Because it is operated as an independent business category of JD. Six years ago, the parent COMpany of com, JD Health currently ranked first in the industry in terms of revenue scale, which is equivalent to Ali Health. Backed by a big tree, you can enjoy the cool, thanks to the traffic in JD.COM. COM's mother in brand, credit, performance ability and supply chain. Both companies are based on pharmaceutical e-commerce, expanding value-added services, introducing high-frequency and low-margin traffic such as drug purchase into low-frequency and high-margin services such as online consultation and offline consumption, and increasing technology research and development to do B-end business. Simply put, "selling drugs" (including medical devices) still accounts for about 90% of the income of these two companies.
In contrast, Dr. Ping An started from the Internet insurance business traffic of the parent company and introduced service traffic such as online consultation and family doctors. At present, selling drugs is also the bulk of its income, but its dependence is not strong and its income structure is relatively balanced. From its point of view, it focuses on online medical care, with the fastest annual growth rate. However, its overall revenue scale is not as good as the first two, and its e-commerce attributes are very weak.
According to the prospectus, product sales accounted for 88.4%, 88.8%, 87.0% and 87.6% of the total revenue in JD Health in the six months from 20 17, 20 19 and up to June 30, 2020, respectively. The corresponding rest is platform service income, including commission, service fee and advertising fee charged to third-party drug sellers, as well as online consultation for C-side and AI solution income for B-side. In other words, the income related to drug sales (whether self-operated or third party) accounts for more than 90%.
In addition, the growth rate of self-operated e-commerce sector was 48% in 20 18, and it dropped to 30% in 20 19, and it surged to 76% in the first half of 2020 due to epidemic factors. After the epidemic, it remains to be seen to what extent the habit of online shopping drugs developed in a special period will fall back.
1. How big can the cake of medical e-commerce be painted?
Although the three giants have described a grand plan for the great health of the Internet, they still rely on medical e-commerce to support their performance in the early stage. First of all, let's take a look at the market segments of pharmaceutical e-commerce. How much room can there be for further expansion?
There are several positive factors here. The first is the reform of prescription drug circulation. According to yost Sullivan's statistics, in 20 19, only 2.4% of drugs in China were distributed through online retail pharmacies outside hospitals; Only 7.6% of out-of-hospital drugs are distributed online. The connection between prescription drugs and medical insurance is a valuable resource that the Big Three want to fight for, but the follow-up trend needs to pay close attention to the supervision, such as the follow-up efforts of the implementation of the centralized drug procurement policy. Will the reduced drug price affect the price advantage and gross profit margin of the medical e-commerce platform?
The second is the integration of distribution channels of offline pharmacies. At present, the average inventory turnover days of the five major offline pharmacies in China are 88.2 days, which is 34. 1 day in the United States. The inventory turnover days disclosed in JD Health's prospectus are 20 18, 20 19 and 610.8 days, 58. 1 day, 53.7 days and 45 days respectively in the six months ending June 30, 2020. The faster the turnover, the higher the efficiency. Now offline pharmacies can improve efficiency and expand customer demand through the network platform, which is an opportunity for the platform. However, compared with the characteristics of American chain stores, the market concentration of domestic pharmacies is very low and it is difficult to integrate. It is convenient for city people to buy medicine near their homes. The actual implementation standards of medical insurance card management in various places are not uniform, and there are still many benefits to be collected offline. Even JD Health has run many offline pharmacies through its own model. In addition, if we focus on the timely delivery demand of over-the-counter drugs, we will also face competition from the US Mission.
The above-mentioned institutions predict that the domestic retail sales of drugs (excluding the retail sales of non-pharmaceutical health products) will be 1.7 trillion yuan in 2020, with a year-on-year growth rate of 5% (the annual growth rate of drug retail sales is expected to be the lowest in the big health market segment), and the predicted value in 2025 will be 2.4 trillion, of which the proportion of online retail sales is expected to exceed 20% for the first time, reaching 248 billion. Then if it is distributed to JD Health according to the market share of about 35%, it will be more than 80 billion e-commerce plates, which is not small. Because the outflow of prescription drugs is expected to be a long process of 5- 10 years, and the habit of buying hospital drugs offline is still stronger than online, the "dividend" of prescription drugs outflow may not be released to medical e-commerce companies soon. The agency predicts that the potential penetration rate of prescription outflow in China will reach 87.6% of outpatient drug sales in the future, but it does not give a specific time.
In this way, relying solely on pharmaceutical e-commerce can still draw a pie for the market, but at the same time, considering the comprehensive factors such as low growth rate, low gross profit margin and the implementation process of prescription drug outflow policy, relying on "selling drugs" cannot support the enterprise valuation level that the blueprint for great health should reach.
2. What medical needs have been solved?
At present, the difficulty in seeing a doctor in China mainly focuses on the contradiction between supply and demand of over-concentration of high-quality medical resources and scattered demand. Grass-roots and community medical systems have failed to better undertake the task of triage of diagnosis and treatment of non-intractable diseases, resulting in long queues in top-three hospitals, limited free practice of high-quality doctors, and salary space needs to be improved; Ordinary small hospitals are relatively deserted, and the space and motivation for doctors to rise are limited. Obviously, the problem solved by e-commerce selling drugs cannot touch this level.
According to yost Sullivan's statistics, the third-class hospitals accounted for 8% of the total number of hospitals in China, and took on 52% of the total outpatient service in 20 19. In addition, 20 19 online consultation accounts for 6% of the total outpatient consultation in China. If the figure of 6% can be steadily increased in the future, it shows that the online consultation experience has been recognized by users, which can alleviate the above-mentioned contradiction between supply and demand to a certain extent, and then cooperate with the prescription drug outflow and medical insurance docking service downstream of the chain. At the company level, online consultation and medical services are also high-margin businesses.
Therefore, the first mountain that JD Health needs to cross in the future may be the conversion rate of medical e-commerce to online medical services. JD Health started this business at the end of 20 17, about two and a half years later than Ping An Good Doctor started the related services, which is also the main business of the latter, so as to establish his own team of doctors first. According to the prospectus, as of June 30, 2020, the number of omni-channel active users in JD Health exceeded 72 million. How many of them can change from buying drugs to online medical users is also related to the prospect of JD.COM family medical products just launched in August this year. A similar product, Ping An Good Doctor, was launched in August 2065438+2009, one year earlier.
The second thing that needs to be crossed is the correlation between the growth of R&D investment and the expected growth of to B service income. JD Health's annual R&D expenditure (including equity incentives) accounts for 2-3% of total revenue, which is not high compared with Internet companies. If the company wants to increase the proportion of service income in the future, especially to expand the scale of to B business that provides intelligent solutions to hospitals, it will inevitably put forward further requirements for R&D investment.
This is a track with broader prospects than medical e-commerce. Therefore, in addition to these three companies and startups around AI, giants such as Tencent and Baidu who have cut into the industrial Internet segment are also making efforts in technology and medical care. However, the current role of AI is more of an auxiliary diagnosis and treatment. For example, in the medical viewing session, the competition has proved that the accuracy and efficiency of AI machines can exceed that of manual work. Once popularized, it may improve the work efficiency of primary doctors and narrow the gap with the high-quality medical level of large hospitals, which has certain inclusiveness.
Third, reduce dependence on JD.COM. COM's mother. One of the characteristics of these three companies is that they all maintain close related transactions with their respective parent companies. However, the more independent they are in the follow-up, the greater the chance of improving valuation and solving deep-seated medical contradictions. When the first and second problems mentioned above are solved, the problem of dependence will naturally be solved.
To sum up, relying on the e-commerce endowment, JD Health has rapidly increased its volume and achieved the first transaction volume in the industry. The "big mountains" in front of us not only have their own business structure problems, but also have the problems that the industry has to be attacked. The health of the Internet still has a long way to go.
Author's official number: 1200 words