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‘Even elderly folks have begun to buy medicines online’: Interview with JD Health’s CEO Xin Lijun

The COVID-19 outbreak has created an unexpected boost for JD Health, according to Xin.

Chinese e-commerce juggernaut JD.com, (NASDAQ: JD) is known for its e-commerce capabilities and self-owned logistics system. However, JD.com has also ventured into other business, such as healthcare platform JD Health, China’s newest unicorn at roughly USD 7 billion, positioning itself as the most valuable among 22 new unicorns that emerged in China in 2019 and second worldwide.

JD Health’s CEO Xin Lijun recently shared with 36Kr his insight on the company’s beginnings, its later spinoff from JD.com, and some of the challenges faced along the way.

JD health CEO
Xin Lijun, CEO of JD Health. Source: 36Kr

Driven by increased demand

At the end of 2018, JD.com decided to split its health business from its retail group. The inception, and later spinoff, of JD Health were major decisions for the two companies, Xin said, adding that the increasing demand for healthcare products on JD’s core e-commerce platform necessitated a separate business unit.

“Initially, JD sold healthcare and nutritional products, and later, medicine as well. In particular, the sale of prescription drugs gradually necessitated the provision of other medical services. For example, if a customer purchases prescription drugs on JD, a doctor will provide some guidance while a pharmacist will review the prescriptions,” said Xin.

“By the second half of 2018, we began to have more discussion on whether JD could develop real medical service capabilities by leveraging the demand for medical products on its e-commerce platform. This is different from the logic of [pure] retail. Ultimately, Liu Qiangdong, [JD’s CEO] decided that JD should invest deeply in this new field. At the end of the year, JD decided to spin off this business, with me taking the lead.”

When asked whether JD Health was part of Liu Qiangdong’s plan to develop another engine of growth for the JD group, Xin said there is a possibility that JD Health could become another tech giant.

“I believe that Liu knows what he is looking for in the long term. However, before the spin-off, no one would have expected the COVID-19 outbreak,” he said. “The situation has, objectively speaking, accelerated the development of the whole industry.”

China digest

Competitive ability

Xin is optimistic about JD Health’s strengths with respect to its competitors. “JD Health already ranks first nationwide in terms of revenue when it comes to medical products, because we have e-commerce retail backing,” he said.

“This serves as an initial penetration point to offer other services to our consumers. For instance, if I sell eight million sets of blood glucose meters to diabetic patients, we can also provide each patient with suggested sugar management services, and let them establish a relationship with our doctors for other related health management services.”

At the moment, however, the retail of medical products still takes up the lion’s share of JD Health’s revenues, accounting for more than 90% of the company’s revenues, according to Xin.

“We are market leaders when it comes to medical services, with our online consultations averaging about 100,000 orders a day. However, the proportion of revenue from medical services is still very low.”

JD Health
JD Health’s platform provides a suite of services. Source: JD Corporate Blog

Xin also reiterated that there is significant cooperation between JD Health and JD.com’s e-commerce business.

“We sell nutritional products, health-boosting products, and medical devices—this is similar to mainstream retail. We both rely on our own medical products, as well as merchants on POP [JD.com’s platform for brand owners].”

However, some aspects of JD Health’s business had to be managed separately from the e-commerce platform.

“There may be some scenarios that require different treatment. For instance, when it comes to inpatient and outpatient medicine, two different systems are involved, namely, the hospital and retail system. Drug and product regulations are completely different and such operations need to be managed and built up separately,” Xin said.

Challenges ahead for JD Health

Xin believes that the current health tech market is very fragmented.

“For example, there are established players such as Ping An Good Doctor, Hao Dafu, and Weiyi, but aside from them, many hospitals themselves have their own apps. Due to the COVID-19 situation, for example, the volume of orders on Wuhan Tongji Hospitals’ website has also risen sharply.”

JD Health’s biggest competition is not Alibaba. Source: KrASIA

When asked about whether JD’s old foe Alibaba (NYSE: BABA) could represent also a potential threat in the health tech industry, Xin preferred to look at the bigger picture.

“We have never considered Alibaba our competitor—this is not a hypocritical statement. The potential size of this industry is very, very large. United Health Group in America is already at USD 260 billion. By comparison, China’s biggest companies in this industry are very small. Our biggest enemy is not each other, but the fact that some users still rely on offline consumption habits.”

Aside from consumer habits, Xin believes that the traditional practices of doctors are another challenge to overcome.

“In traditional offline medical institutions in China, doctors tend to focus their attention on medical research and are less familiar with digitalization and the internet. Therefore, the time taken to establish firm cooperation between JD Health and hospitals is usually very long.”

In China, doctors tend to focus on medical research and are not so familiar with digitalization and the internet. Photo by Piron Guillaume on Unsplash

“For example, when JD Health thinks that a particular service has a lot of potential to be taken online, doctors and hospitals themselves might not see this as a given. We take some things for granted which they do not. With these different modes of thinking and information asymmetries on both sides, there will be some mismatch of beliefs.”

However, recognizing and accepting this as a fact of reality was essential to overcoming it.

“If you recognize this problem, both sides can work together and gradually adjust to one another. Over time, ways of thinking will eventually converge.”

How COVID-19 pandemic has boosted the industry’s growth

Xin says the COVID-19 pandemic has been an unexpected event that accelerated both the growth of the entire industry and businesses within it.

“For example, the demand for medicine is huge now. However, no one could go out, and e-commerce deliveries were also problematic for other e-commerce companies. Therefore, people could only buy medicine from JD.com,” he explained, referring to JD.com’s well-known self-owned logistics system. “Sales of drugs have increased by more than 100% year-on-year.”

In addition, the early symptoms of COVID-19, since they resemble those of the regular flu, have created a surge of demand for online doctor consultations.

“The initial symptoms of COVID-19 are the same as those of flu, so people are very worried when they sneeze. The demand for online consultations has increased greatly. All our full-time doctors in Beijing began working immediately, since the second day of [Chinese] New Year, while our full-time and part-time doctors answered phone calls and video calls all day long,” Xin said.

“Previously, we had an average of 60,000 orders per day. During the outbreak, we hit a maximum of 150,000 orders. Even now, after the outbreak has passed, we receive an average of 100 thousand orders for this service every day,” Xin detailed.

COVID-19 has accelerated growth in the industry. Image Credit To Unsplash.

Xin also thinks that COVID-19 had brought other major disruptions.

“In the past 20 years, nothing, not even SARS, has had the power to change people’s living habits like this. Everyone has begun to realize minor and chronic illnesses do not necessarily have to be treated at the hospital. Even elderly folks have begun to buy medicine online.”

JD Health market positioning going ahead

Across China’s vast health tech landscape, different companies adopt different strategies. Xin emphasizes that JD Health has a variety of options for business development, including chronic disease management.

“When businesses enter the health industry, they pick different strategies and paths based on their own advantages. This is not necessarily just for the sake of differentiating themselves for competition, but also based on their inherent capabilities and pre-existing assets. Currently, we have a large-scale pharmaceutical retail business as well as access to prescription drugs, so it is logical to enter into the chronic disease management sector,” Xin said.

“Ultimately, however, JD Health hopes to build a full-service, closed-loop business, rather than being a platform to connect users to others to serve them. We choose to follow the culture of top management and the brand of JD. The model may be heavier and slower, but we believe it is more solid.”

This article was adapted and translated from an interview conducted by Qian Qian for 36Kr, KrASIA’s parent company. The English version was adapted by Lin Lingyi.