Haoyaoshi Plans to Add 200 Stores Nationwide with O2O Services as Strategic Focus

Recently, a relevant official from the marketing department of Haoyaoshi announced that, in accordance with the strategic deployment of Jointown Pharmaceutical Group, Haoyaoshi would adjust its O2O online and offline store layout in 2017, with an expected opening of 30 pharmacy stores within the Fifth Ring Road of Beijing.

This marks a rare “new development” following Jointown Pharmaceutical Group’s adjustment of its business structure in the first half of last year. VCBeat consulted Zhou Hongliang, General Manager of Haoyaoshi Pharmacy, who stated that the O2O business (via the Haoyaoshi APP) has now been integrated under Haoyaoshi Pharmacy, with the aim of creating synergies between online and offline operations. Meanwhile, the company plans to expand by 200 stores across 24 cities this year, achieving nationwide coverage.

According to Zhou Hongliang, in terms of existing operations, Haoyaoshi currently operates 300 stores across 12 cities in China, with more than 100 of them integrated into online-to-offline (O2O) medicine delivery services. The Haoyaoshi app has 1.6 million registered online members, a monthly active user base of 310,000, and an average daily order volume exceeding 3,000.

It is reported that in the first half of last year, Jointown Pharmaceutical Group consolidated several of its internet-based business units—namely, the Haoyaoshi online pharmacy (B2C), overseas purchasing, Wuhan Madison (O2O), Jointown Health Management, and the Telemedicine Division—to establish the 998 E-Commerce Group.

In late December, Jointown Pharmaceutical Group launched its mobile health product, the “Health 998” app. At that time, it was disclosed that the “Health 998” app centers on personal health management, aligning with the current healthcare reform direction of tiered diagnosis and treatment, and provides users with convenient, efficient, end-to-end, and integrated health management services. Specifically for the hypertensive patient population, the platform independently developed a self-diagnostic big data model capable of precisely identifying the root causes of hypertension.

Leveraging Jointown’s vast pharmaceutical resources, “Health 998” is a platform built by Jointown to integrate online and offline omnichannel medical and health resources, achieving an effective closed-loop system and resource sharing. With upstream health big data, midstream consultation and medical services, and downstream medication purchase and insurance, “Health 998” provides comprehensive integration, linking doctors, patients, and medicines to form a complete and positive industrial chain.

This means that Jointown Pharmaceutical Group now has a relatively “integrated” product for its C-end consumers, which is not solely focused on pharmaceuticals but encompasses all functionalities related to health management, medical consultation and diagnosis, and pharmaceutical distribution.

Jointown also stated that its primary objective in the near future is to leverage its pharmaceutical sales operations to shift the focus of its pharmaceutical e-commerce from mere medication services to customized user health services. This aligns with what is externally discussed as Phase 4.0 of pharmaceutical e-commerce. In layman’s terms, Pharmaceutical E-commerce 4.0 refers to integrated “drug + medical” solutions or a model where “drugs” serve “medical care.” At this stage, pharmaceutical companies should place greater emphasis on integrating resources across the entire pharmaceutical industry chain, building a more comprehensive service system, and gradually establishing an effective, differentiated strategic framework and business model.

From the current perspective, Haoyaoshi’s nationwide store expansion also falls within the “Medical + Pharmaceutical” framework. According to Zhang Dingding, Marketing Director of Haoyaoshi’s Marketing Department, future stores will assume additional functions, including medical consultation accompaniment, chronic disease management, health management, and medication delivery, effectively serving as “Health Service Stations.” These Health Service Stations will be embedded in communities and grassroots units, fulfilling daily medication purchase needs while aiming to achieve online-offline integration and provide users with comprehensive, end-to-end health services.

Not coincidentally, in addition to Haoyaoshi, O2O pharmaceutical delivery companies such as Kuaifang Songyao and Dingdang Kuaiyao also made announcements at year-end, revealing their financing progress or new business plans.

On the 28th of last month, Dingdang Kuaiyao announced that it had secured RMB 300 million in Series A financing. Meanwhile, it reaffirmed its goal of leading the new retail sector in pharmaceuticals and healthcare by upgrading its services through Dingdang Smart Pharmacy.

The RMB 300 million in financing will also be allocated to three key business areas. According to its official introduction, first, it will restructure online and offline resources by leveraging Dingdang Smart Pharmacy to integrate these resources, redefine the value of traditional pharmacies, empower online operations, and enhance user experience. This expansion will broaden the operational scope of pharmacies while delivering a superior experience for users. Second, it aims to provide users with an exceptional service experience. It will continue to deepen its 24/7 health-at-home service with a 28-minute delivery promise and strengthen round-the-clock expert pharmacist services. While Dingdang Smart Pharmacy is designed to enhance offline services, it will also leverage Dingdang Kuaiyao’s online resources to offer users multi-dimensional services. Furthermore, through resource integration, Dingdang Smart Pharmacy will optimize Dingdang Kuaiyao’s 28-minute medication delivery service. Third, it will apply member health big data. Dingdang Smart Pharmacy will create electronic health records for users, collect health data, and build a “C2B” model to truly meet user needs. Users can choose nearby Dingdang Smart Pharmacy locations to undergo health check-ups using intelligent wearable devices at its Health Stations, gaining insights into their physical condition. Additionally, Dingdang Smart Pharmacy will establish electronic health records and collect health data to predict health status, detect issues early, and provide personalized services tailored to individual needs.

This stance is not significantly different from Haoyaoshi’s O2O layout. It also aims to bolster online medication delivery capabilities by strengthening its offline store network, while pharmacies will assume broader functions beyond merely serving as online “warehouses” and distribution points. Strategically, the scope of in-store services will be expanded from single-product pharmaceutical retail to include light consultations, patient accompaniment, health management, and electronic health records, thereby leveraging pharmacies as service hubs to deepen the operational functionality of the entire service system.

It is worth noting that both of these O2O pharmaceutical delivery platforms are backed by traditional pharmaceutical commerce enterprises: Jointown Pharmaceutical Group and Renhe Pharmaceutical. Yang Wenlong, Chairman of Renhe Pharmaceutical, revealed in a media interview that although numerous companies have entered the pharmaceutical O2O sector, Dingdang Kuaiyao remains the first in China to truly penetrate the core medication segment and integrate the upstream and downstream industry chains, particularly by providing free, round-the-clock medication delivery services in key regions.

After securing RMB 200 million in its Series B funding round in September 2015, KuaiFang began to pivot. Gao Yue, CEO of KuaiFang, previously stated in an interview with VCBeat (WeChat ID: vcbeat), “The model of partnering with pharmacies poses numerous challenges, including fragmented management and an inability to guarantee service quality. The key to addressing users’ pain points lies in delivering the best possible service experience; without such assurance, this business model cannot be sustained.” In light of this, KuaiFang has actively developed company-owned stores, currently operating 18 locations in Beijing.

Regarding the overall industry outlook, Gao Yue believes that “it is feasible to sustain seven or eight, or even ten, companies with similar business models. Moreover, it requires collective efforts from industry peers to standardize the sector, continuously expand its scale, and increase its market share.” Currently, Kuai Fang Song Yao, Ding Dang Kuai Yao, and Hao Yao Shi’s O2O operations are all putting this principle into practice by actively expanding their offline store networks while enhancing service capabilities and professionalism at these locations, striving to secure a foothold in this critical “entry point.”

Nevertheless, some industry insiders have expressed concerns about the future of O2O medicine delivery. A head of a chain pharmacy in Chongqing frankly told reporters, “We are also pursuing the O2O medicine delivery model, with operations handled by our existing chain stores, which offer substantial store counts and extensive coverage. However, we face an obvious problem: order volume is limited, making it impossible for this channel to become a core part of our business system. In fact, it is rather marginal.”

His concerns are well-founded. To begin with, purchasing medication is a low-frequency consumer activity. More importantly, the coverage of chain pharmacies is already extensive. Taking Chongqing as an example, there is nearly one to several stores every kilometer in the main urban area. It takes less time for customers to buy medicine themselves than for staff to deliver it, and they avoid the hassles of payment and describing their symptoms. Describing this service as “of little value” is actually quite mild; some have even labeled it a “pseudo-demand.”

Although Dingdang Medicine, Haoyaoshi O2O, and Kuaifang Medicine have successively announced that they have achieved basic revenue balance or profitability, it is difficult to claim that medicine delivery via O2O represents the future trend of pharmaceutical retail.

So, what are the reasons behind Alibaba Health, JD Daojia, Renhe Pharmaceutical, Jointown Pharmaceutical, and Kuaifang entering the O2O medicine delivery market? The first and most important reason is likely “strategic positioning.” Since other companies and competitors are engaging in this sector, failing to do so would represent a gap in their strategic architecture, causing them to fall behind in the competition. Secondly, it is about channel expansion. Companies like Jointown Pharmaceutical and Renhe Pharmaceutical aim to expand their channels and generate incremental growth through the niche service of medicine delivery, thereby achieving their goal of integrating online and offline operations and connecting the entire industry chain. Thirdly, it is about deepening service offerings. As evident from the aforementioned developments, medicine delivery is not merely the core business of O2O platforms; these companies intend to expand from “pharmaceuticals” to the broader scope of “health management.” In terms of timeline and service depth, purchasing medication is a low-frequency consumption activity, whereas health management is not. Medicine delivery is often a one-time transaction, but comprehensive patient-doctor services throughout the entire care journey are not. In the future, the O2O operations of these companies may evolve toward diversified business layouts, uncovering user needs while adding value to their services.

Viewed against the broader backdrop of the pharmaceutical industry, following the separation of prescribing from dispensing, the reduction in the drug revenue share, and the outflow of prescriptions, retail and e-commerce are inevitably poised to become critical channels for pharmaceutical distribution. O2O (Online-to-Offline) precisely spans both these domains; it can be regarded as pharmaceutical e-commerce with integrated logistics, or as the “Internet Plus” evolution of retail pharmacies. In essence, it leverages internet tools to transform and reshape the landscape of pharmaceutical distribution.

For this very reason, pharmaceutical O2O faces numerous constraints—regulatory, cost-related, and service-demand-related. Nevertheless, the investment by enterprises in this sector underscores its exploratory value. We have good reason to believe that, amidst the diverse strategies employed by various players, pharmaceutical delivery O2O will witness some “breakthroughs,” thereby bringing new possibilities to pharmaceutical distribution.