Entrepreneurs are often faced with a challenge: how to avoid having their ideas and business models quickly copied by established companies. I would like to share the example of Hims to explore this issue.
Founded in 2017, Hims is a DTC (Direct to Customer) healthcare company that provides online physician consultation 24/7 as well as drug delivery services. Starting with men’s hair loss treatments and sexual dysfunction medication, Hims has now expanded into cardiovascular health, mental health, and weight management. In 2021, Hims was listed on the New York Stock Exchange. It had been less than five years since the company’s founding.
Early this year, Eli Lilly and Novo Nordisk launched weight-loss injections that were immediately in short supply due to an exceedingly high demand. Seizing the opportunity, Hims launched GLP-1 in May, a compounding product priced at only 15% to 20% of the big brands, and the rush to buy it was rapid. According to US regulations, in order to address shortages, manufacturers are allowed to make manufactured drugs under certain conditions to supplement the market.
This brings us back to the question at the beginning: How should Hims stabilize itself in a highly competitive market and, in turn, challenge the traditional pharmaceutical companies? The company’s success can be attributed to the flexible use of three strategies at different stages: first-mover advantage, branding, and reverse positioning.
First-mover advantage: seize the opportunity to enter the market quickly
With limited resources, start-ups must quickly achieve a product-market fit and acquire their first customers at an early stage. Hims’s establishment as a company coincided with the liberalization of e-health regulations in the United States, which now allowed physicians to consult online and write certain types of prescriptions. At the same time, patents on several medications for sexual dysfunction and hair loss were about to expire, allowing other players in the industry to introduce alternatives at a lower cost.
Hims has capitalized on these opportunities and rapidly moved into areas usually ignored by the traditional healthcare industry. Sensitive issues such as sexual dysfunction and hair loss are particularly suitable for telemedicine services. This allows doctors to avoid the potential embarrassment of face-to-face consultation, and also satisfies consumers’ need for privacy. These strategies allowed Hims to attract a large number of younger customers and quickly establish a solid market base.
Branding: Consolidating market position and building brand influence
With their successful entry into the market, Hims has further strengthened its brand position. From its website design to its product packaging, Hims has adopted a pastel-colored, simple, and modern style to make cold pharmaceutical products more approachable and attractive. At the same time, Hims has successfully transformed what used to be embarrassing medical products into more consumer-friendly, everyday healthcare products by presenting them in a humorous and elegant way (e.g., using a cactus as an analogy for sexual dysfunction) in its advertisements.
Reverse Positioning: Subverting Traditions and Redefining Market Rules
During their expansion period, Hims used a reverse positioning strategy to redefine the rules of the market. “Reverse positioning” refers to a situation in which a new, emerging company offers a fundamentally different and better business model than incumbent companies, putting the incumbent businesses in a dilemma — not copying the new model may cause them to lose customers and fall behind, but copying it may hurt their existing business.
Traditional weight management services often involve cumbersome face-to-face counseling sessions, high prescription costs, and complicated insurance processes. Hims’s D2C model, which offers consultations and products over the internet, is a direct challenge to traditional healthcare providers with their face-to-face visits and insurance billing, putting strong pressure on traditional businesses. For example, in response to competition, Eli Lilly has also introduced affordable vials of weight-loss medications. However, most traditional businesses are maintaining a conservative attitude toward new models in order to protect their established models. This attitude creates further opportunities for new start-ups.
After gaining a foothold in the market, Hims acquired Nivagen Pharmaceuticals, a specialty pharmaceutical company, in September this year. By incorporating some of Nivagen’s products, Hims continues to deepen its competitive moat through different strategies. After all, it’s always the entrepreneurs who dare to break the status quo who will truly win in the market.
