Convenience, timely deliveries and easy access drawing more consumers

Online pharmacies are witnessing rapid development in China, thanks to a growing number of consumers choosing to buy medicines via internet platforms, experts said.

Like many of his age, Guo Feng, a 56-year-old blood pressure patient in Beijing, used to visit a hospital regularly to get prescription and medication. But with the advent of online pharmacies, Guo no longer goes to the hospital that much. Instead, he now gets consultation, prescription and medicines at home.

The number of monthly active users on online pharmacies such as 111 Inc and Dingdang Medicine Express rose from less than 1.5 million to over 2 million between December 2019 and February 2020, according to data from Beijing-based app tracker Analysys Qianfan. Though the surge was largely due to the COVID-19 epidemic, the trend has continued afterward. By April, the total number of monthly active users for online pharmacies crossed 6.3 million, up by 1.1 million from the levels in December 2019.

Data from Nasdaq-listed 111 Inc showed that between January and June last year, newly registered users grew by 128 percent on a yearly basis. Last April, when the country's epidemic situation improved, a number of new users still registered and purchased medicines on the company's online platform 111.com, the Shanghai-based company said.

The business-to-customer market of China's online pharmacies surged to 159.3 billion yuan ($24.9 billion) in 2020 from 400 million yuan in 2011, with a compound annual growth rate of 80.5 percent, data from Shenzhen, Guangdong-based online research consultancy ChinaIRN showed.

"The epidemic affected several industries such as tourism and catering, most of which require offline scenarios to complete the transaction. However, pharmaceutical ecommerce platforms, which are mostly online businesses, saw explosive growth. Due to the epidemic, people shifted their purchases from brick-and-mortar pharmacies to online platforms," said Xiang Lianhua, an analyst at VCBeat, an online healthcare website.

AliHealth, the e-commerce pharmacy of tech giant Alibaba, said sales rose by 88.3 percent on a yearly basis to 9.6 billion yuan between April 2019 and March 2020. JDH Online Healthcare, an online pharmacy under the JD umbrella, and 111 Inc said sales grew by 78.8 percent and 107.6 percent respectively to 19.4 billion yuan and 8.2 billion yuan on a yearly basis last year.

Though the companies notched up impressive results, it was by no means an easy task, considering that e-commerce pharmacies had to respond quickly to cope with the new challenges due to the pandemic and ensure normal medicine supplies.

During the epidemic period, by constantly exploring distribution channels, and setting up direct purchase partnerships with domestic and foreign pharmaceutical companies, 111 Inc managed to ensure the business-side and customer-side supply of masks, COVID-19-related medicines and chronic disease medication, it said. Data from the company showed that by May last year, it had established strategic partnership with over 360 pharmaceutical enterprises.

Last February, AliHealth launched online pharmacies on Taobao and Alipay platforms, enabling patients to see a doctor online, get an e-prescription and have the medicines delivered to their homes. The service was a boon for chronic patients as they needed regular follow-ups and medicine refills. According to Ali-Health, accumulated online visitors totaled nearly 3 million within three days after the service was launched. To guarantee medicine supplies, AliHealth teamed up with nearly 50 pharmaceutical companies from home and abroad, including Sanofi, GSK, AstraZeneca, Novartis, Bayer and CSPC Pharma.

"Due to the epidemic, consumers were not able to enjoy services such as overnight delivery or 24-hour services like they used to. Medicine consumption is, however, a constant requirement and there can be no delays. Therefore, it was a challenge for online pharmacies to ensure timely deliveries," Xiang said.

In January last year, when COVID-19 hit Central China's Hubei province, delivery services were shut down. To ensure that patients in the epidemic-stricken area had access to lifesaving medicines, 111 Inc got in touch and inked deals with express companies to ensure its medicine deliveries. A green channel was opened to ensure that medicines were delivered to patients in a timely manner.

"My family members, who were infected with the COVID-19, were desperate for medicines but could not find any purchase channels. I consulted 111 Inc's online doctor on Jan 29, and in just three days the medicines were delivered to my family in Jianli county, Jingzhou, Hubei province, solving our great urgency," said a man surnamed Liu.

Other online pharmacies also managed to resolve the delivery problems. By teaming up with JD Logistics, the logistics arm of e-commerce giant JD, JDH Online Healthcare was able to offer consumers faster medicine delivery solutions.

Data from JD showed that by the end of last year, JDH Online Healthcare had 14 special warehouses for stocking medicines. The company's online-to-offline services based on the warehouses covered 300 cities nationwide and provided services such as overnight delivery, sameday delivery, 30-minute delivery and 24/7 delivery.

The first online pharmacy in China, namely Shanghai First Pharmaceutical Co Ltd, was set up in 1998 and started online medicine services.

In 2005, the National Medical Products Administration launched a temporary guideline on internet-based medicine transactions. Policy directions on online pharmacies has been moving back and forth, with third-party online medicine retail even being suspended for a time.

During the 13th Five-Year Plan period (2016-20), several favorable policies for the sector were launched, boosting the further development of online pharmacies. In 2016, the Ministry of Commerce issued a development timeline for national medicine circulation, encouraging the application of mobile internet and internet of things in the medicine distribution sector, to diversify the various supply channels.

In 2017, the State Council, China's cabinet, launched a document to remove two approval procedures for online pharmacies, thereby lowering the threshold of the industry. "Yet the government still maintains strict supervision over the medicines being sold online," Xiang said.

Though online pharmacies experienced rapid growth during the epidemic period, experts are apprehensive whether the same can be sustained in the long term.

"When the platform is not a 'must have', companies should improve their technology, content, products and services to enhance user experience and retain users," said Sun Mengzi, a senior analyst at Beijing-based market consultancy Analysys.

In addition, the huge number of users who used online pharmacies during the epidemic period can serve as an ideal database for future reference, said experts.

According to a report from 111 Inc, men born in the 1970s and 1980s were the main consumers of online pharmacies. During the epidemic period, men accounted for 64 percent of the total, and said they prefer to purchase medicines online because of convenience and privacy.

Customers born in 1970s and 1980s accounted for 53 percent of 111 Inc's total users, as consumers of these ages usually start to face the early onset of various diseases. They pay increasing attention to their health, and are willing to manage their health through online diagnosis and medicine purchases, said the report.

In terms of user distribution, according to the report, users from first-tier and third to fourth-tier cities are becoming the target group for online pharmacies, as the former values the convenience, while the latter have relatively inadequate access to offline medical resources.

Yu Gang, co-founder and executive chairman of 111 Inc, said: "Pharmaceutical e-commerce platforms have effectively resolved the pain points of various types of patients, and fueled the habit of online medicine purchases, thereby creating a solid foundation for the rapid and sustainable development of the sector in the post-COVID era."

Xiang said that to better satisfy consumer needs, while focusing on medicine services, online pharmacies should also strengthen their healthcare consultation services, so as to form a closed loop from diagnosis to medicine deliveries.