Over fifteen years ago before Richard Liu’s JD.com was one of the largest e-commerce giants in the world, it was a small but successful chain of electronics stores. However, in 2003 China experienced an epidemic of the SARS coronavirus and in a move all too familiar to most by now, the country shut down in an attempt to stop the virus from spreading further. Liu was placed in a tight spot when he was forced to temporarily shutter all twelve of his retail locations, and began posting his products to online bulletin boards in an attempt to continue generating revenue.
Seventeen years later another coronavirus has spread, reaching the level of pandemic and bringing the world sputtering to a halt for much of the year. However, instead of spending the day in his home painstakingly photographing and writing descriptions for his products to be placed online, this time Liu is running one an online empire. Even more so, the healthcare arm of his company JD Health has helped millions of people weather the pandemic through its medical and health e-commerce, internet-based medical service, intelligent hospital solutions, and consumer healthcare services, thanks in part to the trust Liu had already gained for his company and brand.
JD Health quickly became the third unicorn launched by JD, and more recently became its second publicly traded unit. Debuting on the Hong Kong Stock Market, it issued 391.9 million shares priced at 70.58 Hong Kong dollars ($9.11), but by market open saw them trading at a 34% higher price of 94.5 Hong Kong dollars ($12.19). On the day of its IPO shares hit an intra-day high of 123.3 Hong Kong dollars ($15.91) – 75% up from the offer price – and closed at 110 Hong Kong dollars ($14.19). Net proceeds from the day were 26.46 billion Hong Kong dollars ($3.41 billion) and if an over-allotment option is exercised it could result in an additional 3.98 billion Hong Kong ($513.48 million) dollars being raised from the initial public offering.
The debut marks the culmination of a stellar year for JD Health. Revenue for the company had grown by 76% year-over-year for the first two quarters of 2020 reaching $1.2 billion, a staggering amount of growth for a company that had only been operating independently for just over a year. Below, we explore the history of Richard Liu and JD.com’s involvement with the health industry, as well as how they have leveraged their supply chain and technology to develop innovative healthcare solutions.
JD.com Enters the Healthcare Sector
Although JD Health officially launched as a separate branch part of the bigger JD umbrella in May of 2019 the company has been working on healthcare solutions since 2013 – the year JD.com began to sell non-pharmaceutical healthcare products on its retail website. They expanded into pharmaceutical products in 2015, and in 2016 launched a platform for third-party pharmaceutical retailers to do business. They also launched their own first-party pharmaceutical business – JD Pharmacy – which they were able to grow through their already well-established supply chains connections to pharmaceutical enterprises, commercial enterprises, retail enterprises, and medical institutions. Additionally, they formed partnerships with offline pharmacies which in tandem with their extensive logistical network gave them the ability to cover 99% of the population of China. Since its launch, the service has become a core part of JD Health’s B2C business and experienced a growth rate four times higher than the industry average in China. Today, is the country’s largest pharmaceutical retail platform covering 150 cities in 25 provinces and providing a guaranteed delivery time of 30 minutes or less.
2017 was a big year for the expansion of JD Health, officially launching as a distinct entity while still operating under the core business. Realizing through their work within the pharmaceutical industry that consumers often desire to consult with doctors for guidance when they purchase drugs, they began working on the development of “internet hospitals” in order to integrate medical services with their pharmaceutical business. Offering telehealth consultations via phone or text to their patients, rather than act as a competitor with hospitals they worked to cooperate with them. Hospitals were able to expand their services online without having to invest in costly website infrastructure and manpower for upkeep, instead utilizing the experience JD had with e-commerce to digitize their services. Over 30,000 doctors from across the country have joined JD Health’s internet hospital, with 62% of them coming from AAA hospitals and 90% of patients using their quick online medical inquiry service receive an answer within three minutes.
That year, JD Health also moved into B2B solutions, starting “JD Medicine Procurement.” The medical procurement platform was aimed at leveraging their supply chains to traditional channels’ circulation efficiency and increase the transparency of information. The platform has been especially beneficial to drugstores, clinics, and medical institutions located in fourth-tier cities and below, helping the small businesses of more rural areas overcome previous difficulties such as incomplete drug procurement varieties, inability to compare prices, and long procurement cycles.
As Richard Liu’s strategy for the greater JD business began to evolve from an e-commerce business to that of a supply chain-based technology and service company, he realized the value their developments could bring to the healthcare industry. Therefore, in 2019 JD Health officially became its own separate company and launched Android and iOS versions of their app this year just as the coronavirus pandemic was peaking in China. Providing their customers and patients a way to access JD Health outside of the retail app as well as greatly expanding the services offered, JD Health began seeking to utilize their smart technologies to transform the sector.
Artificial Intelligence (AI) and Big Data
JD’s artificial intelligence technologies have been used in a large variety of ways throughout JD Health’s services. With their JD Health app, AI is used to direct patients wishing to make an appointment to the correct department based on their symptoms. The function has over 95% accuracy channeling customers to 29 different online clinic consulting departments, and can also offer services for over 77% of online consultation orders. Not only does this greatly benefit the patients, aiding them in getting timely and accurate diagnoses, but also reduces labor costs by 50%.
Additionally, JD Health is using artificial intelligence to optimize the clinical prescription process and improve patient safety. Until recently pharmacists in China were not seen or required to be a source of medical knowledge and guidance. Instead, they were simply seen as dispensers of medication, blindly following the doctor’s orders. However, the World Health Organization has found that over half of all medicines prescribed are either dispensed or sold improperly, and the Chinese government issued new requirements to try and improve on this within their country. Pharmacists are now required to carefully review all prescriptions that doctors give and are responsible for ensuring the dosage is correct, there are no contradictions between medications, and the patient understands how to use each drug. While beneficial, this places a burden on pharmacists to memorize troves of medical data, so JD Health began working with Peking University Third Hospital to create an advanced, artificial intelligence-based prescription review and analysis system. Calling the program PharmCOO (pharmaceutical chief operating officer), they leveraged the hospital’s extensive database of pharmaceutical knowledge with their artificial intelligence technology to create a knowledge graph-based prescription review system. Using the company’s advanced natural language processing and deep learning technology, PharmCOO can draw subtle, intelligent connections between a patient’s condition and potential allergies to medications and provide doctors with timely reminders on any issues in addition to functioning as a comprehensive reference. By using a knowledge-based graph system instead of a static database, pharmacists and doctors have access to a tool that is constantly learning and improving its accuracy, allowing them to prioritize learning the most pertinent information.
One the B2B front, JD Health opened up the company’s e-commerce technology and big data capabilities to pharmacies across China, enabling them to expand their traditional business models and enhance the products and services they offer to consumers. Through the technology, pharmacies can access data-driven recommendations on which products to stock, helping member pharmacies increase sales and expand into categories that may have been a higher risk otherwise such as personal care, beauty, and baby and maternal products. They also launched a partner program with offline pharmacies through Golden Elephant, a leading pharmacy chain with more than 200 stores across China. Again using big data technology, they analyzed information from smart cameras and other sources at one of the pharmacy’s central Beijing locations to help them better understand information about customer preferences and consumption habits. In this way, they are able to optimize inventory and increase sales, as well as acquire new customers.
These are just a few of the many accomplishments JD Health has made in a very short period of time. Their rapid development has been the result of Richard Liu’s singular vision as well as tireless efforts from the dedicated JD Health team, along with five conditions that have proved to be essential to the company’s meteoric rise.
A steadily growing industry with a complex compound growth rate of over 30%, internet-based healthcare has been developing over the past 20 years in China. However, in 2018 the Chinese government threw significant support behind the idea with the State Council issuing a guideline encouraging medical institutions to use information technologies such as the internet to expand the space and content of healthcare service. They also encouraged healthcare institutions to cooperate with internet companies, citing that analysis of big data from within the industry could be used to predict epidemic trends, strengthen intelligent monitoring on infectious diseases, and improve the response ability to prevent and control serious illnesses and public healthcare emergencies.
After the advent of the coronavirus, the Chinese government began issuing new guidelines relaxing limitations on internet healthcare. In July of 2020, the National Development and Reform Commission issued a guideline to promote the development of new business models including internet hospitals, and one week later all thirteen of China’s ministries and commissions issued a joint document requesting the improvement of telemedicine services and also further relaxing limitations on their inclusion in the national medical insurance scheme. Finally, in September the State Council issued another guidance to encourage the development of new business models in China that stressed the importance of promoting internet-based healthcare services. The support of the government in the integration of telemedicine and internet-based healthcare has been instrumental in JD Health’s growth.
As demonstrated by government response, the coronavirus pandemic significantly boosted the telemedicine industry in China, and JD Health was lauded internationally for their efforts in providing aid through their services. They launched a new platform to help patients with chronic diseases maintain their drug supply, and took steps to ensure that their supply chains remained active and there were no hikes in drug prices due to shortages. Through their recently introduced app, they provided 24/7 online medical consultation, offering a medicine information sharing platform and psychological support hotlines. They also held livestream sessions with some of China’s top medical experts who had experience with the 2003 SARS epidemic on a variety of coronavirus-related topics in an effort to further alleviate public anxiety.
According to data from China’s National Health Commission, the number of medical consultations from internet hospitals under its supervision increased 17 times in March compared with the same period in 2019, with the JD Health app aiding in lessening the burden on hospitals considerably.They saw more than 10 million medical consultations between January and April, with tens of thousands of patients served within an hour during peak times and an average of 100,000 consultations occurring in one day.
Health Management Awareness
According to China’s Blue Book of Health Management released in 2018, roughly 300 million Chinese people suffer from chronic diseases, the most common being diabetes, high blood pressure, fatty liver, and dyslipidemia. Additionally, the growing population of those over sixty in China only serves to further increase these numbers, with research from the Chinese Center for Disease Control finding that two out of every three Chinese person over sixty is suffering from at least one chronic disease.
Thankfully, in recent years public health awareness has significantly increased. People are becoming more willing to spend money on disease prevention as they have become more mindful about the management of their health, and telemedicine creates an easy access option to access better healthcare. Understanding the increasing desire for maintaining a healthy lifestyle, JD Health introduced the Family Doctor program to provide customized telehealth services and long-term health management support for Chinese families, while also stepping up their efforts to open internet hospitals for specialized chronic diseases.
As discussed previously, JD Health has applied the technological innovations of their company to their internet-based healthcare solutions, which has been a game changer for the industry as a whole. Thanks to Richard Liu’s emphasis on technology, the company has swiftly made great strides in the realm of big data, artificial intelligence, and robots among other things, paving the way for healthcare services from intelligent robot systems to enhance patience consultations interaction and triage efficiency and accuracy to the knowledge graph-based solutions like PharmCOO for supervising drug prescription and dosage.
As the government encouraged, technology within the internet-based healthcare industry has the ability to transform the ways people access health. Whether it be using big data to improve systems, or telehealth and logistics to enable greater access of special medicines and doctor services to people in lower-tier cities and rural areas, technology will be essential in breaking and rebuilding the healthcare business model.
At its core, Richard Liu has made sure that JD.com has an impeccably strong supply chain, and this extends to JD Health. As the largest online pharmaceutical retailer in China, it accounts for more than 15% of the market, covering all types of services from B2C, B2B, and O2O. It currently operates 11 warehouses specifically dedicated to medicine in addition to over 230 healthcare-related product warehouses across China. There are more than 9,000 third-party merchants doing business on JD Health’s platform, and JD Medicine Procurement provides services to over 170,000 downstream suppliers.
Through selling on the JD Health platform, suppliers can bring down marketing expenses by benefiting from the immense traffic the JD brand brings, as well as take advantage of the distribution though their extensive logistics network. For JD, economies of scale bring strong purchasing and negotiating power to offer a wide selection of healthcare-related products at competitive prices.
According to JD Health, 40% of the net proceeds from the company’s IPO will go toward business expansion over the next three to five years, 30% will be used for research and development in the next two to three years, and the remaining money will be spent on potential investments, acquisitions, and general corporate purposes. Moving into the future, the company intends to continue focusing on improving user experience, a core value of JD and its growing family of subsidiaries. Along with JD Health, this year the core online retail business made a secondary listing on the Hong Kong Stock Exchange, their grocery delivery unit Dada JD Daojia made its United States IPO, and the fintech branch JD Digits has filed to be listed to Shanghai’s STAR Market. As for JD Health, prior to going public, it was ranked as the second-highest valued new unicorn globally after the gig economy behemoth Uber, and was also the youngest unicorn on the Global Unicorn Index 2020. Now that it has seen a successful IPO, one can only surmise that it will continue to break barriers as a publicly traded company.