Investigation and Countermeasures of the Development of Chinese Pharmaceutical E-commerce in the B2C Model Based on PEST-SWOT Analysis

Xiu Yu,Wang Shuling

(School of Business Administration,Shenyang Pharmaceutical University,Shenyang 110016,China)

Abstract Objective To analyze the problems of pharmaceutical e-commerce and provide strategies for its development in the future B2C mode since drug network management has great potential in China.Methods By collecting,identifying,and conducting literature research,PEST-SWOT identification and positioning of pharmaceutical e-commerce in the B2C mode were carried out.Results and Conclusion A PEST-SWOT analysis matrix was established to analyze the status of B2C pharmaceutical e-commerce,and to summarize its advantages,disadvantages,opportunities and threats from four perspectives of politics,economy,society and technology.Suggestions on cultivating compound talents proficient in medicine and e-commerce,exploring online payment methods for medical insurance,integration of upstream and downstream of the industrial chain and data sharing are put forward to promote the healthy and long-term development of pharmaceutical e-commerce under the background of big data.

Keywords: pharmaceutical e-commerce;B2C;PEST-SWOT analysis matrix

If network marketing is compared with traditional marketing,traditional marketing is a separate military operation,while network marketing is a joint operation of the two armies[1].Traditional marketing channels have a pyramid structure,requiring too many intermediaries and layers of agents,which increases the difficulty of management.The flexibility and adaptability of multi-layer channels are poor,resulting in high transaction costs,poor channel control,and difficulty in coordinating the interests of canal members.Therefore,there are many problems in traditional pharmaceutical marketing channels[2].The beginning of China’s pharmaceutical e-commerce can be traced back to the China Medical and Health E-commerce Network in 1998,followed by the legal documents issued and revised by the Government[3].In 2014,China Food and Drug Administration first proposed to open e-commerce channels for prescription drug sales in the “Measures for the Supervision and Administration of Internet Food and Drug Operations (Draft)”.In addition,as medical insurance can be paid online,the potential of e-health commerce is huge.Today,data permeates all aspects of people’s lives.Through data,all living habits of consumers can be mastered.In the context of big data,there are also new challenges for sales.The pharmaceutical industry can make full use of data and rely on online sales to serve customers,thereby bringing new opportunities and channels to pharmaceutical enterprises.

1 Overview of the main modes of pharmaceutical e-commerce

As data technology and e-commerce continue to develop,their merger has inspired new industries.The pharmaceutical industry has always been China’s original innovation industry with the characteristics of inelastic demand[4].At present,e-commerce services are roughly divided into the following modes according to the different market participants in China.Among them,the business to business (B2B) model is exchanges between enterprises.In the pharmaceutical industry,pharmaceutical production enterprises and wholesalers use their own resources to create a network platform and then conduct transactions with related companies.This kind of mode has the characteristics of vertical and comprehensive marketing with some obvious advantages.The company’s medical resources are guaranteed.Besides,effective communication is carried out with the help of intermediary information.

The online to offline (O2O) model can realize the integration of the internet and offline sales.This model has both online and offline advantages,so it has strong development potential in the future market and will become a new trend.Products and services consumed in stores are suitable for driving online marketing and purchasing.The O2O model of medicine is no longer the key to winning differentiated competition,but a necessary and basic sales service that can be provided to customers.In China,many chain pharmacies such as Yifeng Pharmacy and Guoda Drugstore are taking the lead in developing O2O business,which has become a new normal business in the pharmaceutical retail industry.

The other model is business to consumer(B2C),which is mainly through the establishment of pharmaceutical companies,with the help of network platforms,to provide consumers with the goods and services they need.Pharmaceutical companies in the B2C model usually have better brands and good sales channels,and their customers are scattered individual patients.This model can be called specialized selfoperated enterprises B2C.In other words,companies build their own online sales platforms,such as Haoyaoshi and Jianke.There is also a model that relies on the platform B2C.Pharmaceutical companies develop their sales channels by using third-party trading platforms,such as JD Mall and T-mall.However,due to the late start and other factors,the development of China’s pharmaceutical e-commerce is still in its infancy.Among them,online pharmacies in the B2C model is the most vulnerable,and the sales volume of online pharmacies in China is still far behind developed countries.Under the background of the accelerated development of pharmaceutical e-commerce and various policy dividends,pharmaceutical e-commerce in the B2C model has a large space.In addition,the B2C model has the advantages of complete supply chain,low price,and wide regional coverage.For enterprises,while reducing operating costs,it can gain more benefits and establish a loyal customer group.For consumers,it is possible to quickly find drugs without the involvement of a third party.In the B2C model,a win-win situation between enterprises and consumers can be achieved.Based on this,this paper chooses B2C as the research object of pharmaceutical e-commerce and expounds the opportunities and challenges it faces.

2 PEST-SWOT analysis of B2C pharmaceutical e-commerce

Compared with the traditional drug marketing model,B2C pharmaceutical e-commerce has huge advantages and good development opportunities.But due to the relatively late development of pharmaceutical e-commerce and the imperfect supervision of the government,it also has weakness and threats.Therefore,combined with PEST-SWOT analysis,a more comprehensive analysis of the development of B2C pharmaceutical e-commerce from the aspects of politics,economy,society and technology is helpful to understand its internal influencing factors and external environment.It can help formulate relevant development strategies to make pharmaceutical e-commerce more competitive.

2.1 Strengths

As to political and legal environment,China has continuously introduced new policies for pharmaceutical e-commerce,which provides a good environment for pharmaceutical online marketing with new opportunities in recent years.In 2017,the General Office of the State Council issued several policies on the reform and improvement of drug production,distribution and use.In the following year,it issued documents such as the “Opinions on Promoting the Development of Online Health Care”,which further liberalized the management of prescription drugs.Besides,the government authorized the electronic commerce to sell prescription drugs,which is the internet drug supply services.These improvements have greatly promoted the sustainable and healthy development of China’s pharmaceutical e-commerce.The legal status of online prescription drugs was established for the first time following the review of the “Drug Administration Law” in 2019.In 2021,the State Council issued the “Implementation Opinions on Comprehensively Strengthening the Drug Supervision and Administration Capability”to encourage and guide the improvement of the service of drug platforms and electronic sales,which strengthened the supervision of drug quality and sales.Therefore,the national policy on online drug sales is gradually improve.The relevant policy documents on pharmaceutical e-commerce released in recent years are shown in Table 1.

Table 1 Relevant policy documents of online pharmacies in China

As to economic environment,patients buy medicines through offline drug stores in traditional marketing.In this model,drugs need to go through several links from manufacturers to distributors to drug stores,resulting in the increase of price and cost.However,online sales do not need to go through intermediate links,and there is no need for distributors to organize a huge sale team,and patients can directly purchase the required drugs through online orders.Therefore,costs such as store rent,employee wages,and publicity expenses are saved,which enables pharmaceutical e-commerce to gain a huge price advantage.

As to social environment,the online drug sales depend on the platform of the internet,thus breaking the restrictions of geographical space and covering most of the country.The online sales of drugs can not only operate 24 hours a day,but also has unique advantages in time and space.In addition,with the popularity of mobile payment and the outbreak of COVID-19 pandemic,consumer groups are accustomed to online purchase,bringing new opportunities for pharmaceutical e-commerce.

As to technical environment,patients can have a variety of choices through online search and purchase the required drugs if they find some drugs that are in short supply in drug stores.Adverse effects of geography,traffic and weather can also be avoided.The rapid development of the logistics industry has made it faster and more convenient for patients to obtain medicines online.

2.2 Weaknesses

As to political and legal environment,China has paid more attention to regulating the online sales of drugs.However,up to now,the implementation and application of laws and regulations related to pharmaceutical e-commerce are still not standardized and comprehensive.There are some hidden dangers in this industry.Compared with the foreign developed countries,China has a long way to go.

As to economic environment,companies with online drug marketing platforms also have offline pharmacies at the same time in China.The consumption habits of some patients are not easy to change in the short term.At present,most pharmaceutical e-commerce cannot operate independently,which inhibits the in-depth development to a certain extent.

As to social environment,the middle-aged and elderly people are always the main body of drug consumption.Since these groups are not familiar with the operation of purchasing medicines online,it is difficult for them to learn new purchasing methods.This is a dilemma because young people do not buy medicines although they are familiar with the process of online purchasing,while the elderly who need to buy medicines cannot use the internet.

As to technical environment,patients cannot communicate face-to-face with doctors and pharmacists through online purchases.It is difficult for patients to accurately describe their diseases,and pharmacists cannot prescribe drugs for them due to the vague words.Besides,there are some barriers for doctors to guide medication.Patients’ satisfaction and trust are not easy to achieve than that they get after seeing a doctor.

2.3 Opportunities

As to political and legal environment,the latest revision of the “Drug Administration Law” issued in 2019 prohibits only prescription drugs to be sold through third-party online platforms.It also mentioned online sales of drugs should follow the relevant provisions.Therefore,it obtained legal permission for online sales of prescription drugs.

As to economic environment,both drug online marketing and entity enterprises have target consumer groups,so they can establish an operating environment for sharing information,commodity,services,and consumers’ interest,and cultivate a common loyal customer group[5,6].

As to social environment,the health awareness of the residents is continuously increasing,and the prospects of the pharmaceutical consumption market are broad.With the reform of China’s medical insurance system,the pharmaceutical industry will have a better market.Under the impact of the COVID-19 pandemic,people’s health management and awareness have reached a new height,and they are willing to spend more time and money on health management.

As to technical environment,mobile internet is developing rapidly.With the continuous development of the big data industry,mobile phone applications and WeChat public accounts can provide consumers with better consultation on purchasing medicines[7,8].It can effectively promote the development of the online drug market.The hardware equipment based on AI terminals is continuously upgraded.Combined with the mobile internet,patients can obtain remote diagnosis and treatment modes easily.

2.4 Threats

As to political and legal environment,online drug purchase has not been incorporated into the medical insurance reimbursement system.Although some cities have begun to pilot the online drug sales with local medical insurance institutions,the scope is limited.Therefore,it is difficult for online drugs purchase to enter medical insurance reimbursement on a large scale in the short term.To a certain extent,the difficulty in using the medical insurance card to buy drugs online will lose the price advantage to compete against offline pharmacies.Many consumers give up online drug purchases because they cannot enjoy medical insurance benefits.

As to economic environment,with the continuous expansion of the pharmaceutical e-commerce market,a large amount of funds from the venture capital market has poured into pharmaceutical e-commerce.With the entry of old e-commerce giants such as T-mall and JD,the market competition for pharmaceutical e-commerce has become more intense.Operators of pharmaceutical e-commerce are facing competition from offline entities and online stores in the same industry.

As to social environment,due to the reasons of history and slow economic development,the quality of the drugs sold online in the early stage was not good.For example,false propaganda and sales of counterfeit or inferior drugs occurred from time to time,and it is inevitable that inferior drugs would drive out good drugs.At the same time,the rights protection procedures for purchasing drugs on the internet are very cumbersome.Besides,consumers are not familiar with rights protection methods and channels,so it is difficult to ensure their legitimate rights and interest,which leads to a decrease in patients’ trust in online drug sales platforms.

As to technical environment,buying medicines online is different from other online shopping.After purchasing medicines,patients want to get the medicines as soon as possible.If the delivery time is long,the price advantage and convenience of online drug purchase will be completely lost.Therefore,pharmaceutical e-commerce needs to consider drug quality and delivery speed.

The PEST-SWOT analysis matrix of pharmaceutical e-commerce is shown in Table 2.

Table 2 PEST-SWOT analysis matrix of China’s pharmaceutical e-commerce

3 Analysis on the development strategy of China’s B2C pharmaceutical e-commerce

Through SWOT matrix analysis,four strategic combinations of SO,ST,WO and WT can be obtained.Based on the analysis of PEST-SWOT macro environment,the industrial strategy matrix is shown in Table 3.

Table 3 SWOT strategy matrix analysis of China’s pharmaceutical e-commerce

3.1 SO strategy: Cultivating compound talents proficient in medicine and e-commerce

With the advent of the era of AI,various mobile applications such as mobile phone APP and WeChat official account have been developed.Mobile shopping has the advantages of flexibility and convenience,many users,and good identity authentication.It currently has the biggest market share for online shopping in China.Pharmaceutical e-commerce should pay attention to the development and utilization of mobile APPs,making full use of the advantages to sell medicines on mobile terminals.In addition to drug sales,other additional services can also be provided,such as intra-city drug delivery,online consultation,pushing health news through public account,appointment registration,and medication reminders.Therefore,more attention should be paid to cultivating compound talents who are proficient in medicine and e-commerce.Different from the management of pharmaceutical entities,drug online operation focuses on the design of network platforms and systems and the management of professional talents.Product marketing and price strategies should rely on pharmaceutical e-commerce managers.Services such as website construction and health consultation also require continuous improvement and support from technicians.Compound talents must have professional knowledge in e-commerce and good medical knowledge.But such high-quality human resources are not abundant.Therefore,in the management of pharmaceutical e-commerce,it is necessary to cooperate with various talents to establish a normal drug network operation process,which will provide a good drug purchasing experience for consumers.

3.2 WO strategy: Exploring online payment methods for medical insurance

There are many advantages for medical insurance to use online payment.For medical insurance institutions,online transactions are more centralized and transparent than offline transactions,and it is convenient for them to have real-time monitoring.If the payment system of medical e-commerce and the medical insurance payment system can realize the connection,it is also convenient for medical insurance institutions to supervise in advance[4].For patients,offline pharmacies cannot cover all residents,while medical e-commerce can break through geographical,space and time constraints.If online drug purchase can be paid through medical insurance,the price advantage of the offline drug stores will be broken.It will be convenient for consumers to purchase medicines anytime and anywhere.Specific measures such as establishing a unified online medical insurance management information system nationwide can be implemented.On the other hand,the government could issue relevant policies to unify and consolidate the general provisions of the registries in multiple regions with a unified online payment arrangements.At present,the relevant health insurance policies have not been fully made.With the help of major parties in the pharmaceutical e-commerce,including e-commerce platforms,pharmaceutical companies,and insurance companies,some new models can indirectly facilitate the link between health insurance and online payments[9].

3.3 ST strategy: Establishing a professional logistics system and optimize cost management

A professional logistics system should be formed to optimize the management of overall cost.Cost is an unavoidable problem in enterprise development.Therefore,the pharmaceutical e-commerce platform should directly communicate with regional distributors,agents or drug manufacturers based on its business characteristics,and cooperate with pharmaceutical logistics enterprises to establish a professional logistics system for online drug operation,which enables data to be shared.The status quo that traditional drug source relying on the supply of entity enterprises should be changed,and a new logistics system for pharmaceutical e-commerce must be established to further control costs so as to gain price advantage.

Nowadays,with the rapid development of network technology in China,electronic prescriptions have become popular,enabling patients to enjoy remote treatment.Many prescription drugs are inseparable from the daily life of the public.The inspection of online drug orders should be strengthened.In addition,the review of auditors should be accepted to check the validity period,incompatibility,damage and deterioration of drugs and order information.The pharmaceutical e-commerce platform should improve the return and exchange policies,strengthen the management of storage,transportation and distribution personnel,and regularly conduct training on drug laws and regulations and drug use to ensure that drugs meet storage requirements in all aspects.

3.4 WT strategy: Integration and data sharing of upstream and downstream of the industrial chain

Whether it is a B2B,B2C or O2O model,pharmaceutical e-commerce companies should promote cooperation with medical institutions such as hospitals to achieve data sharing and resource integration[10].It can not only provide patients with a better drug consumption experience,but also achieve a win-win situation for both enterprises and institutions[11].Pharmaceutical e-commerce will not only allow patients to purchase the required drugs on the platform,but also provide online consultation services.Adding online consultation,health management and other functions to the APP can increase residents’access rate to the medical e-commerce platform,thereby increasing the purchase of online drugs.In the era of data sharing,APP can also provide users with personalized services,and push rational prescriptions based on personal data on the relevant interface.Online prescriptions are provided on the internet,and drug delivery services can be offered as well,enabling vertical integration of diagnosis and treatment and drug purchases.Medical institutions collect and store a large number of patients’ diagnosis and treatment information,meanwhile,they also have all the data related to the patient’s birth,illness,medical treatment and nursing.In this way,the data can be fully utilized and linked to provide better services for patients[12].B2C pharmaceutical e-commerce can make full use of these data resources to achieve targeted production and operation activities.

4 Conclusion

In the future,China will issue more policies to promote the trend of the drug market,and pharmaceutical e-commerce will be more standardized under the guidance of policies.In the context of big data,the sales of pharmaceutical products will change greatly[13].Identifying users more accurately,understanding consumer needs,and providing better services are the key points in adapting to competition in the pharmaceutical field.Therefore,pharmaceutical e-commerce will have a broader space for development in the future[14].

To sum up,the development of B2C pharmaceutical e-commerce in China has huge potential.Now,under the impact of COVID-19 pandemic,the sales of online pharmaceutical products have become an important channel for future sales.At present,there are still many problems in China’s pharmaceutical e-commerce.For example,policy constraints,imperfect logistics and distribution systems,low price advantages and consumer trust.Pharmaceutical e-commerce needs to seek breakthroughs in the future.It can deploy such strategies as cultivating compound talents who are proficient in medicine and e-commerce,exploring online payment methods for medical insurance,establishing a professional logistics system,optimizing cost management,integrating upstream and downstream of the industrial chain,and sharing data to seek long-term development.