The offline pharmacy retail sector, which experienced rapid expansion in recent years, is now undergoing a significant transformation marked by widespread store closures, with several publicly listed companies reporting earnings pressure.
Industry experts suggest that 2024 may represent a turning point for the offline pharmacy sector, marking the end of aggressive expansion strategies. The industry is transitioning from a "land-grabbing" approach focused on scale growth to a "refined cultivation" model emphasizing efficiency and diversification. For listed companies, the immediate priority appears to be optimizing their pharmacy chain layouts and implementing strategic business restructuring.
**Performance Challenges and Store Count Declines**
Multiple offline pharmacy listed companies reported disappointing results in their 2025 interim reports, reflecting broader industry pressures.
Among the eight listed pharmacy companies in the Shanghai and Shenzhen markets, major players including Yifeng Pharmacy Chain Co.,Ltd. (603939.SH), Lbx Pharmacy Chain Joint Stock Company (603883.SH), and Yixintang Pharmaceutical Group Co.,Ltd. (002727.SZ) all experienced revenue declines.
Medical strategy consulting firm Latitude Health founder Zhao Heng noted that major retail pharmacy companies saw revenue growth rates drop to single digits or even negative growth in 2024, with the negative growth trend becoming more pronounced in the first half of 2025, potentially ending two decades of high growth.
Sinopharm's pharmacy chain, which once belonged to the "10,000-store club," provides a notable example. According to China National Accord Medicines Corporation Ltd. (000028.SZ) 2024 interim report, Sinopharm's pharmacy chain operated 10,702 stores as of June 30, 2024. However, as the company shifted its strategy from "scale growth" to "high-quality development," it strategically closed over 1,270 directly-operated stores in 2024. By year-end 2024, the total store count had decreased to 9,569.
The store reduction trend continued into 2025. By the end of the first quarter 2025, Sinopharm's pharmacy chain operated 9,234 stores, and by June 30, 2025, this number had further decreased to 8,591 stores - a reduction of 2,111 stores, or nearly 20%, compared to the same period in 2024.
According to recent research from Chengtong Securities, all four major listed pharmacy chains significantly slowed their directly-operated store expansion in the first half of 2025, with store counts declining compared to year-beginning levels. Dashenlin Pharmaceutical Group Co.,Ltd. (603233.SH), Lbx Pharmacy Chain Joint Stock Company, Yifeng Pharmacy Chain Co.,Ltd., and Yixintang Pharmaceutical Group Co.,Ltd. saw their self-operated store counts decrease by 1.30%, 2.00%, 1.80%, and 1.10% respectively from the beginning of the year.
Industry data shows that China's physical pharmacy retail sales (pharmaceuticals plus non-pharmaceuticals) reached 48.7 billion yuan in July 2025, remaining flat compared to June but declining 4% year-over-year. Cumulative sales from January to July 2025 totaled 344.8 billion yuan, down 2.4% from the same period last year.
**Store Closures as Strategic "Cost-Cutting" Measure**
Facing market pressures and intensified competition, pharmacy chains have been compelled to reassess their expansion strategies. Research indicates that most chains have begun slowing store expansion while focusing on existing store development and cost efficiency improvements.
Data shows that in 2024, Yifeng Pharmacy closed 1,078 stores, Dashenlin closed 733, and Yixintang closed 358. Industry observers note that the "slimming down" effect has been significant, with companies optimizing resource allocation by closing unprofitable or inefficient locations to seek new growth opportunities.
Yifeng Pharmacy reported that its revenue declined 0.35% year-over-year in the first half of 2025, primarily due to store closures in 2024 and the current reporting period, along with slower new store expansion. However, through selective store closures, cost reduction measures, and operational strategy adjustments, the company's profitability continued to improve, with net profit attributable to shareholders increasing 10.32% year-over-year.
China National Accord Medicines Corporation Ltd. has focused on optimizing Sinopharm's pharmacy chain store layout through "one store, one strategy" approaches to improve operational quality. For loss-making stores, the company has accelerated "bleeding control" through strategic closures. In the first half of 2025, Sinopharm's pharmacy chain opened 24 new directly-operated stores while closing 864, significantly reducing the proportion of loss-making stores by the end of June 2025.
**Industry Inflection Point and New Market Dynamics**
Industry professionals believe that the growth inflection point for retail pharmacies may have occurred in 2024, marking the beginning of a new era for the sector.
Zhao Heng explained that low growth in the healthcare industry is an inevitable result of population aging. While aging drives rapid growth in medical expenditures, it also brings declining birth rates, meaning fewer people contributing to medical insurance funds. Facing higher expenditures and slower income growth, medical insurance systems will inevitably accelerate payment reform, from drug pricing and DRG (Diagnosis Related Groups) to individual account reforms, significantly impacting traditional operational models across various healthcare sectors.
Using 2024 as a watershed, the inflection point for offline pharmacy numbers has arrived. After years of continuous growth, the sector is now experiencing sustained contraction, primarily due to medical insurance outpatient coordination reforms that have reduced individual accounts and stricter regulatory oversight, compressing pharmacy development space.
One listed company executive noted that intensified competition has accelerated industry consolidation, with traditional pharmacy business models facing bottlenecks and industry profit pools peaking earlier than anticipated.
Regarding investor concerns about future store closures, China National Accord Medicines Corporation Ltd. publicly stated that the company has no plans for large-scale closures in the second half of the year. While online business has indeed impacted offline operations, the company is actively embracing digital channels and adjusting product categories to enhance customer acquisition capabilities.
Research suggests that the industry's development direction will likely involve differentiation between prescription drug-focused stores near hospitals and community stores focused on general health products.
Industry analysis indicates that under new pharmaceutical reform initiatives, the separation of medical services and pharmaceutical sales continues to deepen, accelerating prescription outflow from hospitals and upgrading pharmacy retail formats. As volume-based procurement expands to more drug categories, more products are shifting to retail channels. Outpatient coordination reforms provide opportunities for pharmacies included in outpatient coverage to attract more hospital prescriptions and customer traffic.
The rapid development of pharmaceutical e-commerce brings additional online market opportunities, potentially accelerating industry concentration and chain penetration rates. For pharmaceutical companies that meet consumer health needs, possess strong professional service capabilities, maintain supply chain advantages, and operate in compliance, long-term positive trends remain unchanged.
Comments