims to build it into a comprehensive integrated service platform for the pharmaceutical industry, providing efficient and personalized services to both upstream and downstream segments of the supply chain. This initiative not only helps pharmaceutical manufacturers enhance their marketing and market expansion efforts but also addresses the procurement needs of small and medium-sized end-users.

Yao Xiaofei stated, “‘My Medicine Network’ is currently the largest and only nationwide pharmaceutical B2B integrated service platform in China, with its annual online transaction volume exceeding RMB 50 billion in 2017. We also offer the Feijia Cloud SaaS platform for pharmacies, comprehensively supporting retail pharmacies in service upgrades and supply chain transformation. For primary care institutions and the third terminal market, we have launched the ‘My Clinic’ mobile platform. Additionally, we provide ‘My Kangkang’ for consumers. These major platforms collectively underpin our S2B2C business model, empowering small businesses (small B) through an efficient supply chain and innovative SupplyChain capabilities, thereby enabling the entire system to better serve end consumers (C-end).”

Of course, the entrepreneurial journey is not without its challenges. Yao Xiaofei told VCBeat that the greatest challenge in “Internet + Healthcare” lies in integrating traditional practices with the internet. Traditional pharmaceutical companies are risk-averse, so implementation requires an open, inclusive, and mutually beneficial approach to gradually guide these enterprises to accept internet-based services.

“Throughout our development, we have adjusted our strategies in response to different market stages. Initially, the focus was on reducing transaction costs and improving efficiency; later, we gradually expanded into marketing and services,” said Yao Xiaofei. Rongguang E-commerce Pharma has consistently implemented its established business model step by step, grounded in a deep understanding of the pharmaceutical industry.

Yao Xiaofei believes that the key words in the pharmaceutical industry are "safety, efficacy, affordability, and accessibility." Guided by these four keywords, Beijing Rongguang Electronic Commerce Co., Ltd. is considering how to determine the ultimate goal to better benefit consumers and patients. Due to the special attributes of pharmaceutical consumption, it is necessary to first empower pharmaceutical companies, commercial enterprises, and pharmaceutical retail terminals in order to achieve the goal of benefiting users.

In a sense, pharmacies and clinics bear greater functional significance than hospitals, as they directly serve end users and act as the first point of contact for healthcare services. However, due to the fragmented, small-scale, and disorganized nature of the industry, many issues remain unresolved. Therefore, Rongguang E-commerce’s pharmaceutical B2B platform primarily targets retail pharmacies and clinics. By serving as a third-party provider, Rongguang E-commerce can truly offer effective support to these entities.

“We do not position ourselves as a B2B e-commerce platform, but rather as an integrated supply chain platform. Through our integration, pharmaceutical manufacturers can reach more end-demand terminals under their existing organizational structure; meanwhile, end-demand terminals can benefit from a more efficient supply chain, ultimately achieving bidirectional connectivity.”

In terms of market promotion, Rongguang E-commerce did not adopt the ground-promotion model commonly used by other pharmaceutical e-commerce platforms. Yao Xiaofei explained that if Rongguang E-commerce were to extensively employ ground-promotion staff, it would merely shift labor costs rather than represent a genuine innovation through the integration of internet-based tools.

She cited the example that pharmaceutical distribution is highly regionalized, with most end-users procuring locally. The existing pharmaceutical distribution system is already comprehensive, leaving no need for an e-commerce intermediary. What Rongguang E-commerce aims to do is not to disrupt the existing system, but to facilitate smoother operation of the pharmaceutical supply chain through innovation and upgrading enabled by internet technologies and digital marketing.

Upholding this reverence for the industry, Rongguang E-Commerce has also achieved remarkable results. According to data provided by Yao Xiaofei, Rongguang E-Commerce’s business now covers 30 provinces and municipalities across China, serving more than 100 industrial enterprises, including Pfizer, AstraZeneca, Xi’an Janssen, Takeda, and Harbin Pharmaceutical Group. Meanwhile, it has connected with over 1,500 pharmaceutical distribution companies and boasts 150,000 end clients, comprising 100,000 retail pharmacies and 50,000 clinics.

In terms of gross merchandise value (GMV), Rongguang E-Commerce achieved a total annual GMV of RMB 22.4 billion across its online platforms in 2016. In May this year, the company held its “5·11” promotional campaign, with monthly GMV exceeding RMB 5 billion. As of early December 2017, the cumulative GMV on the Rongguang E-Commerce platform had surpassed RMB 50 billion.

In terms of financing, Rongguang E-commerce has completed three rounds of funding, totaling nearly RMB 1 billion. Investors include Ping An Ventures, Huagai Capital, Fosun RuiZheng, and Trustbridge Partners, all of which are top-tier investment firms in the healthcare sector. The recognition and support from these investors serve, to some extent, as a strong endorsement of the company’s business model and growth trajectory by the market.

Rongguang E-commerce Series C1 Financing Signing Ceremony

Regarding the completion of a new round of substantial financing, Yao Xiaofei stated, “With the strong support from this round of financing, Rongguang E-Commerce will contribute more significantly to the industry’s ‘Internet Plus’ transformation and business model upgrading, further leading innovation and value creation in the pharmaceutical internet sector, making the industry more efficient, giving the government greater confidence, and delivering greater benefits to the public!”

From an industry-wide perspective, e-commerce in the pharmaceutical sector has emerged as a popular direction for the “Internet + Healthcare” initiative in recent years, driven primarily by policy liberalization. For instance, the 13th Five-Year Plan for Drug Circulation states that the implementation of policies such as the “Two-Invoice System” and the “separation of prescribing from dispensing,” along with innovations in models like “Internet + Healthcare,” have imposed new requirements on the transformation and upgrading of the pharmaceutical industry. It encourages enterprises to carry out service innovations based on the internet, thereby diversifying drug distribution channels and development models.

According to the data in the plan, more than 500 enterprises have obtained qualifications for online drug trading. It can be judged that after the cancellation of the three-certificate qualification review for pharmaceutical e-commerce, more and more enterprises will enter the pharmaceutical e-commerce field.

The sector features not only traditional giants such as Sinopharm, Shanghai Pharmaceuticals, and China Resources Pharmaceutical, but also regional leaders like Nanjing Pharmaceutical and Huadong Medicine, along with a cohort of new internet entrants including Alibaba and JD.com. As a result, the pharmaceutical e-commerce industry is experiencing explosive growth.

Behind the large number of participants, the transaction volume of B2B pharmaceutical e-commerce has also reached new highs. According to the "2016 Statistical Analysis Report on the Operation of the Drug Circulation Industry" issued by the Ministry of Commerce, incomplete statistics show that the total sales revenue of pharmaceutical e-commerce enterprises directly reporting in 2016 reached RMB 61.2 billion. Among this, B2B (business-to-business) business sales amounted to RMB 57.6 billion, accounting for 94.2% of the total sales revenue of pharmaceutical e-commerce. B2B pharmaceutical e-commerce is undoubtedly the main protagonist in the Internet + healthcare sector.

With numerous participants and significant room for market expansion, enhancing competitiveness has become a key focus for pharmaceutical e-commerce companies.

Yao Xiaofei believes that in the next stage, the focus of pharmaceutical e-commerce should be on service extension, aiming to build a comprehensive pharmaceutical service platform rather than engaging in e-commerce for its own sake.

She also analyzed the strengths and weaknesses of various participants in the pharmaceutical e-commerce sector. She pointed out that traditional pharmaceutical giants have been slow to embrace the internet and will require time to catch up; meanwhile, internet companies with an e-commerce DNA have yet to achieve significant success in the pharmaceutical e-commerce space. This is because pharmaceutical e-commerce differs from general consumer goods e-commerce, demanding deeper industry accumulation and specialized expertise.

“Only teams that can effectively integrate pharmaceuticals with the internet can succeed in pharmaceutical e-commerce. The foundation lies in e-commerce technology, data capabilities, and e-commerce systems, while the key to success rests on comprehensive services, including marketing services and supply chain finance services.”

Yao Xiaofei concluded by stating that Rongguang E-commerce has recognized this trend and will remain committed to its original reverence for the industry, optimize its service structure, actively integrate industry resources, and build an efficiently executed “Internet + Pharmaceutical” third-party service platform. This initiative aims to create value for all participants and foster an ecosystem of win-win cooperation.