Pharmaceutical e-commerce faces bottlenecks and struggles to achieve profitability.
2024-07-08
The downturn in the traditional retail sector continues to spread to the pharmaceutical retail segment. The growth rate of pharmaceutical e-commerce sales has slowed, and the strong momentum of pharmaceutical e-commerce is starting to wane. Data show that from July last year to June this year, the pharmaceutical e-commerce sales index stood at 152, representing a year-on-year increase of 12.5%. However, the growth rate declined by 22.5 percentage points compared to the same period last year.
According to data from the “China Pharmaceutical Industry E-commerce Market Competition and Investment Analysis Report” by the Qianzhan Industry Research Institute, from July last year to June this year, the growth rate of pharmaceutical e-commerce sales slowed to 12.5%. In 2015, e-commerce sales accounted for only 2.9% of total pharmaceutical sales, and more than 90% of e-commerce sales were B2B transactions.
In fact, the slowdown in the growth of online pharmaceutical retail has been evident for some time. For instance, Renhe Pharmaceutical in Nanchang, Jiangxi, has been facing difficulties in securing funding. Moreover, policies are tightening: Recently, the National Medical Products Administration issued a document titled “End of Pilot Program for Online Retail of Pharmaceuticals via Third-Party Internet Platforms,” notifying the Food and Drug Administration bureaus of Hebei Province, Shanghai Municipality, and Guangdong Province to terminate the pilot programs for online pharmaceutical retail conducted by Tmall Pharmacy, 800Fang, and 1 Pharmacy Network, effectively halting the pharmaceutical retail business on third-party platforms.
Moreover, the state has yet to issue a clear stance on the online sale of prescription drugs. Currently, pharmaceutical e-commerce platforms are still limited to selling OTC products, medical devices, health supplements, and family planning supplies. Relevant data show that in 2015, the domestic prescription drug market was approximately 1.2 trillion yuan, while the OTC market reached 200 billion yuan. “The state has consistently remained ambiguous about the online sale of prescription drugs, and even some favorable policies have so far been only tentative signs. At present, prescription drugs still cannot be sold online, which represents a critically important issue for pharmaceutical e-commerce businesses.”
However, some industry insiders believe that although pharmaceutical e-commerce is still in its early stages of development, B2C pharmaceutical e-commerce holds tremendous growth potential. According to statistics, the total size of the pharmaceutical B2C market in 2015 reached 14.42 billion yuan, of which platform-based B2C accounted for 7.79 billion yuan (55.40%), self-operated B2C accounted for 5.25 billion yuan (36.40%), and pharmaceutical O2O enterprises and other players accounted for 1.18 billion yuan (8.20%). Clearly, the strength of platform-based online channels remains significantly greater than that of self-operated online channels; platforms such as Tmall Pharmacy, No.1 Store, and Babafang continue to be the top choices for consumers. Now, with the suspension of third-party pharmaceutical e-commerce platforms, self-operated pharmaceutical e-commerce companies are presented with a golden opportunity to leapfrog their competitors.
Overall, currently only a small number of pharmaceutical e-commerce companies are profitable, and the industry as a whole has yet to enter a period of substantial profitability. A key reason for this is the impact of government policies. The tightening of national regulations, which have halted the pharmaceutical retail business on third-party platforms, has had a certain impact on the entire pharmaceutical e-commerce sector. Moreover, since the policy allowing online sales of prescription drugs has not yet been implemented, pharmaceutical e-commerce companies are unable to capture a share of the prescription drug market. The inability of medical insurance systems to connect with pharmaceutical e-commerce platforms is also a major factor hindering the development of the industry.
The pharmaceutical e-commerce market is one of free competition. Right now, it’s difficult to say which business models are good and which are not, or which companies are successful and which aren’t. The industry is still in its early stages of development, and the future market potential is undoubtedly enormous. Only those companies that dare to break with convention, continuously explore new avenues, and steadily build up market scale will ultimately emerge victorious.
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