Deconstructing the development track of 2014-2015 drug retail industry

Source: on August 12, 2015, at the 2015 Xipu conference, Ren Guanghui, chief technology officer of Zhongkang information, made a report on the opportunities and challenges of pharmacy retail industry, which deconstructed the annual trajectory of China's pharmaceutical retail industry In 2014, the total number of drugstores tended to be stable, and the chain rate increased to 39% In 2014, the total number of drugstores nationwide reached 434920, only 2261 more than in 2013 The total number of drugstores tends to be stable, and some first tier and second tier cities have begun to close stores Influenced by the new GSP policy and the declining profits of retail drugstores, the living space of single drugstores has been greatly squeezed Its own integration and merger alliance have led to a significant decline in the data of single drugstores It is expected that integration and merger will be the main keynote of the development of drugstores in the next few years The average number of people served by each drugstore nationwide is 3011, close to the saturation standard of 2500 people / store Meanwhile, the chain rate increased to 39.4% in 2014 (see Table 1 below) Table 1: the number of drugstores in China from 2010 to 2014 is expected to increase by 9.5% in 2015, which is higher than that of OTC drugs In 2014, the market size of drugstores in China is expected to reach 281.7 billion yuan, an increase of 9.5% In 2015, the market sales of drugstores is expected to reach 313.8 billion yuan, an increase of 11.4% The retail market is affected by the dropping of standards and abandoning of standards by foreign enterprises in many provinces Some products are transferred from hospital channels to retail, and the drug growth rate will be increased Due to the impact of e-commerce on health products and household appliances, and the continuous decline in the price index of traditional Chinese medicine, non drug sales growth is expected to decline to 9% in 2015 In addition, in 2014, OTC drug sales in pharmacies reached 120.8 billion yuan, an increase of 8.8% year on year It is expected that OTC growth in pharmacies will pick up in 2015 In 2014, the scale of prescription drugs reached 81.7 billion yuan, accounting for 29% of the sales scale of drugstores Due to the influence of bidding policy, some prescription drugs that were dropped or abandoned were transferred to drugstores In 2015, the growth of prescription drugs is expected to exceed that of OTC drugs It is worth noting that chemical drugs, proprietary Chinese medicine and health care products are still the main categories of drugstores, and the three categories together account for 83% of the turnover of drugstores The growth rate of chemicals in 2014 is 9.1%, and the growth rate is expected to reach 13.6% in 2015 The share will be increased The growth rate of proprietary Chinese medicine is 14.2%, 0.4 percentage points lower than that in 2013, and the share is also reduced from 35% to 34% It is expected that it will further decline in 2015 The growth rate of health care products declined, with the share down 0.4 percentage points The increase in sales of online and supermarket health products has robbed some pharmacies of the share of health products The market scale of medical devices maintained a double-digit growth with a share of 0.5% Other categories maintain rapid growth, but the share growth is not obvious due to the small base In 2014, small and medium-sized cities became the main force of market growth The market growth of Hunan, Guangxi, Yunnan, Henan and Jiangsu provinces was significantly higher than that of the whole country; the growth of Tianjin, Liaoning and Guangdong was slow, and the market of Shanghai declined slightly In the first quarter of 2015, the growth rate of Hunan retail market continued to lead the whole country In the second quarter of 2015, the growth of Beijing, Shanghai, Guangzhou and Shenzhen were all lower than the national average Moreover, MDC data statistics shows that small and medium-sized cities are still the main driving force for the growth of drugstore market in China (as shown in Table 2) table 2: the increase in the number of top 100 direct stores in 2014-2015 national major provincial market performance has not brought significant benefits According to the results of 2015 top 100 comprehensive competitiveness survey, the number of top 100 direct stores in 2014 increased by 1.9% year-on-year, slightly higher than the overall growth of retail pharmacies The contribution rate of top 100 sales scale reached 34.1%, with a year-on-year growth rate of 15.7% It can be seen that under the new GSP regulations, the top 100 chains with stronger competitiveness can better adapt to the policy requirements With the listing of leading chain enterprises such as Yixintang, common people and Yifeng pharmacy, the integration of industry M & A is accelerated In the next few years, the pharmaceutical circulation industry will be reshuffled and the industry concentration will be improved Moreover, with the supervision and restriction of the new GSP policy on the operation of drugstores and the development trend of individual stores joining the chain drugstores, the chain rate of drugstores has increased significantly, with the chain rate of retail drugstores reaching 39%, increasing by nearly three percentage points, and increasing for five consecutive years However, the concentration of chain drugstores in China is still low, and there is still a lot of room for improvement According to the 2015 top 100 competitiveness survey results of China health information, at present, the sales of top 100 direct stores account for 34%, showing a slow upward trend As 70% of the top 100 chains are regional chains, but with more and more capital paying attention to the retail market and the increasing investment in M & A, it is expected that the concentration of the top 100 retail chains will increase to a certain extent in the next few years From the perspective of the cost distribution of top 100 chain, labor cost still accounts for a large proportion, but the proportion has increased in 2014; rental cost and marketing cost have increased slightly this year, and the chain's operating cost pressure is still large At the same time, the average gross profit margin of top 100 chain has declined Although the customer unit price has increased, the average floor efficiency has further declined The expansion of chain stores has not brought significant benefits to chain stores The five opportunities and four challenges of the retail industry in the future are mainly driven by policies, capital, technology and environment First of all, in terms of policies, medicine will be restarted again, the coverage of designated retail pharmacies for medical insurance will be gradually expanded, and the implementation of the new GSP rules will have a huge impact on the industry; second, PE / VC will be actively distributed in terms of capital, while chain enterprises such as Yixintang, Yifeng, and ordinary people will be listed one after another, making capital power very important; Third, in terms of technology, the demand for category management, chronic disease member management, Internet and e-commerce integration with new technology in retail pharmacies is constantly increasing; finally, in terms of environment, the aging population is becoming increasingly serious, people's awareness of health management is increasing, the environment is gradually deteriorating, and the demand for medical treatment is increasing It can be predicted that in the future, the opportunities of drug retail industry will come from five aspects: 1 Urbanization, aging, and the demand expansion brought by fertility Urbanization means that the number of drugstore consumers increases At the end of 2011, 185 million people over 60 years old and 221 million at the end of the 12th Five Year Plan are expected to meet the huge health demand potential of the elderly In addition, the prevalence of chronic diseases has increased, and the market for chronic disease drugs should not be underestimated Moreover, with the loosening of family planning policy, the increase of birth rate and the expansion of infant market demand 2 Improve self-treatment concept and health awareness People's awareness of health care is enhanced (especially in health preservation), and more people choose to go to the drugstore to buy drugs by themselves, and consider the convenience and price sensitive issues At the same time, people also want to get more convenient knowledge of health management, disease prevention and health preservation 3 The increase of medical insurance coverage and disposable income brings about the improvement of payment ability The coverage rate of all kinds of medical insurance is over 98%, and the number of medical insurance drugstores is increasing At the same time, in 2012, the per capita income of urban residents increased by 9.6% In the 12th Five Year Plan, the Chinese government set the expected growth target of disposable income (> 7%) higher than the GDP growth target (7%) for the first time, which will help people increase their health investment 4 Medical reform policy, basic drug policy, hospital fee control, and grass-roots prescription opening The Ministry of Commerce, in conjunction with six ministries and commissions, issued the notice on implementing the key tasks of medical reform in 2014 to improve the service level and efficiency of drug circulation, taking "clearing up and abolishing the policies and regulations hindering fair competition" and "promoting the separation of medicine in various forms" as the core two tasks Beijing first proposed to cancel outpatient dispensaries in basic hospitals; a new round of hospital bidding, the phenomenon of bid dropping and bid abandonment was common everywhere, and the opportunity of prescription drugs was highlighted 5 Capital market promotes product integration / Internet + Yixintang, ordinary people, Yifeng, etc have been listed in succession Capital promotes industry integration and upgrading Technologies such as Internet +, big data, e-commerce, mobile medical, etc will also play an important role in the industry At the same time, the future drug retail industry will also face four challenges: first, the development level and professional service ability of drugstores The pattern of many, small, scattered and disorderly retail pharmacy industry has not fundamentally changed, but the chain rate has been reduced from 35.4% to 34.6% According to the goal of the 12th Five Year Plan, the chain rate will be increased from 1 / 3 to 2 / 3 by the end of the 12th Five year plan, which is obviously difficult to achieve The professional nature of practitioners is low, and the resources of licensed pharmacists are scarce, which can not meet the requirements of pharmaceutical services Second, disordered competition of drugstores / low growth of industry customers In the past, we mistakenly used the business model of supermarket for reference, overemphasized the gross profit margin of sales, and ignored the role of brand drugs, which led to the loss of customers Many drugstores use price war as the main means to collect customers, and consumers are diverted to primary medical institutions, and the growth rate of drugstore passenger flow is lower than that of hospitals Third, before the implementation of the hospital's safeguard and compensation mechanism, the outflow of prescriptions is difficult Even with zero margin, hospitals can still benefit from drug sales The compensation mechanism of hospitals, especially large hospitals, is not in place Electronic prescriptions are widely used in hospitals Consumers basically have no right to choose channels Different standards of medical insurance payment for pharmacies and hospitals make pharmacies unable to use overall fund Fourth, the operating cost of drugstores is high The high cost of rent, labor cost, tax and other costs makes pharmacies have to choose the "high gross profit" business strategy The profit exploitation of upstream enterprises by the terminal makes the whole OTC industry fall into a negative cycle mode At the same time, the retail industry faces a huge risk of insufficient passenger flow.