In China's major cities, you can see all kinds of pharmacies. However, with the changes of the times and the tide of the market economy, some pharmacies are now in a depression and predicament, and many of them have closed down directly, which makes people sigh: This year is really difficult!

Why did pharmacies bloom everywhere in the first place, and why are they in trouble now? Let's take a closer look at this below.

1. Why are there pharmacies all over the streets?

By the end of 2022, the number of pharmacies in mainland China had reached 644,000.

Geographically, Guangdong (more than 62,000, accounting for about 10%), Sichuan (nearly 50,000), and Shandong (more than 47,000) have the largest number of pharmacies.

In contrast, as of the third quarter of 2018, the total number of bubble tea shops nationwide was only 410,000, and even now in 2024, the number will only be just over 600,000, which is still not comparable to the number of pharmacies.

Through such a comparison, we can clearly see to what extent the number of pharmacies in China has increased, and it can be regarded as blooming everywhere.

It is reported that the actual profit margin of pharmacies is relatively low, and the profit margin of individual pharmacies is usually only about 10 percent, while the profit margin of chain pharmacies is even lower, directly halved to only about 5 percent. So the question is, since the profit of pharmacies is so low, why are there pharmacies all over the streets? The main reasons are as follows:

One is the profit model of pharmacies. The source of profit for pharmacies does not lie in the profit of the drug itself, but in the amount of its sales. This unique profit model allows pharmacies to increase sales by frantically expanding the number of stores to cover more consumer groups.

The profit sources of pharmacies mainly include drug sales, medical device sales, health care products sales and traditional Chinese medicine decoction pieces sales. Among them, drug sales are one of the main sources of profit for pharmacies, but the profits of pharmacies are not limited to the profits of the drugs themselves, but are affected by various factors such as sales, types and prices of drugs, market demand and competition.

Some insiders said that the profit margins of over-the-counter drugs, health products and daily necessities in many pharmacies are much higher than those of ordinary drugs. Moreover, in the face of e-commerce competition, it will actively develop online sales models to further increase its sales.

The second is because of market competition. Market competition is an important factor driving pharmacies to actively expand their stores. In the increasingly fierce pharmaceutical retail market environment, pharmacies can not only significantly increase their market share by continuously expanding the scale of their stores, but also stabilize their position in the competition to ensure that they are not eliminated from the market.

By aggressively expanding, pharmacies can further broaden their services to reach more people and regions. As a result, the number of customers in pharmacies will naturally increase, and sales will rise accordingly.

At the same time, with the increase in the number of stores, the brand image of pharmacies will also be more widely disseminated, and the brand influence and popularity will naturally increase. This will undoubtedly further promote the business development of pharmacies and give them an edge in the market competition.

The third is because of policy orientation. Policy support is an important reason for the expansion of pharmacies. The government has certain supportive policies for the pharmaceutical industry, which provides a good environment for the expansion of large pharmacies.

For example, in 2016, the General Office of the State Council issued a document, emphasizing that the pharmaceutical industry is an important foundation to support the development of medical and health services and health services, and that it is necessary to reduce the cost of pharmaceutical products from R&D to listing by optimizing the application environment, adjusting the industrial structure, and strictly supervising the industry.

A year later, a proposal was put forward on the implementation of the comprehensive reform of public hospitals, which clearly stated that the pilot of comprehensive reform of urban public hospitals should be fully launched, so that the current unreasonable growth of medical expenses can be effectively controlled, and at the same time, the proportion of personal health expenditure in total health expenditure will be reduced to less than 30%.

All of the above policies have enabled pharmacies in the mainland to expand rapidly, and eventually formed a situation where the streets are full of such pharmacies.

Fourth, the cost is low: the threshold for pharmacies is relatively low, and only a first-class health school graduation certificate is required, which is a relatively relaxed condition compared with other physical stores. Pharmacies are decorated in a relatively simple style and do not require a lot of money to create an eye-catching environment, so the cost is low.

Fifth, market demand. The Chinese population is large, people get sick every day, and people need medicine every moment. This huge demand makes pharmacies a unique presence on the streets.

2. Why are pharmacies currently in recession?

So, why are there some of the current pharmacies that are closing down? The main reasons are as follows:

First, after the epidemic subsided, the demand for drugs fell off a cliff. As the pandemic has receded, there has been a very significant reduction in our daily medication needs. In the days when the epidemic was raging, the sales of drugs in pharmacies soared, and various epidemic prevention drugs and antiviral drugs became popular commodities that people rushed to buy.

However, as the epidemic gradually subsided and subsided, the demand for this medication suddenly fell off a cliff. In particular, epidemic prevention supplies such as masks and disinfectants have been greatly affected.

This decline in demand for drugs has also put a lot of pressure on pharmacies' inventory. At the height of the pandemic, pharmacies procured a variety of medicines in large quantities in response to a possible increase in demand. However, with the sharp decline in demand, the inventory of these drugs began to overstock, which brought considerable challenges to the cash flow and inventory management of pharmacies.

Pharmacies that have been frantically expanded during the epidemic will naturally need to close down after the epidemic.

The second is the impact of online shopping. With the development of the times, online shopping has gradually penetrated into all aspects of people's lives, and drug purchase is no exception. More and more people are choosing to buy medicines online, which has led to a significant diversion of customers from traditional pharmacies.

Specifically, the convenience and abundant choices of e-commerce platforms have attracted a large number of consumers. Whether it's prescription or over-the-counter drugs, people can easily find them on e-commerce platforms and often enjoy better prices.

At the same time, e-commerce platforms also offer door-to-door delivery services, allowing consumers to buy the medicines they need without leaving their homes, which undoubtedly further enhances its appeal.

In contrast, traditional pharmacies are a little powerless in the face of competition from e-commerce platforms. While pharmacies are able to provide face-to-face consultations and services, they often struggle to compete with e-commerce platforms in terms of price and convenience.

In addition, with the change of people's shopping habits, more and more consumers have begun to prefer to shop online, which has further reduced the number of customers in traditional pharmacies.

The third is the adjustment of national policies. In recent years, the state's strict control of drug prices has compressed the profit margins of many pharmacies. In the past, pharmacies may have made a profit through a certain price fluctuation, but now this space has become very limited.

The control of drug prices not only limits the pricing power of pharmacies, but also makes the market more competitive. In order to maintain operations, pharmacies need to make more efforts in terms of cost control, procurement channels, and service quality.

Fourth, the market competition is fierce. In the current market environment, the competition in the pharmacy industry is becoming increasingly fierce. With the sharp increase in the number of pharmacies, the problem of oversupply in the market has gradually become prominent, which has made the competition among pharmacies extremely fierce.

In order to compete for market share, pharmacies have adopted various strategies to try to stand out from the fierce competition. Some pharmacies attract customers through price reductions and promotions, while others win word of mouth by improving the quality of service.

However, not all pharmacies can stand their ground in this competition. Some pharmacies have no choice but to close their doors due to poor management and lack of competitiveness.

3. What measures should pharmacies take to deal with it?

As mentioned above, there are many challenges faced by pharmacies in mainland China, such as fierce market competition, too much impact on e-commerce platforms, too many policy restrictions, and so on.

What should pharmacies do to address these challenges?

First, pharmacies should strengthen market research and analysis, understand the changing trend of consumer needs and preferences, and adjust their business strategies in a timely manner.

At the same time, we provide high-quality products and services, train professional pharmacists and staff, and provide professional consultation and suggestions to meet customer needs.

Second, pharmacies can expand their online sales channels and use the Internet and social media platforms to increase visibility and visibility. At the same time, it provides personalized services to enhance consumer loyalty and improve competitiveness.

Third, pharmacies need to clarify their own positioning and differentiated competition strategies, and can establish their own brand image through special products, personalized services, price advantages, etc. At the same time, it strengthens communication and collaboration with partners such as hospitals, doctors and insurance companies, and establishes a good platform for sharing medical resources.

epilogue

All in all, this year, the predicament of the miracle pharmacy is indeed food for thought. In the past, they were like blooming flowers, spread all over every corner of the city, providing people with convenient drug purchase services, and also witnessed the prosperity and development of the industry.

However, now some pharmacies are facing the dilemma of depression and closing, which can not help but make people lament the impermanence of the market and the cruelty of competition.

When looking back on the challenges of this year, we can clearly see that multiple factors such as the intensification of market competition, the adjustment of national policies, and the impact of e-commerce platforms have jointly led to the dilemma of the pharmacy industry.

However, just as difficulties and opportunities coexist, the pharmacy industry is also pregnant with new hope in this transformation. What are the different views of readers? Welcome to leave a message in the comment area at the bottom to discuss.