Kan Zhongyi Files IPO Prospectus: Building the 'Zhou Hei Ya' of Traditional Chinese Medicine with Offline Capsule Clinics
Kan Zhongyi CEO Luo Feng
“From the very inception of our company, we have clearly defined our mission: to deliver Traditional Chinese Medicine (TCM) healthcare services.” Luo Feng believes that in-person, face-to-face clinical care constitutes a rigid demand and represents his competitive advantage. “We operate our own TCM outpatient clinic and hold the necessary qualifications to provide TCM medical services, which gives us a head start over competitors,” said Luo Feng.
Luo Feng, Founder and CEO of the Kan Zhongyi (See a TCM Doctor) App, was born in 1980. A graduate of Beihang University with an EMBA degree, he hails from a traditional Chinese medicine (TCM) family and is the young heir to a TCM-focused family enterprise. His professional career spans telecommunications firms, gaming companies, data credit agencies, overseas media outlets, and even government institutions.
Before launching the “See a TCM Doctor” project, Luo Feng worked in the telecommunications, technology, and media industries, with all his professional experience centered around the internet and data. “Because of my passion, I was able to remain highly focused.”
Given Luo Feng’s extensive resume and experience across numerous industries, he ultimately recognized the promising prospects of the traditional Chinese medicine (TCM) sector. Consequently, he gradually came to appreciate his family’s well-intentioned insistence that he study TCM, proactively took over the family business, and leveraged his expertise to promote TCM culture.
In the face of the red-hot "Internet + Traditional Chinese Medicine" trend, Luo Feng chose a traditional path: developing offline services and engaging with users face-to-face.
“Traditional Chinese medicine’s core competitive advantage lies in face-to-face consultations between physicians and patients. As long as doctors and patients meet in person, conversion rates are significantly high, and the average transaction value is also elevated,” said Luo Feng.
Reflecting on the development of traditional Chinese medicine (TCM) services over the past year, Luo Feng was deeply moved. “In fact, our product underwent four iterations: initially shifting from offline to online, then back from online to offline, and subsequently leveraging online platforms and big data to enhance medical services, before finally confirming a return to an offline-centric model.”
Currently, the Kan Zhongyi team comprises 26 members. This is not an internet-based team; rather, they excel in offline operations and possess expertise in establishing clinical consultation relationships between patients and physicians. As a brick-and-mortar Traditional Chinese Medicine (TCM) medical institution, Shengren Jifang holds the necessary qualifications for TCM practice operations, adheres to regulatory frameworks governing TCM medical institutions, and employs physicians predominantly recruited from accredited medical institutions under the National Health and Family Planning Commission.
“The Kan Zhongyi APP platform has over 1,800 licensed TCM practitioners.”
Initially, Luo Feng aimed to leverage offline physical clinics to expand into the online space, but the results were underwhelming. This was because Traditional Chinese Medicine (TCM) relies on the four diagnostic methods—inspection, auscultation and olfaction, inquiry, and palpation—which cannot be adequately addressed through lightweight online consultations. He then attempted to use big data models to accumulate online user data and drive traffic to offline outpatient services, yet the user conversion rate remained low. After four rounds of integrating online and offline operations, he concluded that the core value of TCM lies in face-to-face interaction. For patients, an in-person visit signifies trust, eliminating the uncertainty of whether they are interacting with a human, a robot, or even a dog. For practitioners, it ensures precision in diagnosis and treatment, as well as greater control over clinical outcomes.
After gaining a clear understanding of the essence of Traditional Chinese Medicine (TCM), one should avoid wasting time on establishing new core values and instead focus on pragmatic implementation in areas that reflect these core values. In healthcare, what is needed is not an audience, but customers. From this perspective, the goal is not to seek validation from others, but to ensure customer satisfaction. Following this logic, managing TCM projects requires the mindset of operating a small business. While having grand ambitions is certainly acceptable, every step of the process should be structured as a viable and rational business venture.
“First test your theories through practice, and adopt the approach that continuously enhances your core value,” said Luo Feng.
“After all this effort, we realized that no matter how late you work on your product, it’s futile if users don’t see it,” said Luo Feng. “We dug our own hole by assuming that simply building a product would attract new users, only to find ourselves repeating the old mistake of believing that ‘good wine needs no bush.’”
Luo Feng believes that the most critical turning point for viewing traditional Chinese medicine (TCM) stems from the newly established sales team, whose members are all recruited from iKang Guobin and Meinian Onehealth. This team possesses absolutely dominant core resources within the commercial health examination industry. Commercial health checkup companies like iKang and Meinian serve thousands of corporate clients in Beijing alone. These corporate clients have chosen superior partners such as iKang and Meinian because they are willing to invest more in their employees' health.
“We have established strategic partnerships with iKang Guobin and Meinian Onehealth, providing value-added traditional Chinese medicine (TCM) diagnosis and treatment services to their corporate clients. This has allowed us to more directly reach our target audience: enterprises that not only have dedicated health budgets but also possess a habitual propensity to purchase health services,” said Luo Feng.
Currently, through strategic partnerships with major commercial health checkup providers, TCM has signed contracts with over a hundred enterprises and is continuously dispatching more TCM practitioners to these companies to provide consultation, diagnostic testing, and prescription services.
“So we finally opened up the channel, not by relying on doctor resources or an app, but through a robust sales channel under the concept of corporate health management,” said Luo Feng. “It was only at this point that we truly began to refine our product.”
It was precisely due to Luo Feng’s pragmatism that, on December 17, 2015, amidst a capital winter, the Kan Zhongyi APP secured tens of millions of RMB in financing, facilitated by Ether Capital, with Zhonglu Capital as the lead investor and Lian Fund as a co-investor.
According to Ether Capital, the business model of Kan Zhongyi features differentiation and scalability, with a distinctive combination of home-visit TCM services and offline outpatient clinics. Furthermore, Kan Zhongyi’s outpatient clinic qualifications enable it to offer a broader range of services and create numerous collaboration opportunities with pharmaceutical manufacturers and medical device companies.
It is understood that after completing its Series A financing, Kan Zhongyi will focus on expanding its offline presence by establishing small-scale capsule clinics. This strategy aims to reduce rental costs while facilitating easier expansion through compact, aesthetically appealing storefronts. In Japan, specialized clinics are densely located along streets, with one every 100 meters, and they enjoy tremendous business success.
Our approach to traditional Chinese medicine (TCM) services involves driving online traffic to affiliated offline capsule clinics. Currently, three such clinics are operational in Beijing, with plans to expand to 50 next year. “Holding our own outpatient clinic license streamlines the approval process for opening new clinics. Additionally, our in-house pharmacy enables better control over gross margins. Most importantly, our highly competent physician team allows for more flexible and efficient staffing at clinic locations.”
All health-related needs, including consultations, prescriptions, and e-commerce, can be addressed on the Kan Zhongyi platform. The platform also collaborates with social networks such as Ta Health Community and Dayima. Through its “TCM Talk” product, it enables article sharing, TCM-focused social networking, and doctor-patient interactions, thereby building Qiji health records, enriching user personal data, and gradually establishing a comprehensive big data analytics system for Traditional Chinese Medicine.
“On his community social platform, we acquired over 100,000 users. Compared to the previous isolated operation of a standalone app, engaging in deep collaboration with specialized communities has led to a much faster growth in user base.”
“TCM Select” is a highly distinctive e-commerce brand established by Kan Zhongyi, currently expanding its market through collaborations with Taobao and Tmall via live streaming and content partnerships.
Integration of online and offline channels has resulted in a high conversion rate for users on the TCM consultation platform. Building on this foundation, numerous live-streaming and e-commerce initiatives have been launched, effectively retaining users within the Traditional Chinese Medicine (TCM) ecosystem and significantly boosting conversion rates. The TCM model functions like a funnel: by comprehensively establishing trust between physicians and patients, it encourages users to direct their healthcare spending exclusively to the TCM consultation platform.
"In the world of martial arts, speed is paramount; the faster one moves, the more likely the opponent is caught off guard. The most common form of rapid combat is close-range striking. It is characterized by swift attacks, aggressive close-quarters engagement, a primary focus on strikes and takedowns, supplemented by joint locks, with techniques that are short, intense, and fast. Traditional Chinese Medicine (TCM) is a unique profession that aligns well with the 'close-range striking' paradigm in martial arts."
“Whether online or offline, our services are centered around the user. We provide exactly what the user wants. My goal in establishing offline capsule clinics is to facilitate the most efficient interaction between users and doctors across all settings where traditional Chinese medicine (TCM) is practiced,” said Luo Feng.
The most critical factor is user satisfaction, which can be achieved through various methods. For instance, online consultations pose potential risks for Traditional Chinese Medicine (TCM) practitioners, as TCM diagnosis relies on the four diagnostic methods—inspection, auscultation and olfaction, inquiry, and palpation—which cannot be accurately performed remotely. Selling herbal medicines online also presents challenges, as users cannot directly assess the quality of the herbs. In the event of a medical incident, if the seller is not a licensed medical institution, it remains unclear who would bear liability. Therefore, the O2O (Online-to-Offline) model is not viable in this context.
Therefore, as an internet entrepreneur in the field of Traditional Chinese Medicine (TCM), it is crucial to focus on survival rather than becoming the type of project favored by media or capital—emphasizing user data and burning cash to acquire users.
Furthermore, it is common for TCM practitioners to establish their presence on multiple medical platforms. Consequently, APP platforms that rely on individual physicians’ personal brands do not hold a distinct advantage. From the physicians’ perspective, these platforms serve merely as tools for building their personal brands.
Drawing an analogy with the restaurant industry, Zhou Hei Ya is undoubtedly the brand that engages most frequently with its customers. The company is primarily engaged in the production, marketing, and retail of casual braised food products. Since opening its first store in Wuhan in 2002, it had operated 757 self-operated stores across 40 cities in 12 provinces in China as of October 23, 2016.
In establishing its self-operated stores, Zhou Hei Ya has developed a standardized procedure. By implementing highly standardized processes for site selection and store opening, along with centralized procurement of interior decoration and fixtures, the company significantly reduces upfront investment per store, minimizes the lead time required to prepare new outlets, and achieves shorter break-even periods and investment payback periods.
“Practitioners of Traditional Chinese Medicine (TCM) follow diverse approaches. We are committed to establishing standardized, compact physical treatment environments to maximize user coverage and fully showcase the unique diagnostic and therapeutic styles of different physicians. By increasing the frequency of consultations within these settings, we aim to drive greater conversion toward premium TCM herbal medicines and health products. In this process, mobile internet serves as the perfect adhesive, while collaborative channels with enterprise clients constitute our lifeline.”
“So we’re hesitant to emulate Tongrentang; perhaps Zhou Hei Ya is a better fit for us.”