The Rise and Challenges of Medicine O2O: How BAT, Ping An, and YaoGeLi Are Competing in China's On-Demand Pharmacy Market

When Yaogeli, which touts “one-hour home delivery of medications,” made its debut earlier this year, the prevailing sentiment among industry veterans was largely skeptical. The announcement in June that Yaogeli had secured a Series A financing round worth tens of millions of U.S. dollars likely came as a surprise to many.

At nearly the same time, Kuai Fang Song Yao also announced that it had secured RMB 50 million in Series A financing. Founded approximately six months earlier than Yao Geili, both companies position themselves as providers of “one-hour rapid medication delivery.”

There was also a company called U Yi U Yao, which predated Kuai Fang Song Yao. It adopted a model similar to Didi Chuxing: after a user placed an order, pharmacies would compete to accept it, and pharmacy staff would then deliver the medication to the customer. However, in August of last year, the company pivoted to focus on blood glucose management services and launched the “U Tang Yi Sheng” app.

The pioneer in experimenting with the “one-hour medication delivery” model in the online pharmaceutical sector was Jinxiang.com. As early as 2012, Jinxiang.com selected a range of commonly used medicines and limited the trial to certain urban districts in Beijing, partnering with KuaiShuBao for drug delivery. Unfortunately, the project was shelved after operating for approximately one year.

Low average transaction value and high delivery costs are the two major weaknesses of the O2O model for instant medicine delivery. Since pioneers have already proven that this model is unviable, why do so many latecomers continue to press on? Even the three tech giants—Baidu, Alibaba, and Tencent (BAT)—are attempting various approaches to enter the pharmaceutical e-commerce O2O space. Behind the rapid rise of pharmaceutical O2O lies the industry’s anticipation of policy liberalization regarding the online sale of prescription drugs, despite such regulations yet to be introduced.

What Is the Current State of China’s Pharmaceutical O2O Market, and What Are Its Future Development Directions? VCBeat Internet Healthcare Research Institute Conducted the Following Review and Analysis.




VCBeat has compiled the following information after analyzing 14 projects that focus on the O2O model for rapid medication delivery:

1. The projects are concentrated in Beijing, with only two located in Shanghai and one in Wuhan. This is inevitably linked to Beijing’s broader environment for internet-based entrepreneurship.




2. In addition to the two projects established in 2013, six were founded in 2014 and six in 2015.




3. Excluding projects affiliated with large corporate groups—such as Yaojisong, Baidu Yaozhida, Dingdang Kuaiyao, Ali Health, JD Health Daojia, and Ping An Good Pharmacist’s Yaojisong—four of the remaining eight independent pharmaceutical O2O projects have secured financing.




4. There are 11 with a one-hour delivery commitment, 1 with a two-hour delivery commitment, 1 with a 30-minute delivery commitment, and 1 with a 28-minute delivery commitment.




5. Except for one provider that charges a nighttime delivery fee, all current deliveries are free of charge and are primarily handled by staff from offline brick-and-mortar pharmacies. Only JD Health At-Home and Kuai Fang Song Yao have established their own in-house delivery teams.




6. Online medication purchasing services based on Location-Based Services (LBS) are provided, among which three platforms adopt a Didi Chuxing-style model allowing pharmacies to compete for and respond to orders, while the remaining platforms assign orders to the nearest pharmacies based on the user’s location.

Different pharmaceutical O2O platforms are both competitive and cooperative.

Yaogeili, Kuaifang Songyao, Dingdang Kuaiyao, and Yaokuaishao have all joined food delivery platforms such as Baidu Waimai, Meituan Waimai, Dianping, and Ele.me in the second half of this year. For these food delivery platforms, the onboarding of pharmaceutical O2O platforms is a welcome addition. They only need to add medication sales to their existing services and integrate the relevant platform interfaces.

What pharmaceutical O2O platforms value is the massive traffic resources of food delivery platforms. On the other hand, they leverage these food delivery platforms, which already have a certain level of recognition among the general public, to expand their own influence and brand awareness.

In theory, the two collaborating parties could share delivery personnel. However, in practice, food-delivery platforms face a shortage of riders during peak meal times, leaving them unable to handle additional medicine-delivery orders. Moreover, since purchasing medication is a relatively low-frequency activity, it is difficult to ensure delivery personnel’s enthusiasm without substantial subsidies. For instance, if ten people place food orders at the same time and location, perhaps only one person places a medicine order. Furthermore, pharmaceutical O2O merchants that prioritize service quality need to provide specialized training for their delivery staff and are therefore unlikely to partner with existing food-delivery teams in the early stages.

Since all players are operating in the O2O (Online-to-Offline) space, third-party independent platforms such as Yaogeli inevitably compete with giants like Baidu and Ali Health. Whether it is third-party pharmaceutical O2O platforms like Yaogeli, or services such as Ali Health, Baidu’s “Yao Zhida,” and JD Health’s home delivery service, they currently must partner with offline brick-and-mortar pharmacies to facilitate medication delivery. Kuai Fang Song Yao stands as an exception; after securing RMB 200 million in Series B financing, it began adopting a JD.com-style self-operated model. However, establishing proprietary warehousing and delivery networks requires substantial financial backing.

Well-Funded Large Corporate Platforms Face Diverse Situations

Although the parent companies of Ali Health, JD Health Daojia, and Ping An Yaojisong are financially robust, their willingness to invest substantial capital in this endeavor is evident from the current state of various pharmaceutical O2O business models.

Alibaba Health’s predecessor was CITIC 21st Century, which held the highly coveted electronic drug supervision codes, although these codes have yet to exert significant influence. After being acquired by Alibaba, it continued to operate as an independent platform. Moreover, Alibaba plans to integrate Tmall Pharmacy into Alibaba Health, underscoring the company’s substantial commitment to this business segment.

By comparison, JD Health At Home is merely a service within the JD Daojia app, and Ping An Good Pharmacist’s “Yao Ji Song” (urgent medicine delivery) is also just a feature on its app platform. In fact, JD has always placed limited emphasis on the pharmaceutical sector.

Internet-Backed Pharmaceutical O2O Platforms Focus on Model Innovation

Yaogei Li:The founding team largely hails from internet companies. Its operational model has three key features:

1. Launched the “One-Minute Clinic,” with the app displaying six licensed pharmacists providing 24-hour medication consultation services. 2. Productized pharmacists’ expertise, such as automated compatibility checks. 3. Supports pharmacy reimbursement through medical insurance, but the process is relatively complex. (The overall process is as follows: The patient obtains an external prescription form from a hospital to qualify for out-of-hospital purchases—places an order via the Yaogeli App—Yaogeli accepts the order and arranges delivery—Upon drug delivery, Yaogeli retrieves the external prescription form and takes it to a partnered designated medical insurance pharmacy for stamping—The stamped form is returned—The patient then submits the external prescription form to their employer for reimbursement.)



Alibaba Health:With Zhang Shouchuan’s departure, Alibaba Health’s attempt to digitize prescriptions—a strategy intended to force the separation of prescribing and dispensing—was declared a failure. Amid widespread external speculation that Alibaba Health might abandon this business segment, the company announced a strategic pivot to launch a new O2O (Online-to-Offline) model for pharmaceuticals.

In October 2015, at the investment promotion conference for Alibaba Health’s “Future Pharmacy Partner” program, Kang Kai, Director of Alibaba Health’s Pharmaceutical E-commerce Division, announced that Alibaba Health had partnered with offline pharmacies to launch the Future Pharmacy Partner Initiative, providing pharmacies with an internet-based operational platform integrating B2C and O2O models.



The specific plan comprises four aspects: First, leveraging the extended shelf space of the Yunyaofang B2C+O2O platform, “Partner” pharmacies can refer offline customers who cannot find required medications in physical stores to the online pharmacy for purchase, thereby generating additional revenue for the brick-and-mortar locations. Meanwhile, online consumers with urgent medication needs will be prioritized and directed to the “Partner” pharmacy in their vicinity. These pharmacies offer one-hour home delivery, allowing customers to choose between express delivery or self-pickup to receive their medications.

Secondly, Alibaba Health provides a membership marketing system and data analytics tools to support “partner” pharmacies in making operational decisions, including store location selection, category planning, and precision marketing.

Furthermore, Alibaba Health will collaborate with domestic and international manufacturers and distributors to provide pharmacies with competitively priced pharmaceutical supplies, logistics and distribution services, financing solutions, staff training, and pharmacist consultation services.

Finally, Alibaba Health has established a platform that integrates online and offline pharmacies, while connecting with medical institutions, third-party healthcare service providers, commercial insurance companies, and wearable device manufacturers, thereby helping pharmacies expand their business scope and optimize their operational models.

Baidu Yaozhida:Yaozhida integrates with pharmacies by enabling them to establish their own pharmacy platforms on its “Zhida Hao” (Direct Access Account) using relevant templates. Users can then search for “@Pharmacy” in the Baidu mobile app to be directly redirected to a consolidated page featuring all pharmacy services. Based on their needs, users may consult with pharmacists or place orders for medications, which are then delivered by the pharmacies.

“Yao Zhida” claims to help pharmacies develop their e-commerce operations. Baidu aims to replicate the successful model of Haidilao. According to statistics from Baidu Mobile Search and Baidu Maps, there are over 20,000 daily searches for “Haidilao” on Baidu’s mobile platform. Users can now directly @Haidilao on Baidu to access online services such as reservations, ordering, and payment. Currently, the Direct Account service generates approximately 400 orders per day for Haidilao. However, the actual operational performance of the “@Pharmacy” model has been less than ideal.

JD Health at Home:Provide a platform to attract corresponding brick-and-mortar chain pharmacies to join and collaborate in the O2O sector. In pharmaceutical O2O, drug information is displayed online, and medications are delivered by the consumer’s nearest pharmacy or via crowdsourcing to complete the transaction.

Tencent Smart Pharmacy:Facilitate the integration of a convenient WeChat Pay channel for pharmacies, leveraging WeChat’s data analytics and interactive dissemination capabilities to address pain points in pharmacy services and marketing. The Smart Pharmacy project will build upon the existing resources of brick-and-mortar pharmacies to create a comprehensive closed-loop ecosystem integrating sales, delivery, insurance, health care, consultation, and diversified value-added services, thereby becoming a service hub that provides users with multifaceted health protection. In terms of marketing, it utilizes WeChat’s precision interactive marketing to establish another complete closed loop: engaging with users, acquiring data through mobile payments, analyzing data for targeted marketing, and obtaining feedback to optimize services. For instance, traditional membership cards are inconvenient to carry; with WeChat, they can be automatically stored in users’ digital card packages. Tag-based management enables precise administration of the membership system. Scan-to-pay simplifies the payment process and saves human resources for pharmacies. Through “2+N” viral propagation, pharmacies can establish connections with users and facilitate real-time one-on-one communication.

Projects with a background in traditional pharmaceutical businesses emphasize pharmaceutical care services.

Search for Medicines and Delivery:The founding team members largely come from traditional retail pharmacies. The characteristics of their operational model include:

1. Select only one partner (a large pharmacy chain) per city, and train the pharmacy’s delivery riders to deliver medications.

2. Integration of the user membership system with that of pharmacies; 3. Pharmacies will establish a dedicated area to handle orders from Souyaosong. Orders placed via telephone will be processed through terminals that integrate functions such as order entry, dispatching, medication dispensing, and settlement. The medication dispensing equipment must be purchased by pharmacies from Souyaosong.

4. Select suitable pharmacies for renovation based on geographic location and foot traffic.

Featured Services of Souyao Song:

1. Prescription drugs may be sold, provided that physicians can review patients' prescriptions;

2. Self-Built Drug Delivery System

3. We are in discussions with a German pharmaceutical packaging technology company regarding a potential partnership, aiming to adapt our medications into the PillPack model. By innovating the packaging, we seek to transform medication adherence habits and reduce drug costs.

Ping An Good Doctor Express Medicine Delivery:Ping An Good Pharmacist partners with Huashi Pharmacy, which has selected select directly-operated stores in urban areas as delivery hubs to establish regional inventory centers. Affiliated with Shanghai Pharmaceuticals Group, Huashi Pharmacy operates nearly 700 stores.

As the online O-end, Ping An Good Doctor leverages its self-built team of full-time physicians to provide users with medication advice through online consultations, thereby facilitating online transactions; as the offline O-end, Huashi Pharmacy capitalizes on its extensive network of physical outlets to integrate online sales with brick-and-mortar retail operations.

Yao Kuai Hao:YaoKuaiHao’s parent company also owns another physician platform, the Doctor Tree app, which focuses on post-consultation follow-up and doctor-patient communication. This makes it one of the few internet healthcare companies in China that have integrated pharmaceutical e-commerce into their services. In September, Doctor Tree and YaoKuaiHao completed their integration, establishing a comprehensive closed-loop pharmaceutical ecosystem. When consulting physicians on the Doctor Tree platform, the system recommends relevant medications based on keywords; conversely, when purchasing medications on the YaoKuaiHao platform, users can opt to consult physicians to address any questions arising during the purchase process.

Currently, Doctor Tree is undertaking another major initiative—the “Cloud Clinic.” By leveraging capital to transform pharmacies, Doctor Tree enables them to obtain clinic qualifications. Alternatively, through strategic partnerships with high-quality community clinics and private hospitals, Doctor Tree allocates its physician resources from the platform to various cloud clinics on a regional basis, facilitating multi-site practice and providing patients with greater convenience in accessing medical care.

800 Fang:As early as 2013, the company began exploring the O2O sales model for prescription drugs (i.e., online prescription review and offline dispensing), integrating chain pharmacy merchants on the 800Fang platform to establish “800 Alliance.” This initiative formed an online alliance cooperation model and a new paradigm for the online sale of prescription drugs.

The specific operational process is as follows: customers upload their location and prescription details, after which 800 Meng automatically matches them with the nearest offline partner pharmacy. By integrating licensed pharmacist resources from its member merchants, 800 Meng completes online prescription verification and notifies the matched store to prepare the medication. Finally, customers need only bring their prescription or relevant proof to the designated store to pick up their medications.

800 Meng was established not only to facilitate the O2O sales of prescription drugs, but also to integrate resources from participating chain pharmacies, particularly licensed pharmacist resources. The pharmaceutical industry faces a significant shortage of licensed pharmacists. Through its online pharmacy alliance, 800 Fang aims to provide continuing education for licensed pharmacists and even assume part of their training responsibilities, thereby enhancing the professional services offered by 800 Fang.

Hao Yaoshi Express Medicine Delivery:Yaojisong made a high-profile debut, claiming to be the first user on WeChat to launch pharmaceutical O2O services.

Hao Yaoshi leverages its parent company Jointown’s network of up to 100,000 partner pharmacies across China, along with its robust warehousing and logistics system, to deploy its O2O initiative.

Jointown’s current warehousing and logistics network has extended to the county level. Pharmacies in certain areas can receive deliveries twice daily, while those in more remote locations can receive deliveries three times a week. As an increasing number of pharmacies join its “Yaojisong” (Medicine Express Delivery) platform, they will form an O2O pharmacy alliance. This alliance will become the key for Jointown to bridge the “last mile” of logistics to end users.

In addition to Haoyaoshi’s own chain of large pharmacies, the pharmacies joining Yaojisong are all independent outlets. Compared with traffic-generating platforms such as Tmall and JD.com, WeChat serves more as a customer service platform for Haoyaoshi. Haoyaoshi aims to leverage the WeChat platform to drive offline consumers to its online channels.

Dingdang Express Pharmacy:Dingdang Kuaiyao has developed “geofencing” technology to plan the ground-level network of its offline partner pharmacies. By taking into account factors such as urban topography and traffic conditions, it determines the coverage area for each pharmacy, ensuring that every location within the geofence is accessible within a 28-minute delivery window.



Dingdang Kuaiyao and 200 renowned pharmaceutical companies have jointly established the “FSC (Factory-Service-Customer) Pharmaceutical Enterprise Alliance Health Service Project.” By partnering with traditional pharmaceutical enterprises and integrating industry resources, the alliance implements centralized procurement of raw materials, packaging materials, excipients, and other inputs from its members. This initiative reduces drug costs at the upstream end of the industrial chain, thereby lowering drug prices.

Dingdang Kuaiyao’s parent company, Renhe, initially intended to partner with third-party pharmacies to operate Dingdang Kuaiyao. However, these pharmacies showed limited enthusiasm due to conflicts between their online and offline pricing systems. Ultimately, Renhe chose to fully acquire 50 pharmacies.

To address the challenge of pharmacy restocking, Renhe has also developed a mobile app that enables all company-owned pharmacies and select franchisees to place online replenishment orders. Previously, pharmacy owners had to procure medications themselves or rely on pharmaceutical representatives for delivery. Now, pharmacy owners can simply place an order via their smartphones, and the medications will be delivered to their stores free of charge.

Baiyang Health Network:Last year, Baiyang Pharmaceutical began engaging medical institutions and physicians to build an O2O closed loop of “physician–pharmacy–patient.”

Baiyang Health Net, under the Baiyang Pharmaceutical Group, offers three mobile apps tailored for doctors, pharmacies, and patients. The service scenario is as follows: patients can download the client app to schedule outpatient appointments or consult with doctors online anytime and anywhere; doctors provide online diagnosis and treatment and issue electronic prescriptions; patients then place orders based on their prescriptions at selected physical pharmacies, either picking up the medications nearby or having them delivered to their doorsteps.

Within this closed-loop system for diagnosis, treatment, and medication services, Baiyang primarily targets patients who have been discharged or chronic disease patients requiring frequent prescription refills. Specifically, patients connected to physicians via the platform must be those who have genuinely received offline clinical care from the respective physicians. This approach not only facilitates continuous medical guidance for patients but also enables physicians to conduct long-term follow-up monitoring of their patients.

The actual drug price negotiation process will be led by payers. Baiyang Health Network is already engaging with professional insurance institutions, including social security agencies and commercial insurance companies.

Baiyang Pharma, adept at brand operations, leverages its inherent advantages to attract more brand partners for collaboration, while simultaneously investing in hospitals through its subsidiary hospital management company to secure greater access to physician resources.

Jianyi.com:First, Jianyi.com is currently the first e-commerce platform to establish physical experience stores. The purpose of Jianyi.com’s establishment of experience stores is to pursue ultimate professional service.

For individuals with chronic conditions and those seeking health wellness services, we provide professional pharmaceutical care, long-term medication management, product trials, rapid local and regional logistics, convenient payment options, and comprehensive after-sales support. Experience stores are located exclusively in first-tier cities with significant online coverage, such as Jiangsu, Zhejiang, Beijing, Shanghai, and Guangzhou.

Given the issue of delivery costs, Jianyi.com only selects products with relatively high gross margins for its O2O business. Since these products are not urgently needed, there is no need to compete with other e-commerce platforms on delivery speed.

While both Yaofangwang and Jinxiangwang are pharmaceutical O2O platforms built upon traditional brick-and-mortar pharmacies, their business models differ:

Jinxiang.com:In April 2012, Jinxiang.com launched a one-hour medication delivery service on its official website, piloting the initiative in select urban districts of Beijing. The platform curated over 100 of the most commonly used and urgently needed medications based on sales rankings from its 300 offline brick-and-mortar stores. During the initial promotional period, delivery was free of charge; subsequently, a minimum purchase of RMB 99 was required to qualify for free delivery. However, this service was discontinued last year.

Pharmacy Network:In 2010, Yaofang Wang (Pharmacy Network) had already established an O2O platform and integrated its online and offline membership points systems. Positioned as a marketing platform, Yaofang Wang does not directly facilitate transactions; all sales, whether for prescription or over-the-counter drugs, are completed at physical stores. Regardless of whether consumers place orders via telephone or online, the system automatically assigns the order to the nearest store, where on-site logistics personnel deliver the products to the customer’s door to finalize the transaction. All transaction volumes are attributed to the respective stores, meaning Yaofang Wang generates no direct sales revenue. Instead, stores pay Yaofang Wang certain marketing fees and cover delivery costs based on market rates to the logistics company. In the pharmaceutical e-commerce sector, Yaofang Wang was a pioneer in implementing consistent pricing across online and offline channels.

Leveraging Jingwei Lida Pharmaceutical Logistics, a subsidiary of Yaofang.com’s parent company, medicines are distributed from the logistics center warehouse in Beijing to stores across China, and then delivered to consumers by these stores. Although delivery personnel are stationed at individual stores, they are formally employed under the unified roster of Jingwei Lida Logistics. To this end, Yaofang.com has established a dedicated delivery team of 100 members in Beijing, averaging six to seven delivery staff per store. All delivery personnel undergo standardized training for their workflows. While handing over medications to customers, they verify the patient’s condition against the medication information and provide instructions on proper administration, contraindications, storage guidelines for certain special products, and even relevant health care knowledge.

It is worth noting that Jinxiang.com and Yaofang.com met similar fates: Jinxiang.com was acquired by WeDoctor Group early this year, while Yaofang.com was acquired by Renhe Pharmaceutical in October.



A comparison reveals:

1. Only three apps have surpassed one million downloads, with "Yao Kuai Hao" having the highest number. Three apps have fewer than 10,000 downloads. Two apps have exceeded 100,000 downloads.

2. All apps offer 24-hour home delivery of medications, but the enforcement of promised delivery times is weak. Apart from early measures implemented by U Doctor U Medicine, none of the others have such penalties in place.

3. Most apps offer medication consultation services and are staffed with corresponding licensed pharmacists. Among the apps with publicly verifiable information, only Yaogeli discloses a specific number of licensed pharmacists (12), while the others do not provide such details.

4. Five pharmaceutical O2O platforms have made certain adjustments to their business models, among which U Yi U Yao underwent the most significant transformation, shifting from pharmaceutical e-commerce to diabetes health management.

5. Although Ping An Good Doctor, Haoyaoshi Yaojisong, and JD Health Daojia are merely categories within their respective app platforms, the apps hosting them all command substantial traffic. Specifically, the Ping An Good Doctor app has surpassed 10 million downloads, the JD Daojia app has exceeded 5 million downloads, and the Haoyaoshi app has recorded over 500,000 downloads. In contrast, Baidu Yaozhida operates directly through the Baidu web search bar without a standalone app.

 

Two Major Challenges in Pharmaceutical O2O: High Delivery Costs and Insufficient Purchasing Power

Regardless of whether drug delivery takes one hour or two, most players are currently in a phase of operating at a loss to gain market visibility. There are three publicly known profit models for major pharmaceutical O2O platforms: collecting commissions and sharing delivery fees through partnerships with offline pharmacies; earning price differentials by streamlining the pharmaceutical distribution chain; and generating revenue from advertising fees.

For pharmaceutical O2O to achieve profitability, it must address the following two challenges:

First, high distribution costs.

It is not difficult to observe that most O2O platforms rely on offline physical pharmacies to fulfill deliveries.

An industry insider has crunched the numbers: a pharmacy can turn a profit if each staff member processes 15 transactions per day, with an average transaction value of around RMB 60. Based on the average gross margin of 30% for brick-and-mortar stores, each staff member generates RMB 270 in daily sales revenue. After deducting management and other costs, the net profit amounts to at least RMB 150.

However, under the mounting pressure of rapidly rising costs such as rent and labor, nearly all pharmacies are stretched thin and unable to spare staff for home delivery services. This is precisely why companies like Kuai Fang Song Yao, Yaofang Wang, and Yao Geili have chosen to establish their own logistics and delivery teams.

Moreover, orders that generally need to be delivered within one hour typically have a low average transaction value, primarily consisting of products priced below 50 yuan.

Another major challenge is inventory pressure, particularly for O2O models that emphasize rapid home delivery of medications. If online offerings are limited to products already available at partnered physical stores, order volumes remain constrained, and costs stay within manageable limits. However, achieving deep integration between online and offline channels requires corresponding renovations of brick-and-mortar stores, leading to increased costs. In the future, if physical stores adopt a layout featuring traditional retail pharmacy counters at the front and warehouse space at the back, they can significantly expand the range of products offered through O2O platforms.

From a long-term perspective, Kuai Fang Song Yao’s self-built warehousing centers are bound to be more competitive, but this requires strong financial backing. For instance, in provincial capitals other than Beijing, Yaofang.com has opted for directly operated stores, while adopting a franchise model in second- and third-tier cities; deliveries in these areas are either made on the next day or at scheduled times. However, the franchise model introduces management challenges and issues related to intra-category competition.

Now, Yaofangwang has been acquired by Renhe Group for RMB 600 million. With capital support and the resources of Dingdang Kuaiyao, its O2O model may achieve more rapid development.

Second,Insufficient purchasing power.

Whether in pharmaceutical O2O or B2C models, it is unavoidable that purchasing medication is a relatively low-frequency activity. This is especially true for the need to purchase medication quickly. Based on objective demand, when patients experience particularly urgent medical conditions, their first choice is undoubtedly to visit a hospital rather than place an order through a mobile app platform. Of course, this does not exclude some users suffering from common illnesses such as colds and fevers who opt for the app-based medication purchasing model. This is particularly relevant to the current demographic of single, young homebodies. However, this potential customer base remains largely untapped.

Current Status: Homogenized Competition; Price Wars to Persist

Open any pharmaceutical O2O app, and you will find little difference in the product categories displayed by various platforms; at most, the order of different categories is rearranged. Nearly all of them are comprehensive, one-stop platforms. Ranging from medications for colds and fever, respiratory conditions, and gastrointestinal issues to various health supplements and medical devices, they essentially function as mobile versions of online pharmacies.

Moreover, all pharmacy apps offer prices that are 10%–20% lower than those at brick-and-mortar pharmacies. Kuai Fang Song Yao claims to source directly from manufacturers, offering prices 30%–40% lower than those at physical stores.

Similar to the subsidy war between Didi Chuxing and Kuaidi Dache, Alibaba Health initially launched a period of aggressive subsidies when it entered the pharmaceutical O2O market. Subsidies were provided not only to users but also to pharmacy staff for promoting app downloads. However, this momentum was short-lived. Following the departure of Zhang Shouchuan, COO of Alibaba Health, the company suspended its nationwide subsidy campaign. Consequently, a significant portion of the user base acquired during this period is estimated to have churned due to various poor user experiences. This year, Ping An Good Doctor plans to invest RMB 30 million worth of medicines and RMB 20 million in logistics costs to subsidize users.

Just as mobile healthcare was rapidly heated up, QR code scanning for free gifts became a common sight on the streets, with Beijing’s Wangjing area even seeing the emergence of a “QR Code Street.” In the pharmaceutical O2O sector, the most common promotion during the initial launch phase of each app is discounts based on order value thresholds.

In their early stages, Chinese internet companies inevitably resort to conventional tactics such as subsidy wars and price wars to acquire users, and the pharmaceutical e-commerce sector is no exception. Moreover, for pharmaceutical e-commerce, which is still in its nascent stage of development, price wars are expected to persist for some time. However, subsidies are not a sustainable long-term strategy; ensuring high user retention after subsidies cease remains a challenge facing all pharmaceutical O2O platforms.

The Future: Competition in Medical Service Capabilities

Platforms such as Yaogei Li and Dingdang Kuaiyao offer pharmacist consultation services, providing 24-hour free advisory support on medication purchases and usage. Dingdang Kuaiyao has also partnered with Chunyu Yisheng to create a closed-loop service that integrates pharmaceutical consultations with delivery. Currently, medical O2O platforms primarily feature over-the-counter (OTC) products, resulting in relatively low volumes of medication-related consultations. However, if the online sale of prescription drugs is deregulated, the competitiveness of medical O2O platforms will be determined by the quality of their medical service capabilities.

Moreover, independent third-party pharmaceutical O2O platforms must have strong financial backing to achieve long-term growth; otherwise, they are highly likely to be acquired by larger companies or phased out.