Kuafang Delivery Aims to Build China's Largest Smart Pharmacy Network to Capture a Share of the Trillion-Yuan Pharmaceutical Retail Market

On the day the new strategy was announced, Gao Yue, CEO of Kuai Fang Technology, conducted separate interviews with several media outlets, with our team scheduled in the final round. As soon as he entered the interview room, Mr. Gao repeatedly apologized to us. He rarely participates in such intensive media engagements, and strives to provide detailed and accurate responses in each session, causing the schedule to run more than an hour behind plan.

Although the questions posed by various media outlets were largely similar, Gao Yue still sought to convey KuaiFang’s upcoming initiatives to the public through as many media channels as possible. In other words, the announcement and implementation of the new strategy may prove critical for KuaiFang.

What the media are concerned about is how KuaiFang, as a benchmark for pharmaceutical O2O, will change the dynamics of the pharmaceutical O2O sector this time.

Kuaifang Smart Pharmacy System Launch Event

Kuaifang Technology was founded in May 2014. In September of the same year, the “Kuaifang Medicine Delivery” app was launched, establishing its first service area in Beijing, the Wangjing Branch. At that time, Kuaifang’s core offering was “one-hour door-to-door medicine delivery,” emphasizing delivery speed and timeliness.

It is worth noting that several other pharmaceutical O2O companies were founded around the same time as Kuai Fang Song Yao, including Yao Gei Li, Yao Kuai Hao, Wan Ying Song Yao, and Ding Dang Kuai Yao. These companies all emphasized delivery timeliness, making prompt delivery their primary marketing point.

In December 2014, Kuai Fang Song Yao secured an angel-round investment of several million RMB from Jihe Ventures, becoming the first pharmaceutical O2O provider to attract capital interest.

After securing financing, KuaiFang began to expand rapidly in Beijing. By April 2015, it was capable of providing ultra-fast medicine delivery services to users within the Fifth Ring Road of Beijing. During the same period, KuaiFang started to replicate its Beijing model across China, successively entering markets such as Shanghai, Guangzhou, Shenzhen, and Hangzhou. At that time, KuaiFang’s business model involved partnering with high-quality pharmacies in local regions and establishing its own delivery teams to provide logistics services for these partners.

Kuaifang’s ultra-strong delivery team has earned it the nickname “the JD.com of pharmaceuticals.”

Throughout 2015, Kuai Fang experienced a period of rapid expansion, launching its services in multiple cities across China and securing two substantial rounds of financing. These included an RMB 50 million Series A round led by Jingji Venture Capital and an RMB 200 million Series B round led by Tiantu Capital. In terms of both funding rounds and capital raised, Kuai Fang Songyao left its competitors far behind. Even to this day, Kuai Fang Songyao’s financing remains among the highest in the entire “Internet + Healthcare” sector.

However, behind its rapid expansion, Kuai Fang has faced its own challenges. Due to the lack of binding contractual obligations with partner pharmacies, ensuring procedural consistency has proven difficult. For Kuai Fang, which maintains stringent standards, this was unacceptable. Consequently, the company has begun to scale back its expansion and enter a period of strategic transformation.

Looking back on that period, Gao Yue said, “At that time, everyone was seeking partnerships with pharmacies, which put pharmacies in a stronger bargaining position and led to some issues in process control. We shifted to a self-operated model in the hope of providing users with the highest quality service.”

Following the transition to a self-operated model, KuaiFang maintains autonomous control over every stage—from drug procurement and warehousing to order processing and outbound logistics. This not only enhances the consumer experience but also ensures greater clarity in management.

The success of this transformation is further supported by data. According to figures released by KuaiFang, as of May this year, the company operated 18 stores in Beijing, with daily orders exceeding 10,000 and an average transaction value above RMB 30. As a core competitive advantage, KuaiFang maintains a dedicated delivery team of over 200 personnel in Beijing, achieving an average delivery time of just 37 minutes per order, with a peak delivery capacity of up to 50,000 orders.

Gao Yue has established three key performance indicators for Kuai Fang Song Yao: inventory accuracy, on-time delivery rate, and customer satisfaction rate, which stand at 99.5%, 96.7%, and 98.2%, respectively. The Kuai Fang model has been proven viable, with the next step being its replication across China.

With its business model proven viable, KuaiFang is planning a “second transformation” to re-engage in partnerships with pharmacies. This time, however, KuaiFang’s collaborative approach carries a degree of subjective selectivity.

Kuailiang’s newly released strategy announced on the same day indicates that Kuailiang will expand into 50 cities across China, partnering with 500 pharmacies to provide them with intelligent pharmacy systems and delivery support. Specific implementation measures include:

1. I. Each city will be divided into an average of 10 zones, with each zone covering 25 square kilometers, and only one pharmacy will be selected for partnership in each zone. KuaiFang will consolidate all orders within the zone, including orders from KuaiFang, orders from various partners (such as Baidu Waimai, Ele.me, Meituan Waimai, and other platforms), remote e-prescription orders, and prescriptions diverted from hospitals. All orders will be routed to this designated pharmacy.

2.  

3. II. Provide pharmacies with intelligent pharmacy systems and professional delivery capabilities to ensure they are capable of fulfilling orders while maintaining consistent service standards.

4.  

5. III. Build a fully intelligent S2b2c pharmaceutical supply chain to provide empowered pharmacies with a first-mover advantage in drug supply capabilities.

Liu Hengrui, COO of Kuai Fang Song Yao, provided a detailed introduction to the intelligent pharmacy system and the development of delivery capabilities at the press conference. Built upon Kuai Fang’s existing initiatives, the intelligent pharmacy system is an O2O information solution that specifically includes order allocation, order acceptance, rapid medication picking, and delivery tracking, thereby comprehensively meeting the informational needs of traditional pharmacies expanding into pharmaceutical O2O services.

Kuaifang COO Liu Hengrui Delivers a Systematic Overview of the Smart Pharmacy System

In terms of delivery capabilities, Kuaifang will collaborate with pharmacies through two models: one involves Kuaifang assisting pharmacies in building their own delivery teams, while the other entails pharmacies outsourcing delivery services to Kuaifang.

According to the plan, KuaiFang will establish a delivery team of over 1,000 people across China. However, this also means that KuaiFang’s medicine delivery model will shift to an “asset-heavy” model, featuring both self-operated pharmacies and its own delivery fleet, similar to JD Daojia’s initiatives in the fresh produce sector.

Limiting the density to one pharmacy within a 25-kilometer radius implies that KuaiFang’s partnerships with pharmacies will be based on mutual selection. KuaiFang’s criteria require pharmacies to have a solid business foundation and strategic location advantages; more importantly, they must demonstrate a proactive willingness to embrace the internet, which will be the key to successful collaboration.

Looking back at KuaiFang’s initial collaboration with pharmacies, the company has since validated its business model following its transition to a self-operated structure. With growing confidence in the prospects of pharmaceutical O2O (Online-to-Offline) services and increasingly refined software, hardware, and management systems, KuaiFang now exhibits certain preferences in selecting partners—a development regarded as a hallmark of corporate maturity.

We can summarize KuaiFang’s new strategy as “O2O managed services for pharmaceuticals,” which will help traditional pharmacies that are willing but lack the capability to venture into “Internet Plus Healthcare,” driving incremental online sales and allowing them to share in the dividends of the “Internet Plus” era.

At the strategy launch event, Gao Yue, CEO of KuaiFang, delivered a speech titled “Unlocking the Trillion-Yuan Blue Ocean Market.” He stated that the scale of retail pharmacies would exceed RMB 1 trillion in the future, and that establishing a presence in pharmaceutical O2O (online-to-offline) is an effective approach to capitalize on surging market demand.

He pointed out that the current market size of the pharmaceutical retail sector stands at approximately RMB 300 billion. With the implementation of policies such as the separation of prescribing and dispensing, and the outflow of prescriptions from hospitals to retail channels, the pharmaceutical retail industry is poised for substantial growth. Taking prescription outflow as an example, studies indicate that by 2020, it would bring over RMB 800 billion in incremental market value to retail pharmacies. Cumulatively, these factors will push the total market size of retail pharmacies beyond RMB 1 trillion.

Facing a trillion-yuan market, Kuai Fang’s strategy is to enter through pharmaceutical O2O, precisely address users’ demand for timely medication access, and collaborate with as many traditional pharmacies as possible to build a comprehensive pharmaceutical O2O network.

Therefore, in terms of implementation timeline, Gao Yue requires Kuai Fang to complete partnerships with 500 pharmacies across 50 cities within this year. Broken down, this means securing partnerships with more than two pharmacies nearly every day in the second half of the year.

Gao Yue, CEO of Kuai Fang

Beyond O2O, KuaiFang also plans to introduce more innovative approaches to pharmaceutical retail, namely the new S2B2C supply chain model. S2B2C refers to a novel model that spans from the pharmaceutical supply side to pharmacies and then to consumers. By leveraging KuaiFang’s smart pharmacy system, user demands can be accurately conveyed to pharmaceutical manufacturers, achieving seamless integration from the supply chain to the terminal.

“This is a fully data-driven pharmaceutical supply chain model that leverages optimized historical order data to build digital systems, thereby enabling intelligent pharmaceutical supply,” Gao Yue described the S2B2C model.

Kuaifang’s confidence stems from its nearly three years of exploration, through which it has gained deep insights into the dynamics of “Internet Plus Healthcare.” In an interview, Gao Yue noted that consumers in the pharmaceutical O2O sector exhibit distinct characteristics, and their medication demands follow identifiable patterns. Leveraging these data could drive transformative changes in pharmaceutical retail.

He cited an example to VCBeat: within three months of a certain industrial pharmaceutical company’s drug being listed on KuaiFang, its sales surpassed the drug’s annual sales in the Beijing region. In other words, online sales can generate incremental growth for pharmaceutical companies. This is also why pharmaceutical companies are willing to collaborate with them; at the new strategy launch event, dozens of representatives from pharmaceutical companies were invited to endorse the platform.

In addition, KuaiFang secured RMB 60 million in Series C financing from Buchang Pharmaceuticals in April this year, which can also be seen as evidence of industrial enterprises’ recognition of the KuaiFang model. Gao Yue stated that “Internet + Healthcare” will have unlimited possibilities in the future, and cooperation with pharmaceutical companies will become increasingly diversified.

At the conclusion of the interview, Gao Yue stated that the continuously liberalizing policies for pharmaceutical retail are enabling the sector to convert its potential energy into kinetic growth. At this juncture, Kuai Fang Song Yao’s empowerment of pharmacies has become a natural progression; by addressing the challenges faced by traditional pharmacies, it helps them better share in the market dividends.

Meanwhile, pharmaceutical retail and pharmaceutical O2O represent a vast market. Kuaifang welcomes enterprises with shared aspirations to join forces in expanding this market. Sharing and collaboration are the core themes of Kuaifang’s development.