Offline pharmacies 'exiting online platforms' looks more like bargaining leverage, while regulatory improvements may ease margin pressure

Overview

This report discusses recent media coverage in China's pharmaceutical retail industry about some offline pharmacies considering exiting online platforms. JPMorgan believes the message should not be interpreted as a credible business-exit strategy, but rather as a bargaining signal from offline pharmacies to regulators and platforms. Offline pharmacies face margin pressure from online low-price competition, platform commissions, mandatory promotions, and traffic migration, but completely leaving the online ecosystem would weaken their ability to reach consumers.

Core views

The core view is: first, it is not commercially feasible for offline pharmacies to proactively exit mainstream online platforms, because online platforms already cover search, consultation, prescription, insurance, and delivery in pharmaceutical consumption; second, the event reflects offline pharmacies' genuine dissatisfaction with asymmetric platform power, commission extraction, and low-price vicious competition; third, the regulatory environment is evolving toward protecting merchants' autonomous pricing rights, constraining platform pricing behavior, and harmonizing oversight of online and offline pharmaceutical sales; fourth, offline pharmacies should shift from pure drug transactions to professional services, community health, and differentiated merchandise capabilities.

Analysis framework

The report uses industry event interpretation, regulatory policy analysis, and business model comparison to distinguish media rumors from actionable strategies, and assesses the impact across four dimensions: platform ecosystem dependence, consumer behavior, regulatory constraints, and offline pharmacy differentiation capabilities.

Methodology notes

• Industry event analysisDistinguishing rumors from real commercial intent

  Interpreting the news about exiting online platforms as a bargaining signal rather than a confirmed industry action.

  The report emphasizes that no major listed pharmacy has taken similar action so far, and that the focus of discussions is more on restoring offline traffic through high-turnover brand partnerships than on strategically exiting the online ecosystem.

• Regulatory analysisPlatform pricing behavior regulation framework

  Assessing the impact of the Internet Platform Pricing Behavior Rules and the joint guidance issued by nine departments on offline pharmacies' bargaining power and margin pressure.

  The new rules target platform practices such as forced low-price promotions, fee increases, traffic restrictions, algorithmic downranking, and store blocking, with the goal of protecting merchants' autonomous pricing rights and curbing low-price vicious competition.

• Competitive advantage analysisOffline pharmacy defense framework

  Judging offline pharmacies' moat from the perspective of professional services, integration with medical services, local fulfillment, insurance reimbursement, and private-label offerings.

  The report believes offline pharmacies should not rely solely on drug transactions, but should strengthen pharmacist consultations, chronic disease management, basic testing, community health services, and differentiated SKUs.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China offline chain pharmacies

  core impacted asset

  Strengths

  Have advantages in face-to-face pharmacist consultations, chronic disease management, basic health testing, insurance reimbursement, local instant fulfillment, and community reach.

  Weaknesses

  Under pressure from online low-price competition, platform commissions, mandatory promotions, an aging customer base, and migration of price-sensitive customers.

  Comparison

  Compared with online platforms, offline pharmacies are stronger in professional services and instant trust scenarios; compared with offline pharmacies, online platforms are stronger in traffic, price transparency, fulfillment networks, and consumer entry points.

  Risks

  If they exit the mainstream online ecosystem, they may fail to win back customers and instead become invisible to platform-native consumers.

• China online pharmaceutical platforms

  competitors and channel infrastructure

  Strengths

  Cover search, consultation, prescription routing, insurance integration, and last-mile delivery, and have become a daily entry point for pharmaceutical consumption decisions.

  Weaknesses

  Face regulatory constraints on platform pricing behavior, protection of merchants' autonomous pricing rights, algorithmic discrimination, and low-price vicious competition.

  Comparison

  Online platforms lead in traffic and transaction efficiency, but are weaker than offline pharmacies in face-to-face professional consultations, community health services, and offline insurance scenarios.

  Risks

  Regulation may limit platform practices such as forced promotions, commission extraction, traffic control, and algorithmic downranking.

Key data

• Effective date of the Internet Platform Pricing Behavior Rules2026-04-10The rules directly address retailers' pain points regarding forced low-price promotions, fee increases, traffic restrictions, algorithmic downranking, and store blocking.
• Joint guidance issued by nine departmentsJanuary 2026The report believes this guidance, together with the platform pricing rules, reflects regulatory progress toward unified oversight of online and offline pharmaceutical sales and tighter constraints on platform behavior.
• Yang Tianhe incidentlate 2025The report mentions that this chain publicly stated its nationwide franchisees would terminate O2O platform cooperation and filed lawsuits over issues such as abuse of platform dominance, forced bundling, and unreasonable store closures.
• Major listed pharmacy actionNo major listed pharmacy has been seen exiting online platformsThis is an important basis for the report's view that the message looks more like bargaining leverage than an industry strategic shift.
• Report completion and disseminationCompleted 14 Apr 2026 07:20PM HKT; Disseminated 14 Apr 2026 07:26PM HKTFrom the disclosure information on the last page of the report.

Impact & implications

For investment implications, the near term should focus on whether the new regulatory rules truly improve bargaining relations between offline pharmacies and platforms, reduce pressure to passively participate in low-price subsidies, and help restore some margin. Over the medium to long term, if offline pharmacies can transform stores into community health entry points and combine pharmacist services, chronic disease management, insurance reimbursement, and differentiated merchandise, they can still maintain customer stickiness and traffic; however, if they only use exiting online platforms to resist competition, they may weaken their visibility in a platform-based consumer ecosystem.

Risks

• The media report may be misread by the market as a collective exit of the industry from online platforms, but the report believes the evidence is insufficient.
• The implementation effect of the regulatory rules still needs to be observed, and actual platform behavior changes may lag.
• If offline pharmacies lack professional services and differentiated merchandise capabilities, margins may still be squeezed by online price competition.
• The online platform ecosystem has a deep influence on consumer decision-making, and excessive confrontation with platforms may hurt offline pharmacies' customer acquisition ability.

What to watch

• After the Internet Platform Pricing Behavior Rules are implemented, whether platform commissions, promotion requirements, and traffic allocation rules actually change.
• Whether major listed pharmacies show any real, sustained moves to exit O2O or online platforms.
• Whether regulators further promote unified oversight of online and offline pharmaceutical sales, including prescription review, drug storage, and pharmacist qualification requirements.
• Progress by offline pharmacies in chronic disease management, basic testing, TCM services, insurance reimbursement, and private-label SKUs.
• Whether online pharmaceutical platforms adjust low-price subsidy and algorithmic ranking mechanisms.