Pinduoduo's Latecomer Online Pharmacy Unit Bets on Medical Devices
Pinduoduo, a formidable contender for Alibaba and JD.com in the mainland, has accumulated serious traffic on its 'online pharmacy' unit and cemented its healthcare category by the promotion of affordable medical devices.
Pinduoduo (PDD: NASDAQ), has diversified its healthcare products unit with affordable and simple medical devices, hoping to find a feasible path to escape from the brutal competition in China's online pharmacy scene dominated by the internet and insurance giants.
The company has been offering a wide range of affordable products via group-buying and various types of reference discounts for China's price-sensitive middle-class consumers which propelled its market capitalization of around USD 40 billion as of September 2019: surpassing China's search engine behemoth Baidu (BIDU: NASDAQ). PDD's MAUs grew 88% to 366 million as of Q2 2019 while Alibaba had around 755 million MAUs in the same period.
As of October 2019, it has been around one year since Pinduoduo launched its 'online pharmacy' unit where it sells simple medical devices and a set of OTC drugs for its hundreds of millions of users. As a latecomer, the company aims at taking its share from the growing online pharmacy business.
Currently, drug delivery sub-sector is being shaped by 111.com (YI: NASDAQ), Alibaba's (BABA: NYSE) healthcare unit Ali Health (阿里健康), and JD.com's (JD: NASDAQ) JD Health — healthcare subsidiary of JD which raised over USD 1 billion in May 2019—.
Amongst them, Pinduoduo is chasing a slightly different path focusing on medical devices rather than prescription drugs. PDD is reportedly shelving over 7 million medical products.
On September 28, PDD kicked off a "Health Day," which it promotes OTC drugs and numerous types of medical devices. 10,000 blood pressure monitors by Andon (九安医疗) (002432: SZ) sold for CNY 19.9 each, and 10,000 blood sugar monitor detectors by Yuwell (鱼跃医疗) for CNY 9.9 each during the one-day event. A set of OTC drugs and contact lenses were promoted during the one-day shopping festival as well.
Pinduoduo doesn't have a related license to deliver prescription drugs in the mainland, according to retail giant's form 20-F of 2018. But the company has "Internet Drug Information Service Qualification Certificate" and it complies with the regulations for the "Third-Party Platforms Providers for Medical Device Online Trading Services", allowing Pinduoduo to sell medical devices and OTC drugs on its platform.
Regulatory risks aside, Pinduoduo's affordable healthcare product unit is a boon to the lower-tier residents of China, who can not easily reach the healthcare facilities in their region.