Alibaba, Tencent and Ping An Group: A Healthcare Update
All digitized and refurbished health services continue to swell, how are these streamlined competitors getting along?
► Ali Health, WeDoctor and Ping An Good Doctor, each backed up by e-commerce, technology and insurance giants, demonstrates a different business logic.
► Three online healthcare giants are faced with their own problems. The Chinese consumer market seems to call for a one-for-all product.
In terms of the ongoing trend of healthcare informatization, the Chinese Internet giants started their business deployment years ago. More than this, titans from e-commerce and insurance have since joined the game, including names such as Tencent and Ping An Insurance Group.
After the booming growth during the COVID-19 pandemic, the online healthcare business has entered the public limelight. Millions of patients have realized the importance of online healthcare services and benefited from the remote diagnosis, medical consultations and medicine delivery during the social distancing and quarantine.
Ali Health, WeDoctor and Ping An Good Doctor are three pioneers in the area of consumer-oriented online healthcare services. Now Ali Health (0241:HK) and Ping An Good Doctor (1833:HK) are listed on Hong Kong Stock Exchange and WeDoctor has posted for a Hong Kong IPO since May 2019 and plans a listing in 2021.
Same market, different logic
Even though consumers can use the apps almost interchangeably, the three online healthcare service providers established very different business models. With a grip on various resources, these players also demonstrate disparate patterns in growth logic.
Ali Health is mostly anchored on traditional e-commerce by taking advantage of relevant technologies, logistics and the influence of Alibaba – the tier-one online shopping platform in China. The gross merchandise value (GMV) is an optimal indicator showing performance.
Compared to Ping An Good Doctor, Ali Health successfully leverages consumer traffic on Alibaba's Taobao e-commerce and the extensive exposure of Alipay (Alibaba's fintech app). With a ‘genetic’ advantage that Tencent and Ping An Group can never surpass, Ali Health can smoothly orient the consumption traffic on Taobao or Tmall online shops to the daily healthcare area.
To fully utilize the potential of the wide-spread reach-out of the online consumers, Ali Health has made some new moves, catching up with the high tide shortly after COVID-19. First, the healthcare star integrated the Tmall pharmacy business into its local life service platform Ele.me. Since Ali Health launched an online-to-offline (O2O) medicine delivery service in 2018 in Hangzhou, the delivery service provider has expanded into over 120 cities across the country. Moreover, to further deploy the O2O business model, the company explores consumable healthcare in a broad spectrum of medical cosmology, dental, vaccines, physical check-ups and maternal care.
WeDoctor is based on and develops from Guahao.com, an online registration platform for reserving appointments at hospitals. Based on the strong connection with hospitals, WeDoctor eyes in a broader network of partnerships with local hospitals. It built the first-ever Internet hospital in Wuzhen, Zhejiang – a physical hospital that provides online pharmacy, online consultation, registration and education, opening the era of the craze for Internet hospitals.
From having the only Internet hospital in 2014 to 128 hospitals as of November 2019, the rise has proved the vast potential for traditional hospitals' digitalization – or moving services online. As the explorer in an unprecedented form, it tried out many measures and now has drawn a three-stage roadmap: the initial online registration platform, the previous linkage between experienced doctors and primary care institutions and the current AI-based alliance connecting across-level clinics, doctors and healthcare insurance.
WeDoctor has a clear first-mover advantage in occupying wide-spread hospital resources. There are a total of around 130 Internet hospitals nationwide and WeDoctor engages in over 45 hospitals already. Other Internet hospitals were initiated by various enterprises, with specializations ranging from medical devices, technology, information, distribution, consumable finance and traditional Chinese medicines.
However, WeDoctor's primary goal, reflected by the company's strategy, is to resolve the unbalanced situation of medial resources and satisfy the unmet demand for high-quality healthcare services. The company mainly deploys the resources in new first-tier and second- to- fifth-tier cities. These cities tend to have fewer triple-A level hospitals and people there tend to have fewer resources on average due to a more extensive population base.
Ping An Good Doctor
The insurer-backed Ping An Good Doctor pivots family doctor healthcare services and relies on comprehensive user-oriented added-value services. At an advantage of the user stickiness levered from Ping An Insurance Group, the healthcare app is the last stop of Ping An Group's business chain.
Ping An Good Doctor helps to complete the insurance business chain. Users pay for the insurance, the insurance company (Ping An Insurance) purchases services, and the service provider (Ping An Good Doctor) offers healthcare services to users. Its family doctor service distinguishes it from other similar healthcare apps based on the strong backbone of the self-owned doctor team.
Even though the family doctor service and online healthcare consultations are the highlights of Ping An Good Doctor, the two services did not accelerate efficiency in conversion as much as online health shop. In the last two years, the online vendor business took up over half of the revenue amount, while the online healthcare services only represented 12% – 17%.
Compared to the other two aforementioned, Ping An Good Doctor does not connect with many local hospitals and medicine deliveries, which is considered a prominent disadvantage to building a deeper connection with users. Due to the lack of advanced and high-end healthcare services, the app can only currently satisfy basic and daily healthcare demands for common diseases.
Challenges for each
The full coverage of business is the ultimate goal for all the online healthcare service providers because the online form can connect medical resources and people without the barriers of regions.
The new giants have just set off in their journey into the healthcare area. If every one of them can reach a relatively sound performance within the last several years, it somehow indicates a lower industry entry threshold. As the online healthcare market trend is asking for more comprehensive, or services similar in some ways to real world offerings, market participants need to fast-orient their business strategies to bolster their indispensable value across the industry chain.
A positive outlook is that these players currently don't need to worry too much about the lack of demand – but only unmet demand. The domestic market has been widely woken up by the national COVID-19 pandemic. However, they did face many threats from different perspectives.
Ali Health will undoubtedly continue prioritizing the advantage of e-commerce and meanwhile, it may further diversify the business coverage. Recently, the CEO rearranged the online pharmacy business into its local life service platform, Eleme. This move will further enhance the synergies between online shops and offline delivery. The greatest challenge could be from the threat of some of its major e-commerce competitors, such as Pinduoduo and JD.com – especially JD Health, which has become the third unicorn of the JD group. It went public (832916:NEEQ) on the Chinese A-share market too.
As for WeDoctor, which is building a robust connection with local public hospitals and clinics, it seems that it is bidding on the sizeable Chinese healthcare system. Indeed, Chinese hospitals have a lot of potential to become more digital and cloud-based. So far, in this segment, it faces few competitors and has dug out an unbeatable moat. However, new entrants in the digital health care might be even smarter. When the whole healthcare industry evolves into an end-to-end form, hospitals might well be just conceptual, serving patients without strict physical boundaries.
Last but not least, Ping An Good Doctor has achieved considerable progress since the start of this year. The conversion rate of paying users increased from 2.7% in 2017 to 4.0% in 2019. But this was mostly credited to the e-commerce business. Its pilot family doctor service is just a start and try-out area for Chinese families, taking quite a time to go through the business circle. Moreover, the insurance-healthcare business's advantage can also be considered a restriction for accessing more new users. Also, it still faces risks around losing good doctors, because other doctor-centered online healthcare services are accumulating critical resources in this industry, such as DXY.com, Haodf.com, and Chunyu Doctor.
Chinese digital healthcare is an exciting industry. The regionally-unbalanced medical resources in China, which seem to invite help from an advanced digitalization ecosystem, add more potential to this area. Besides the technology and insurance giants hurrying to deploy the healthcare business, participants in medical devices, specialty medicines and information systems are also taking a share of the market.