Yaodian LihuoBao Files IPO Prospectus: Empowering Pharma Companies, OTC Reps, and Pharmacy Staff

Pharmacy Stocking Pro, a subsidiary of Guangzhou Xiaoming Network Technology Co., Ltd., was initially planned by a team led by co-founder Lan Xujun in December 2014 and officially launched in March 2015.

In April 2015, Yaodian Lihuobao secured an angel round of financing amounting to RMB 8 million, led by Zhongyu Capital. Three months later, its WeChat mini-program was officially launched. In August of the same year, after accumulating 10,000 seed users, Yaodian Lihuobao released its standalone mobile app. By October 2015, the platform’s user base had reached 100,000.

It is reported that “Pharmacy Stocking Assistant” has been vigorously promoted in 35 key cities selected from major regions and municipalities, including Guangdong, Shandong, Shanxi, Henan, Hebei, Jiangxi, Chengdu, Chongqing, and Tianjin. As of December 2015, the service had covered 36,000 pharmacy outlets, attracting 178,000 followers, among whom 114,000 were verified users. The platform’s page views (PV) exceeded 10 million. It is expected that around the Spring Festival of 2016, the platform will establish collaborations with pharmaceutical manufacturers on 100 product varieties.

Currently, among the pharmacies covered by Yaodian Lihuobao, medium-to-large chain pharmacies account for 60%, while small chains and independent stores make up nearly 40%. Notable chains include Chongqing Heping Pharmacy, Guangzhou Dashenlin Pharmacy, and Shandong Shuyu Pingmin Grand Pharmacy.

The original intention was to address the pain points in the pharmaceutical retail sector.

From the original intention of the establishment of Yaodian Lihuobao, it is to solve the pain points of different roles in the current pharmaceutical retail link.

It is reported that in the pharmaceutical retail sector, frontline pharmacy staff face the pain point of low wages, with average monthly salaries hovering around RMB 2,000. Many employees attempt to supplement their income through channels such as social commerce, but with limited success; some have even left the industry due to compensation issues. Meanwhile, OTC (Over-the-Counter) representatives struggle with low management efficiency, typically overseeing only 80–120 pharmacies at a time. Approximately 70% of their working hours are spent traveling between stores, resulting in high time costs and stagnant productivity. For upstream pharmaceutical manufacturers and chain pharmacy operators, the primary challenges lie in low sell-through rates and sales volumes, coupled with high management costs.

Since pharmacy staff are the core factor exerting the greatest influence on consumers’ purchasing decisions, and OTC representatives play a pivotal role in influencing these staff members, the final sale of a medication is closely tied to the ability of OTC representatives to motivate pharmacy staff. Therefore, to achieve optimal product turnover, OTC representatives must devote considerable effort to building strong relationships with pharmacy staff.

Currently, there are 600,000 OTC representatives in China. Pharmaceutical companies spend RMB 60 billion annually on their salaries, social security contributions, travel expenses, and management costs. In reality, apart from in-store inspections of display stacks, posters, and drug placement, as well as providing necessary training to pharmacy staff on product usage, the vast majority of an OTC representative’s time is spent traveling.

All these factors have made high costs an insurmountable hurdle for pharmaceutical companies in managing their OTC channels. Reducing terminal management expenses and improving operational efficiency are precisely the key issues that Yaodian Lihuo Bao aims to address.

Targeted Solutions for Endpoint Management Challenges to Achieve Win-Win Outcomes

An overview of retail pharmacy terminal management reveals that “staff training, product sales activation, and shelf management” are three major challenges. To address these issues, Yaodian Lihuobao offers targeted solutions.

In terms of staff training, Yaodian Lihuobao adopts an online training approach, where key product information is developed into learning materials and staff comprehension is assessed through questionnaires. Traditional in-store training requires pharmaceutical sales representatives to visit pharmacies in person, incurring costs for lost work time and travel expenses, while the effectiveness of such training remains difficult to evaluate. In contrast, online training significantly reduces training costs, saving pharmaceutical companies substantial expenses and improving training efficiency.

For example, promoting a new drug may require training 10,000 pharmacy staff members. Traditionally, this is done by organizing training sessions of 100 participants each, led by teams of two sales representatives. Completing the training for 10,000 people would typically take ten staff members four months. When accounting for salaries, travel expenses, materials and promotional gifts, as well as compensation for pharmacies’ lost business hours, the total cost amounts to approximately RMB 650,000.

By leveraging the online training platform “Lihuo Bao” for pharmacies, it is essentially sufficient to have one sales representative conduct four training sessions per store clerk over a four-day period, while using incentives to encourage clerks to improve their answer accuracy. This approach can basically achieve the desired outcomes. The total cost, including training expenses, the sales representative’s salary, and subsidies for the store clerks, will not exceed RMB 50,000, which is significantly lower than that of traditional methods.

In terms of product sales velocity, Yaodian Lihuobao directly incentivizes pharmacy staff through a “Share Receipts, Get Red Packets” campaign, boosting staff motivation and helping pharmacies increase sales.

Since a positive rapport between OTC representatives and pharmacy staff is a critical factor for pharmaceutical companies to boost terminal sell-through, traditional approaches require sales representatives to visit stores in person to build such relationships, sometimes offering inexpensive promotional gifts to stimulate sales. However, this strategy has yielded limited effectiveness.

On the Yaodian Lihuobao platform, OTC representatives can interact with pharmacy staff in two phases. In the first phase, during the initial launch period of the platform, OTC representatives recommend that pharmacy staff register for and use Yaodian Lihuobao, and train them on features such as online training and sales-driven receipt sharing.

In the second phase, which began in December 2015, OTC representatives were able to assign tasks via the Lihuobao app to the store clerks under their responsibility. These tasks included product knowledge training, shelf management, and sharing sales receipts to drive sell-through, thereby strengthening interactions with store clerks and facilitating more efficient customer relationship maintenance.

In terms of shelf management, Yaodian Lihuobao enables OTC representatives to remotely monitor and manage terminal conditions through a “precise location positioning and real-time photo submission for rewards” mechanism, eliminating the need for frequent store visits to inspect issues such as drug display stacks and poster placement.

Through the aforementioned approach, not only can the income of pharmacy staff be increased, but the management efficiency of OTC representatives can also be improved, thereby helping to enhance the sell-through rate and sales volume for pharmaceutical companies and chain pharmacies.

So, does the improvement in work efficiency for OTC representatives brought about by Yaodian Lihuobao mean that a batch of representatives will lose their jobs as a result?

Lan Xujun stated that many OTC representatives at pharmaceutical companies are currently overwhelmed, with numerous pharmacies lacking sufficient personnel for follow-up and management. It is certain that the emergence of “Pharmacy Shelf-Stocking Assistant” will not lead to job losses for OTC representatives; on the contrary, it can help them improve terminal management efficiency, ultimately achieving a win-win outcome for all parties involved.

Pharmacy Inventory Management Interface

Profit from three aspects: transaction commissions, advertising placements, and service bundling

In terms of its operational model, Yaodian Lihuobao adopts a “subsidy for pharmacy staff” approach. Lan Xujun explained that the subsidy funds currently provided to pharmacy staff by Yaodian Lihuobao come from three sources: first, contributions from manufacturers’ headquarters; second, top-ups made by sales representatives; and third, subsidies provided by Yaodian Lihuobao itself.

Regarding the revenue model of Yaodian Lihuobao, Lan Xujun stated that while maintaining its core services free of charge, the platform currently has three revenue streams. Primarily, Yaodian Lihuobao charges a commission from the funds allocated by manufacturers or sales representatives upon the successful initiation and acceptance of each task. This constitutes the platform’s primary revenue model at present.

On the other hand, there is advertising revenue, which involves assisting manufacturers in delivering targeted advertisements. Through daily brand exposure, this strategy aims to deeply imprint the brand in the minds of pharmacy staff.

In addition, the Pharmacy Stocking Treasure team also provides paid services to manufacturers in need, including the production of pharmaceutical training video materials and brand activities such as display competitions.

Team Introduction

Pharmacy Inventory Pro was launched in Guangzhou, known as the "Ram City," and currently has a team of over 40 members.

Liao Guanghui, founder, investor, and product designer, was among China’s first OTC terminal managers at foreign enterprises and has served as a strategic e-commerce consultant for multiple well-known pharmaceutical companies.

Co-founder and CEO Lan Xujun, a marketing expert born in 1989, has won prestigious awards such as the Effie Gold Award and the Golden Mouse Award.

CTO Wu Chaolong, formerly a backend development engineer at Tencent, has prior entrepreneurial experience.