Exclusive Interview with Zhang Yibing, COO of Haoyaoshi: The Window of Opportunity in Pharmaceutical E-commerce Has Never Closed
At Jointown Pharmaceutical Group’s headquarters in Daxing, Zhang Yibing sat down for an exclusive interview with VCBeat. As a veteran in the pharmaceutical e-commerce sector, Zhang shared his personal journey and insights into the successes, failures, gains, and losses of the industry during the two-hour conversation. Moving forward, VCBeat will roll out a series of interviews with senior executives in pharmaceutical e-commerce; this article marks the first installment.
Profile:Zhang Yibing currently serves as the Chief Operating Officer (COO) of Haoyaoshi Online Pharmacy. Prior to joining Haoyaoshi, Mr. Zhang was the General Manager of Simcere Zaikang Online Pharmacy, a position he left in July 2014. As a seasoned veteran in the pharmaceutical e-commerce industry, Mr. Zhang previously worked at Jointown Pharmaceutical Group for five years, where he served as Website Operations Manager and oversaw online B2B operations. He joined Kangaiduo in 2011 and departed in 2014, having served as Assistant to the General Manager and Marketing Director. He subsequently joined Simcere Zaikang, where he worked for one year.
Zhang Yibing
Text | Bu Yan, Zhou Chao
Over the past year or two, more than ten senior executives from pharmaceutical e-commerce companies have resigned to switch platforms, with Zhang Yibing being one of them. In July 2015, Zhang Yibing resigned from his position as General Manager of Simcere Zaikang Online Pharmacy and joined Haoyaoshi Online Pharmacy (hereinafter referred to as “Haoyaoshi”), a subsidiary of Jointown Pharmaceutical Group, as its Chief Operating Officer (COO).
For Zhang Yibing, returning to Haoyaoshi was both a coincidence and an inevitability.
Five years ago, Zhang Yibing participated in the founding of Haoyaoshi. Now, five years later, he has returned to this familiar platform. Along with his change in role, his mindset has undergone a fundamental shift: from various complaints about bosses and superiors to focusing on how to drive work more effectively with existing resources. Most importantly, after working at several pharmaceutical e-commerce platforms, Zhang Yibing is set to truly realize his equity stakes. “Jointown Pharmaceutical Group has a tradition of sharing equity,” Zhang stated, noting that he had previously received a small portion of equity during his earlier tenure at Jointown.
The lack of equity is one of the main reasons for the departure of senior executives in pharmaceutical e-commerce. “I have always placed great importance on equity,” Zhang Yibing admitted, noting that there is currently a shortage of talent in the pharmaceutical e-commerce sector, and offering equity is a relatively feasible method for employee retention.
Over the years immersed in pharmaceutical e-commerce, Zhang Yibing’s greatest takeaway has been mastering refined management. Under this approach, and within the current competitive landscape, e-commerce operations not only avoid cash burn but also achieve profitability every year.
How to Build an E-commerce Business Without Burning Cash?
After leaving Jointown Pharmaceutical Group in 2011, Zhang Yibing joined Kangaiduo Online Pharmacy (hereinafter referred to as “Kangaiduo”), which had been recently established, and gained experience across various business areas including operations, customer service, and marketing.
According to Zhang Yibing, Kang Aiduo was initially positioned in the vertically specialized field of liver disease. At that time, Kang Aiduo’s management believed that achieving sales of RMB 1 million would be a commendable milestone. In reality, it took Kang Aiduo only five months to surpass RMB 1 million in sales. Today, just four years later, Kang Aiduo’s annual sales have exceeded RMB 700 million.
Zhang Yibing stated that Kang Aiduo has been profitable since its inception. This is primarily due to two factors: first, its strong marketing capabilities. At the time, a common saying in the pharmaceutical e-commerce circle was, “Kang Aiduo’s marketing combined with Baiji Pharmacy’s products would be unbeatable.” Kang Aiduo made full use of SEO (Search Engine Optimization) tools, ensuring its products and brand were omnipresent, thereby rapidly accumulating user traffic.
Second, focus on building the official website. After the Tmall Medicine Pavilion reopened in 2012, major pharmaceutical e-commerce platforms flocked to this massive traffic gateway, while competition for official websites remained a blue ocean opportunity that Kangaidu seized effectively. As a third-party platform, Tmall inevitably engages in price wars, whereas an official website can avoid such competitive pricing battles. Consequently, Kangaidu rapidly emerged as a dark horse in the pharmaceutical e-commerce sector.
Many professionals in pharmaceutical e-commerce at traditional pharmaceutical companies and chain pharmacies often cite reasons for poor performance in various settings, such as lack of support from management and insufficient talent. Before joining Kang Aiduo, Zhang Yibing also held similar views.
After joining Kangaidu, Zhang Yibing was responsible for market operations, with the biggest challenge being a lack of funds. At that time, it was necessary to find ways to cut costs and budget carefully. The concept of refined operations gradually took shape during this period. “Every single penny had to be stretched as far as possible. This mindset was, in fact, forced upon us by objective realities.”
However, after being acquired by the listed pharmaceutical company Tai'an Tang in 2014, Kang Aiduo began to expand on a large scale, resulting in losses. According to Tai'an Tang's 2015 annual report, Kang Aiduo incurred a loss of RMB 26.8766 million.
After leaving Kangaidu, Zhang Yibing joined Simcere Zaikang Online Pharmacy as General Manager. “Being a general manager is truly challenging. I used to think the role was mainly about formulating strategic plans, but once I actually assumed the position, I realized it was far from easy. This represented a significant shift in mindset.” When he departed from Simcere Zaikang, its e-commerce sales had surpassed RMB 100 million, up from RMB 30 million in the year prior to his appointment.
Loss 1What Are the Gains and Losses for Haoyaoshi in the Hundreds of Millions?
Compared with Kang Aiduo and Simcere Zaikang, Haoyaoshi holds a clear advantage in terms of both its establishment date and inherent resource strengths. Haoyaoshi initiated its B2C business project as early as 2008 and officially launched its online platform in 2009.
“Kangaiduo once considered Haoyaoshi to be one of its biggest competitors,” Zhang Yibing stated candidly. Leveraging the strong backing of Jointown Pharmaceutical Group, Haoyaoshi possessed inherent advantages in pharmaceutical e-commerce; nevertheless, Kangaiduo ultimately far surpassed Haoyaoshi.
Zhang Yibing told VCBeat that the biggest problem for Haoyaoshi is personnel. In recent years, the CEO of Haoyaoshi’s online pharmacy has changed frequently, and the direct consequence of instability at the senior management level has been low employee morale. Except for 2011, when it posted a profit due to its cooperation with JD.com, Haoyaoshi has consistently operated at a loss, accumulating deficits of RMB 100 million.
Zhang Yibing stated that Haoyaoshi should be able to turn a profit this year.
In fact, Haoyaoshi’s sales have been consistently growing. In the first half of 2015, its sales reached RMB 219 million, representing a year-on-year increase of 36.88%.
Haoyaoshi missed the first-mover advantage on the Tmall Pharmacy platform, but it has achieved strong sales on JD.com. Zhang Yibing stated that this is because the establishment of JD Haoyaoshi in 2011 provided Haoyaoshi with some accumulated strengths. “Haoyaoshi’s supply chain advantages are unmatched by others, and not every company is willing to bear a loss of RMB 100 million.”
Jointown for CDuan's E-commerce Group
Since joining Haoyaoshi in July last year, Zhang Yibing has primarily focused on three initiatives: team restructuring, mindset transformation, and supply chain collaboration.
“In the past, everyone relied on price wars, considering it a given that e-commerce would operate at a loss,” Zhang Yibing told VCBeat. He added that while the management team of Haoyaoshi still negotiates certain loss allowances with its parent group, it is gradually turning losses into profits.
Within Haoyaoshi, there was once a prevailing view that Jointown Pharmaceutical Group was a traditional enterprise and that Haoyaoshi should maintain a certain distance from it. This mindset resulted in the underutilization of Jointown’s supply chain resources. After Zhang Yibing joined the company, he engaged with various suppliers to negotiate collaborations, driving optimization and upgrades. Currently, Haoyaoshi employs over 500 people, with customer service, technical, and logistics personnel constituting the majority of its workforce.
As recently as January this year, Jointown Pharmaceutical Group formally established a subsidiary named Health 998 E-commerce Group (hereinafter referred to as “998 E-commerce Group”), which is fully responsible for all of the group’s consumer-facing (B2C) e-commerce operations. The 998 E-commerce Group primarily comprises five major business segments: Haoyaoshi Online, Haoyaoshi Offline Stores, O2O (Online-to-Offline), Health Management, and Telemedicine. Among these, the Haoyaoshi Online Pharmacy plays a pivotal role.
“Haoyaoshi’s online pharmacy serves as a supplement to its offline product categories and is also a key channel for monetization across the entire e-commerce platform,” stated Zhang Yibing. Currently, Haoyaoshi has established a comprehensive omni-channel marketing presence through its official website, WeChat store, and flagship stores on multiple mainstream third-party e-commerce platforms.
O2O is a key business focus for 998 E-Commerce Group this year.
Previously, Jointown’s O2O business platform was “Yaojisong” (Medicine Express), launched on WeChat. “Yaojisong” went live in April 2014, but its operational performance was less than ideal.
Zhang Yibing believes that the pharmaceutical O2O sector is still in its exploratory phase, and the underperformance of Yaojisong is not entirely attributable to Haoyaoshi itself.
According to Zhang Yibing, Haoyaoshi’s “Yaojisong” (Medicine Express Delivery) service previously leveraged Jointown Pharmaceutical Group’s extensive downstream pharmacy customer base to onboard pharmacies onto the platform, but encountered challenges such as reconciliation difficulties.
It is understood that chain pharmacies settle their accounts on a daily basis and are required to deposit all cash receipts into the bank each day. The O2O model involves the challenge of delayed payment settlements, which can create issues for the financial control of chain pharmacies. Secondly, pharmacy staff have low motivation for delivering orders. Yaojisong also attempted to collaborate with express delivery companies for logistics; however, this would increase costs for the courier firms and make it difficult to guarantee timely delivery. According to Zhang Yibing, Yaojisong once integrated its system with YTO Express’s delivery network. Once an order was placed, it would be transmitted to YTO. Through system matching, the order would be assigned to a courier for pickup from a designated store.
With the establishment of Jointown B2C E-commerce Group, its O2O strategy has been adjusted accordingly.
It is reported that Jointown has established an independent O2O company, Madison, in Wuhan, launching a pilot program in the Wuhan area first. The service features 24-hour operations and one-hour home delivery. The stores are primarily self-operated, with a few locations operating as franchises.
Currently, Haoyaoshi operates over 800 offline stores across more than ten provinces in China, including over 200 company-owned stores and 500 franchised stores. Moving forward, Haoyaoshi will consider negotiating acquisitions of pharmacies in Beijing.
The fourth major business segment, health management, focuses on software and hardware products for personal health management, along with supporting services.
The fifth major business segment, telemedicine, is also being piloted. In July 2015, Jointown Pharmaceutical Group Co., Ltd. signed an agreement with the First Affiliated Hospital of Zhengzhou University in Henan Province, Huawei Technologies Co., Ltd., and Donghua Software Corporation to formally explore the telemedicine model. This February, Jointown partnered with Wuhan Central Hospital to launch a remote delivery service for online prescription medications from the hospital.
The Opportunity Window for Pharmaceutical E-commerce Has Always Been Open
"Many in the industry believe that the window of opportunity for pharmaceutical e-commerce has closed, but Zhang Yibing disagrees. 'It depends on your aspirations: do you aim to build a company with a market capitalization of tens of billions, or are you content with earning a few million yuan annually? As for who will become a major player, anyone could succeed, yet no one is guaranteed to.'"
“The primary reason for high offline prices is information asymmetry, whereas e-commerce aims to achieve information symmetry. Additionally, the basic medical insurance fund faces a significant deficit, which can be addressed by increasing revenue sources and reducing expenditures.” Zhang Yibing believes that once the online sale of prescription drugs is fully liberalized, it will save hundreds of billions of yuan in medical insurance funds. After sufficient market competition, there will undoubtedly be an impact on offline physical pharmacy chains. This is also a major reason why Haoyaoshi has laid out its O2O strategy. “Offline stores have a limited range of product categories; their core competitiveness lies in providing better services, such as rapid home delivery of medications and health management services.”
With the gradual implementation of policies such as the cancellation of medical insurance audit qualifications, the nationwide interconnection of medical insurance systems, and the separation of prescribing from dispensing, pharmaceutical e-commerce will usher in new market opportunities.
Regarding the future landscape of pharmaceutical e-commerce, Zhang Yibing believes that, unlike the 3C electronics sector, no single player will dominate the market. Instead, there will be robust market competition, ultimately leaving around three nationwide pharmaceutical e-commerce platforms. “Any of the current players has the potential to be one of the final three.”