Pharmacies don't sell products, they sell a lifetime
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
Today everyone in startup circles is sharing the news that Big Caring plans to list in Kuala Lumpur next year.
600 stores, a valuation of 20 billion, possibly raising 6 billion. Whether or not it finally happens, the local market hasn't seen something of this size in a long time.
But honestly, what grabbed me most about this news wasn't the IPO itself, but this:
Why has the pharmacy industry become a "good business" in the eyes of capital at this particular moment?
Mother and baby: an endless hunt for new customers
Having worked with the mother-and-baby sector these past two years, I feel it strongly:
Mother and baby is going through a structural decline that many people haven't understood. It isn't that brands aren't trying. It's that demand is changing: the birth rate is falling too fast.
More importantly, the mother-and-baby sector has a built-in fate it can't escape:
The customer life cycle is too short.
For diapers, once a child can walk and use the toilet, the need naturally ends. Formula is the same: as children grow, they leave the category completely. Mother and baby looks like it has huge GMV, but behind it you have to acquire customers all over again every year, and pay a new CAC every day. To do well in this kind of industry, what matters isn't marketing but the ability to "endlessly find new customers". It's exhausting, and a real test of cash flow.
Pharmacies: selling a life cycle
The pharmacy industry is the exact opposite.
Say someone discovers at 50 that they have high blood pressure. From that moment, they become a long-term pharmacy customer: once a month, several items each time, plus some supplements, a monitor, products for older people. If they live from 50 to 80, that relationship lasts 30 years.
That's an LTV mother and baby can never reach.
In other words, a pharmacy isn't selling products. It's selling a life cycle.
And the silver economy brings a kind of "demand that grows bigger by itself over time".
When everyone understands it
But the other side of the story is also worth stopping to think about.
When everyone understands an industry's logic, capital floods in, chains expand, and price wars appear. The pharmacy industry is going through this kind of "early competition phase" now. You'll see drug margins pushed down again and again, while chains use supplements, personal care and other high-margin products to subsidise the profit on medicines.
Does an industry get more competitors because its prospects are good?
Or do its prospects start looking less good because there are too many competitors?
Mother and baby looks huge, but structural decline makes life hard for every player. Pharmacies look certain, but over-competition keeps thinning the profit structure.
These two industries stand at completely different points in the cycle.
Big Caring's IPO is like a lamp lighting up the contradictions in the whole industry: on one side an extra-long customer life cycle, on the other ever-shrinking margins; on one side the opportunity of the silver economy, on the other everyone rushing towards the same cake.
Where does it go from here?
I don't have a standard answer.
What's certain is that you judge an industry not by how hot it is now, but by its competitive structure + customer life cycle + the speed at which capital is coming in.
Sometimes the real opportunity in an industry isn't now, but in the moment before others react.
And sometimes an industry's biggest risk isn't that business is bad, but that everyone thinks it's too good.
If the silver economy really does take off, the pharmacy industry may only now be entering "deep water". And every change from here is worth watching closely.