At the end of 2017, Liu Qiangdong, the founder of Jingdong Group, sent a message in the micro-headlines: “Jingdong smart drug dispensers have officially begun to deploy, and each pharmacy in the future can realize 24-hour unmanned drug sales”. It seems that the news is not shocking, but it has drawn a lot of people’s hearts, and even pharmaceutical companies think that “the wolf is coming.”
Since Liu Qiangdong released the micro-headline, Jingdong intelligent drug-selling cabinets have disappeared. A person close to Jingdong told the “Chinese Entrepreneur” that “(this new project) basically hangs out without taking the first step.”
The discount of the intelligent drug sales cabinet project is only a partial failure of Jingdong in the field of medical E-Commerce. In fact, since China’s pharmaceutical E-Commerce began to enter the exploration stage in 1999, this new market has attracted the attention of many giants and entrepreneurs. Jingdong and Ali, both tested water and medicine E-Commerce in 2011.
In the circulation of medicine, the imagination of the Internet + is huge. According to the data of the Ministry of Commerce, the total sales of seven major medical products (drugs, medical devices, chemical reagents, glassware, proprietary Chinese medicines, Chinese herbal medicines and others) in the country in 2017 totaled 201.6 billion yuan, of which the pharmaceutical retail market was 400.3 billion yuan. In terms of pharmaceutical E-Commerce, the sales volume in 2012 was only 13.3 billion yuan, and in 2017 it was 121.1 billion yuan. The proportion of online shopping for drugs was even less than 10%.
By 2018, the field of medical E-Commerce has finally emerged. On September 12th, Beijing time, the 111 group of the 1 drug network parent company, which was spun off from the No. 1 store, was listed on NASDAQ in the United States and became the first share of Internet medicine health. In early September, Jianke announced that it had invested US$130 million in the B round. It is planned to go public in the US in 2019; for the safe doctors who have listed Hong Kong stocks soon, medical E-Commerce has become its main source of income in recent years.
However, a well-known medical expert told the “Chinese Entrepreneur” that the Chinese pharmaceutical E-Commerce market has been occupied by two major E-Commerce giants Jingdong and Ali. “The two together account for about 70% of the national online drug trading market.” Zhang Dingding, the marketing director of the online pharmacy pharmacist, believes that under the two offensives, small and medium-sized players in the pharmaceutical E-Commerce industry have basically no chance, and listing is only their A means of conducting capital operations.
It’s only these seven years, Jingdong and Ali are not easy.
Hard to test the water
In the past, the medical E-Commerce industry has been popularized as saying that “the license is difficult to get to the sky.” Because the government implements license management for Internet drug trading services, there are three certificates: A, B, and C. Their main applicants are medical third-party trading platforms. Pharmaceutical production/wholesale enterprises and chain pharmacies can provide Internet platform services for medical transactions, Internet drug wholesale services (B2B), and Internet drug retail services (B2C).
In July 2011, Jingdong had obtained a qualified management right by establishing a joint venture company “Jingdong Good Pharmacist” with Jiuzhou Tong (acquired C certificate in 2009). Two years later, Jingdong withdrew from the equity of “Jingdong Good Pharmacist”. An important reason for the breakup between the two sides is that they all want to control and dispute. Although according to the agreement, Kyushu accounts for 51%, and Jingdong accounts for 49%.
Zhang Dingding joined the pharmacist at the end of 2013, which coincided with the termination of cooperation between Kyushu and Jingdong. “At that time, there were only a few dozen pharmacists, basically new employees.” Zhang Dingding revealed to the “Chinese Entrepreneur”.
Jingdong has also brewed a new medical B2C platform “Jingdong Medical City”. At the 2013 China Pharmaceutical E-Commerce Annual Meeting, Cui Wei, then CEO of Jingdong Medical City, revealed that Jingdong Medical City will be launched at the end of August and announced the first eight chain brands that exclusively cooperate in eight cities, including Desheng. Tang, Fumei, Jingwei Pharmacy, etc.
However, Jingdong Medical City is still aborted. “Without a license, on the one hand, Jingdong has also seen executives fighting in this business.” People familiar with the matter told China Entrepreneur.
Also in this year, Jingdong Shanyuan (Qingdao) E-Commerce Co., Ltd., a subsidiary of Jingdong, acquired the Qingdao Anjitang Pharmacy at a price of several hundred thousand yuan, and later renamed it Jingdong Pharmacy. In July 2015, Jingdong applied for the online sales of medical qualifications to the regulatory authorities for the first time. Four months later, JD received a C certificate issued by the Shandong Food and Drug Administration, which sells medicines to individual consumers as an online pharmacy.
The insiders revealed to the “Chinese Entrepreneur” that at the same time that Kyushu and Jingdong were in contact with each other, Fumei Pharmacy also found Ali to pursue similar cooperation. Ali refused because it valued the platform business. However, Ali digs the head of the re-American pharmacy at the time, Jin Feng.
In June 2011, Tmall tested the water and medicine business, and only operated for 18 days, it was negotiated and rectified by the Zhejiang Food and Drug Administration under the name of “no online drug sales qualification”. On February 1, 2012, Tmall once again adjusted the pharmaceutical business to go online. After 8 days, the service was suspended again. On February 28, 2012, the Tmall Medical Museum was officially launched, but only the drug information display was provided. After the consumers selected the required products, they will jump to the official website of the corresponding pharmaceutical company to complete the transaction.
In order to get a license, Ali did not hesitate to pay a lot of money. In January 2014, it purchased Hebei Huiyan Medical Technology (hereinafter referred to as Hebei Huiyan) for 3 million yuan.
Hebei Huiyan was the first to obtain a third-party platform online drug retail pilot qualification in November 2013 (the resident merchants on the platform provide pharmaceutical retail services for individual consumers). After the completion of the acquisition, Tmall has a “pilot B2C platform license”.
In May 2016, Tmall Medical Center received a notice from Hebei Food and Drug Administration and no longer continued the third-party platform drug retail pilot qualification. This time, it was not only Tmall that was stopped, but also the 800 and 1 stores that were qualified for this pilot in July 2014.
The article posted on the CFDA official website shows that “the Internet third-party platform drug online retail pilot work is over”, and said that the third-party platform and the entity pharmacy main body responsibility is unclear during the pilot process, and it is difficult to effectively supervise the sale of prescription drugs and drug quality and safety. It is not conducive to protecting the interests of consumers and the safety of medication.
Since then, the Internet third-party platform can only display drug information, and can not involve online drug transactions. In order for consumers to purchase drugs on the Internet’s third-party platform, they must first submit the demand and transfer the order to the online pharmacy. This means that platform companies can only achieve profit sharing by means of other E-Commerce traffic, and can not achieve real platform sales (of course, there are still many platforms in the edge).
Ali’s attempts in the medical field are not limited to the Tmall Medical Museum. At the same time as the acquisition of Hebei Huiyan in January 2014, Ali United Yunfeng Fund invested 1.3 billion Hong Kong dollars in the Hong Kong listed company CITIC 21st Century (00241.HK). In October of the same year, CITIC changed its name to Ali Health in the 21st century. After the third-party platform drug retail pilot ended, in July 2016, Ali Health acquired the entire equity of Guangzhou Wujiu Pharmaceutical Chain Co., Ltd. for 16.8 million yuan, thus obtaining the C certificate. In less than a month, Ali Health renamed the 5,000-year online pharmacy conscience pharmacy to Ali Health Pharmacy.
At this point, Jingdong and Ali are involved in medical E-Commerce, which is a big step. However, when Jingdong and Ali were like the Western Heaven, they finally got the license, and the licenses of the medical E-Commerce were all released. In 2017, the three certificates of Internet drug trading services B, C and A were successively cancelled by the State Council.
In November 2014, Ma Yun mentioned at the first World Internet Conference that “the biggest opportunity for China after 10 years is health and happiness”. In less than half a year, Ali Health began major business restructuring and high-level personnel adjustment.
On April 15, 2015, Ali Group announced the transfer of the Tmall Online Pharmacy Platform business to Ali Health in exchange for the newly issued shares and convertible bonds of Ali Health. Upon completion of the transaction, Ali Health will become a subsidiary of Alibaba Group and serve as the flagship platform for the health and health of the Ali Group’s “Double H” (Health and Happiness) strategy.
On the 17th, Ali announced that one of the group’s 18 founders and partner Wu Yongming will serve as the chairman of Ali Health’s board of directors. Wang Lei, former general manager of the Group’s Taodian Point, will serve as Ali Health CEO. In September of that year, the former CST 21st Century CTO and Ali Health President Wang Yaqing resigned from Ali and had nothing to do with this matter.
But what happened next made Ali’s health in crisis.
Zhang Lei, senior public relations director of Ali Group, entered Ali Health after entering the CITIC 21st century. She told China Entrepreneur that Ali’s health revenue source was only electronically regulated, which was much lower than Tmall‘s online pharmaceutical business. The former was financially considered a reverse takeover and approved by the Hong Kong Stock Exchange. The process and cycle are long.
Until the beginning of 2016, Hunan Yangtian and the big pharmacy will appeal to the court of the State Food and Drug Administration, saying that its enforcement of the drug electronic supervision code is illegal. Electronic drug supervision refers to the posting of electronic supervision codes on the packaging of drugs to realize the management and tracking of drug circulation information.
Since 2006, the State Food and Drug Administration has established a nationwide unified drug electronic supervision network in three phases. At the beginning of 2015, the State Food and Drug Administration issued an announcement requiring all pharmaceutical preparations, wholesale and retail enterprises to be included in the China Drug Electronic Regulatory Network by December 31, 2015. Such a technical service provider for government projects is CITIC’s 21st century.
19 chain drugstores, such as ordinary people, Yixintang and Yifeng Pharmacy, also issued a joint statement, suggesting that the current drug electronic supervision code should be completely abolished, and that Ali Health should completely withdraw from drug information supervision. They believe that Ali Health, after entering the 21st century and accepting Tmall‘s online pharmaceutical business, will not only hold the national drug regulatory network but also sell drugs, such as “both referees and athletes”, and it is suspected of selling data.
Ali Health denied these allegations, but the State Food and Drug Administration has stopped the regulations of the aforementioned pharmaceutical companies to be included in the drug electronic regulatory network, and said that it is necessary to recover the technical operation and maintenance rights of the electronic code of drugs. At that time, Ali’s health stock price fell by about 30%. “Do you know what this feeling is? Crazy! The stock price is like this, what should I do in the future?” To this day, Ali health insiders are still worried.
To make matters worse, the future of Ali’s core business is unclear, which directly affects the transaction process of its acquisition of Tmall‘s online pharmaceutical business.
In the face of these sudden changes, Ali Health has adjusted its thinking and changed its acquisition into a generational operation – providing related categories of outsourcing and value-added services to the Tmall Medical Museum and charging for it. On the other hand, Ali Health has launched a third-party traceability platform that is compatible with the electronic regulatory code of drugs. The platform is a private platform for Ali Health, which is more open than the pharmaceutical electronic regulatory network previously affiliated with the State Food and Drug Administration. Marketization (Enterprises are no longer forced to join, but can be selectively added).
The B2C medical platform business was blocked and did not affect the pace of Ali Health’s acquisition of other businesses in the Tmall Medical Museum. In May 2017, Ali Health acquired Tmall “Blue Hat” health care products for HK$3.8 billion. A year later, Ali Health acquired Tmall medical equipment and health products, adult products, medical and health services for HK$10.6 billion.
“Now most of the assets of Tmall Medical Museum are already owned by Ali Health. The remaining assets, Ali Health is operating on behalf of the company.” Zhang Lei said.
According to the financial report, the GMV (total trading volume) of Tmall Medical Museum in FY 2018 (April 2017~March 2018) is close to 40 billion yuan, including the provision of outsourcing and value-added services by Ali Health. GMV, and the GMV of Ali Health’s health food category E-Commerce platform service business acquired from Alibaba Group in 2017, totaled more than RMB 30 billion.
In addition to the Tmall Medical Museum, other resources of the Ali Department are also working with Ali Health. An Ali insider told the “Chinese Entrepreneur” that Alipay’s medical portals such as Alipay, Nail, and UC have gradually opened up with Ali Health. Under the guidance of Ali Group’s “Double H” strategy, Ali Health also conducted explorations in online hospitals and smart medical services.
In addition, in March of this year, Ali Health released a new appointment: Wang Lei returned to the Ali Group to work, no longer served as the CEO of Ali Health, the position of the former Alibaba AliExpress general manager Shen Difan. From March to April, Ali Health and Ali Group, Tmall, Rookie, Ali Mama, Aliyun and other renewed a series of agreements covering E-Commerce, logistics, advertising, technology and many other aspects.
Jingdong‘s traffic business
Regarding the dystocia of Jingdong intelligent drug sales cabinet project, the above-mentioned people close to Jingdong have learned a number of reasons: “Firstly, the departments for technology research and development and implementation are Jingdong Intelligent and Jingdong Medical Health, respectively. The starting point of the two is different. Secondly, the product The unit price is over 100,000 yuan, and the average market price is only 30,000 to 50,000 yuan. In addition, its technology has not completely passed the test. For example, users buy medicine, the machine does not take medicine, or buy a box out of two boxes.”
In the opinion of this person, the most important reason for the failure of Jingdong intelligent drug dispenser to test the water is that Jingdong regards it as a product for sale, and has no interest in the pharmacy. In this regard, what is hungry is in contrast to it.
In the first half of 2018, when I was hungry, I also launched a smart medicine cabinet, hoping to give the pharmacy a 24-hour empowerment. Online delivery through O2O, the drug store brings traffic; offline, through the automatic drug dispenser to take orders for pharmacies. In addition to its sales, the way it works with pharmacies also includes joint operations. According to the official, more than 200 smart medicine cabinets have been laid in major pharmacies.
Jingdong also had O2O business – Jingdong arrived home, and its medical and health O2O business was home to Jingdong Health. In April 2016, after Jingdong arrived at home and merged with the crowdsourcing logistics platform Dada, it was stripped from the Jingdong Group. The above-mentioned people close to Jingdong believe that the separation of Jingdong from home is a loss for Jingdong. “Either Shang Chao or medicine, regardless of Ma Yun’s new retail or Liu Qiangdong’s unbounded retail, O2O is an important empowerment tool.”
The insiders revealed to the “Chinese Entrepreneur” that although the starting time in the medical field is basically the same, there are still a large gap between Jingdong and Ali in many data. On the one hand, determined by their genes, Jingdong started its own business, and Ali is good at making platforms. On the other hand, it is also related to their positioning of medicine.
“Jingdong is doing traffic business. Perhaps in Jingdong’s view, medicine is not much different from other categories, but Ali regards it as a strategy.” The above-mentioned medical experts pointed out to Chinese Entrepreneur.
This logic revealed the clues when Jingdong and Kyushu were joint ventures. Analysts said that Jingdong‘s role in this cooperation is an IT enterprise, and there is a fundamental difference in the way of thinking with pharmaceutical companies. “Liu Qiangdong hopes to make use of the flow advantage to be a pharmaceutical trading platform, and Kyushu General wants to take advantage of the advantages of medical resources to do vertical and closed loop.”
Jingdong’s recent emphasis on medical care has increased. In June, Liu Qiangdong said in an interview with CCTV Finance that the essence of unbounded retail is the integration of supply chain. In the future, JD’s layout of supply chain service business will focus on the fields of automobile, real estate and medical care. In September, Jingdong Cloud released the “Medical Health Strategy” and planned to build an ecological closed loop covering the life, old, sick and full-cycle cycles with partners. In June 2017, Jingdong also established the Yinchuan Jingdong Internet Hospital.
According to “Chinese Entrepreneur”, Jingdong‘s pharmaceutical business is scattered in different departments. For example, Jingdong Medicine Health and Medical City is a parallel department of the Home Life Division (within the Jingdong three business group system). The former is responsible for Jingdong Pharmacy (self-operated B2C), home medical care, nutrition and health care, etc. Responsible for prescription drugs, B2B, Internet hospitals and other services. Jingdong Cloud is the business unit outside the three business clusters of Jingdong Mall, and the O2O business has been divested. “If JD is determined to make a difference in the medical field, it should integrate different medical resources like Ali,” said the medical expert.
Hungry, the person in charge of medicine, Shao Qingjian, built a WeChat group called “Medicine E-Commerce Social Responsibility Group”, which brought together 25 medical practitioners, including Jingdong and Ali’s medical leaders. Shao was responsible for the pharmaceutical business for many years in Jingdong, and later went to Baidu for takeaway. With Baidu take-out being hungry, M&A, hungry and Ali, M&A, he is now in the Ali system.
Shao Qing told the “Chinese Entrepreneur” that the establishment of the WeChat group represented them in reflection. “The original intention of medical E-Commerce is to ease the problem of buying medicines, but then gradually transferred to selling goods, and how to make more money or more money by selling goods, even at the price war, but many user scenarios still have not done it is good.”
“The price war on the Internet has not stopped, we often have to deal with it,” Wei Kaishen, general manager of Jingdong Pharmaceutical Health, shares the same feeling. Because whether it is medicines, or health care products, medical equipment, adult products, etc. covered by medical E-Commerce in a broad sense, most of them are standard products, and the pharmacies and platforms sell a high degree of coincidence.
The industry generally believes that in the past two years, the industry has become more rational, more service and user satisfaction, which can be seen from the dynamics of the two companies Jingdong and Ali.
In May and September this year, Jingdong Pharmacy and Ali Health Pharmacy were launched for the second anniversary. Jingdong launched the “Kingxin Care Plan” for the pain points of brand parties and consumers, including integrated marketing, big data opening, drug repurchase scene reconstruction, and smart cloud pharmacist platform. In order to make pharmacies better serve users, Ali issued the “Super Pharmacy 1.0” standard, which is the global operation process of finding goods, big data selection, sampling inspection, full-line monitoring, drug traceability and licensed pharmacists all-weather service.
At the press conference, Wei Kai gave an example: Jingdong has a licensed pharmacist named Jiang, who refused to use thousands of irrational medications for the health of the people. “This makes me feel very proud.” Wei Kai revealed to “Chinese Entrepreneur” that Jingdong is working on building a consumer health file to prepare for the next stage of accurate drug use. In the future, consumers will also get more professional and humanized help from nutritionists and physicians.
“Online and offline integration must be a trend.” Zhang Lei said that although a small number of pharmacies “have a lot of trouble”, Ali Health still hopes to cooperate with them and gradually deepen through different combinations of light and heavy assets.
In May 2016, Ali Health and Deshengtang and other 65 chain pharmacies (including one of the aforementioned chain pharmacies that boycotted Ali Health) launched the China Pharmaceutical O2O Pioneer Alliance, which exported Ali’s brand, membership, traffic, and technology to help pharmacies sell. Provide services on the basis of goods; optimize the supply chain of pharmacies on drug collection.
In August 2018, Ali Health teamed up with a number of offline chain pharmacies in Hangzhou. With the support of the rookie point, I opened the 24-hour drug delivery service for the first time and made a delivery within 30 minutes during the day and 1 hour during the night. Commitment, timeout must be compensated.
Zhang Lei told the “Chinese Entrepreneur” that the Chinese Medicine O2O Pioneer Alliance had been established for more than two years, and the delivery of O2O had already been realized, but the delivery of personnel and time was not standardized. Ali Health hopes to proof in Hangzhou, and will copy the standards and capabilities of fast drug delivery to the country in the future.
From June to August 2018, Ali Health successively invested in Shandong Yuyu Civilian Pharmacy, Anhui Guosheng Pharmacy, and Guizhou Yishu. The three are the largest pharmaceutical retailers in their respective provinces, with a total of nearly 3,000 pharmacies. They will have a new retail of medicine in the area with Ali Health Test.
It is worth mentioning that, regardless of price or service, the current competition of pharmaceutical E-Commerce mainly focuses on non-prescription drugs for consumers, namely medicine B2C, while medicine B2B is compared with “blue sea”. According to industry insiders, even Jingdong and Ali, the market share of their pharmaceutical B2B is still very small.
On the other hand, the “Opinions on Promoting the Development of “Internet + Medical Health” issued by the State Council on April 28 this year proposed that “prescriptions for common diseases and chronic diseases can be issued online. After examination by pharmacists, medical institutions and pharmaceutical companies can Entrusting qualified third-party agencies to deliver,” which means that online prescription drugs are available or banned.
These will be the new battlefield for medical E-Commerce.