Dingdang also offers cheaper medicines and 28-minute home delivery, thanks to its innovative logistics and partnership models
Around 2012, when smartphones began their explosive growth in China, pharmaceutical giant Renhe Group saw their sales slowing despite the same level of ad spending. Its 62-year-old founder and chairman Yang Wenlong realized that mobile was fast turning into a consumer trend – and a new business opportunity.
But it was after meeting Xu Huansheng, who was then head of Baidu’s smart hardware unit, in early 2014 and the pair became fast friends, that the whiff of opportunity concretized into a new business venture.
"We were thinking how about trying medicine delivery service. Whether it's at midnight, or on stormy days, we can still make it," said Xu. The duo wasted no time and Dingdang Medicine Express was launched in October 2014.
Four years on, Dingdang has built up a customer base of over 32m across seven major Chinese cities including Beijing, Shanghai, Guangzhou and Shenzhen. In May 2019, it was ranked as one of the 70 high-growth startups that are most likely to become unicorns within three years by the well-known Hurun Research Institute.
Dingdang launched its mobile app in February 2015, focusing on free home delivery within 28 minutes to cater to urgent orders late at night and for emergencies. According to the company, night-time purchases account for 40% of its total sales. Not surprisingly, the majority of Dingdang app users come from the 25–40 age group who expect quick responses to on-demand orders. This raised the bar very high for logistics providers and e-commerce vendors.
In its early days, Dingdang's 28-minute delivery promise relied heavily on partnerships with traditional offline pharmacies. However, problems arose and deliveries arrived late because many of the partner pharmacies prioritized orders according to profit margins, and not user demand. As a result, they tended to be slower in expediting the purchases made via Dingdang, which often include online price discounts.
Such failure to honor the 28-minute delivery promise led to many complaints. A Beijing Business Today journalist tested the delivery promise in 2016, buying two items separately at different times. One item was delivered after 42 minutes, while the other was received within 23 minutes.
As a result, Dingdang decided to set up its own delivery network. In June 2016, Dingdang also launched its own self-run offline pharmacies. To minimize the delivery promise failures, Dingdang adopted the “electronic fence” technology. The technology divides a city into delivery area segments, defined by a service radius to ensure the fulfilment of the 28-minute delivery promise.
For example, in Beijing, only 50 Dingdang bricks-and-mortar outlets are needed to cover all the areas within the Sixth Ring Road, a loose boundary between Beijing’s urban areas and outskirts. The same coverage without the technology would need 6,000 offline pharmacies.
Dingdang also launched a smart distribution center in 2017. The center uses big data analytics to optimize the logistics in cooperation with Baidu’s eagle eye service to keep track of deliveries in real time. Thanks to these efforts, the late delivery rate is now below 3%.
AI-managed 24/7 pharmacies
In August 2017, shopping guide robots named Dingdang Big White (Dingdang Dabai) were stationed at the offline pharmacies. Empowered with voice assistance and a medical information database of 40m data points, the store robots can process information given by customers about their symptoms and recommend suitable medication that can be purchased in-store.
The robots can also connect customers to Dingdang’s online doctors for further consultation in greater detail for more serious illnesses. Such online consultations are provided by Dingdang's partners like Medlinker, a social networking platform for doctors in China.
Traditional Chinese medicine (TCM) services are offered by local Chinese medicine practitioners registered with Dingdang TCM. The TCM doctors are based at the pharmacies to offer in-store diagnosis and prescriptions. Customers can order the medications at the store and opt for the home delivery service.
Big data plays an important part in the Dingdang stores. Products are displayed on shelves based on consumer behavior patterns in each store, such as purchase frequency and search frequency. The pharmaceutical items with the highest score will be placed in the most prominent positions to help customers locate the popular items easily and quickly.
Market insights, pricing partnerships
In 2015, Dingdang launched the FSC (Factory Service Customer) Pharmaceutical Alliance to lower prices for consumers. Over 600 pharmaceutical companies worldwide have signed up, including the biggest players Bayer, Pfizer and GSK.
Cutting the number of traditional distribution channels also helped to reduce costs and retail prices. At least 20,000 items are available for sale through the Dingdang app and offline pharmacies.
In return for the lower prices, Dingdang will collect consumer purchasing data from its customers as feedback to its partner pharmaceutical companies. This helps the suppliers to know more about their customers' needs to improve future product development, inventory and sales optimization.
For example, Dingdang has co-developed a new drink of crystal sugar Bird’s Nest “Swallow Nest” with the Renhe Group based on data gathered from the consumption preferences of its female customers. Monthly sales are exceeding 10,000 units at Dingdang.
Another marketing initiative was by TSKF, GSK's joint venture in China. Its advertisement for skin medicine sub-brand Baiduobang can instantly be promoted to all of Dingdang app users as soon as they open the app on their phones.
"Dingdang Medicine Express not only accelerates the delivery of medicine from pharmaceutical companies to customers, it also helps our partners to tackle pain points, such as the high cost of winning customers," said CEO Yu Lei.
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