Prequel to the Instant Retail War: A Decade of Internet Health "Three Kingdoms Kill"

In June 2015, ten years ago, Meituan quietly launched the "Pharmaceuticals" module in the takeaway section of its APP client, further extending the path of "everything can be delivered."

Around the same time, JD.com began to build its own pharmacies based on its platform, officially expanding its B2C territory into the pharmaceutical retail sector.

The following year, Alibaba integrated its pharmaceutical business under Tmall into Alibaba Health (0241.HK), sounding the horn for "Internet + Health."

At that time, no one could have predicted that the initial actions based solely on horizontal expansion of existing business models would lead to continuous interweaving and conflict over the next decade.

Especially after 2020, the rising demand for online instant medication purchases ultimately led the three major companies, each with its own unique business, to converge into the same river to compete.

Today, the imagination that O2O brings to the health sector goes far beyond the improvement of delivery efficiency in instant retail; more importantly, the online penetration of many medical services represented by in vitro diagnostics (IVD) is accelerating.

The long tug-of-war between Alibaba, JD.com, and Meituan not only shaped the current landscape of Internet health but also profoundly influenced the map of the domestic medical and pharmaceutical industry.

How the major companies' health businesses rose and how they invaded each other's territories of expertise may reflect the current battle of instant retail in vertical fields over the past decade.

Business Extension

In 2015, Meituan, dedicated to incorporating more categories into its takeaway business, set its sights on the essential category of pharmaceuticals.

However, unlike traditional supermarkets, offline pharmacies face more cautious entry requirements for online business expansion due to the lack of precedents, and platforms like Dingdang Kuaiyao, which also focus on Internet pharmacies, became the breakthrough point at that time.

On July 17, 2015, Meituan announced a partnership with the O2O pharmaceutical platform Dingdang Kuaiyao, which had already connected with 400 pharmacies in 10 cities nationwide, leveraging its rider network to trigger the phenomenon of takeaway medication delivery.

In those days when takeaway was still a novelty, online medication purchases, which occurred less frequently, had not yet entered people's daily consumption habits.

Although orders were relatively few, the expansion of categories objectively improved the delivery efficiency of riders' routes and filled the gap of fewer orders during non-peak dining hours.

Just 17 days later, another major company, JD.com, also began to eye the medication business.

On August 3, JD.com started exploring cooperation with local third-party pharmacies in Beijing, its home base, in its local life service, testing the waters of pharmaceutical O2O.

However, compared to this, more significant actions still took place in the e-commerce main business.

In November of the same year, JD.com obtained the Internet drug sales service license and began to build its own pharmacy and retail system.

Looking back at the early days of the Internet health business ten years ago, the actions of the three platforms were more about "expanding categories" based on their main scenarios.

For example, Meituan added pharmaceuticals to its takeaway delivery categories, Alibaba focused more on the potential of health business, integrating pharmaceuticals into Alibaba Health from its B2C lineup, while JD.com emphasized building its own pharmaceutical operations, which later became the prototype of JD Health combined with local services. However, platform-based enterprises often have an instinctive impulse to continuously expand their boundaries by leveraging traffic momentum.

Many large companies only need a trigger to shift from adhering to their territories to engaging in battles with each other.

Close Combat

After maintaining peace and development in the health business for five years, various large companies began to rapidly change due to sporadic factors.

The catalyst for this was the emergence of the COVID-19 pandemic in early 2020.

On one hand, consumer demand for health products such as masks and disinfectants surged, raising higher expectations for delivery timeliness from internet platforms.

On the other hand, with the implementation of the "Guiding Opinions on Promoting 'Internet+' Medical Insurance Services During the COVID-19 Pandemic" in March of that year, policies began to test the inclusion of compliant internet medical institutions into the medical insurance system.

As a result, each platform doubled its efforts.

JD.com’s "Urgent Medicine Delivery," which quickly covered first- and second-tier cities within a year of its launch, found its place.

This same-city medicine delivery platform, jointly created by JD.com and Dada, aimed to improve the efficiency of pharmaceutical delivery and later continuously refreshed its delivery speed records.

By the Double 11 shopping festival in 2022, Urgent Medicine Delivery achieved a record where over 60% of night orders in Beijing were fulfilled within 20 minutes.

In terms of business scope, the Urgent Medicine Delivery service expanded to cover over 80,000 pharmacies across more than 400 cities and 1,200 chain pharmacies.

Behind such rapid expansion was the nearly 26.5 billion raised from JD Health's Hong Kong stock market listing at the end of 2020, providing ample ammunition to support capital expenditures in the following years.

It is evident that JD.com was accelerating its efforts in instant retail of pharmaceuticals at that time, directly targeting Meituan's O2O base.

Similarly, at the beginning of the pandemic in 2020, Meituan developed "Meituan Medicine" as an independent business, making pharmaceuticals a parallel business department alongside flash purchase and group buying, and recruited Li Jinfeng, who had previously worked at Baidu and Didi, as the head.

With the organizational structure and personnel in place, Meituan then initiated significant moves in pharmaceutical retail.

That year, Meituan applied to register the Meituan Professional Pharmacy trademark and began building warehouses for B2C delivery of pharmaceuticals.

However, to balance its relationship with O2O, Meituan still adhered to the principle of not opening physical pharmacies.

As stated by Wang Puzhong, Senior Vice President and President of the Home Business Group: "Meituan does not produce any medicine, nor does it open its own offline pharmacies."

It was from this point that Meituan inevitably began to encroach on JD.com's B2C territory in pharmaceutical e-commerce.

Compared to the aforementioned two platforms, Alibaba's layout in the health sector presents a dual-drive model of B2C + O2O.

On one hand, Alibaba Health firmly adheres to B2C pharmaceutical retail, shifting more attention to the field of internet medical services, and even launched deep learning-based diagnostic products and a cloud-structured hospital SaaS system.

On the other hand, Alibaba's pharmaceutical O2O business primarily reaches customers through Ele.me, which it acquired earlier.

As early as 2018, when Ele.me joined the Alibaba ecosystem, it launched a "24-hour, 24-minute urgent medicine delivery" service nationwide During the pandemic, Ele.me began to strengthen cooperation with various applications in the Alibaba ecosystem, such as launching the "Find Medicine on Map" service in collaboration with Amap, connecting nearly 100,000 online pharmacies to Amap.

The coincidental actions indicate that Meituan, JD, and Alibaba have been partially competing in the pharmaceutical retail sector since 2020.

Pharmaceutical retail, along with the booming community group buying at that time, became a rehearsal for the full-scale instant retail war that would break out five years later.

Extended Frontlines

The rapid escalation of the pharmaceutical retail battle among the three platforms in 2020 was also facilitated by policy empowerment.

For example, the "release" of internet hospitals allowed online consultations and online prescriptions to be permitted, further expanding the range of pharmaceutical sales on internet platforms from traditional OTC to prescription medications with lower demand elasticity.

Now, more policy dividends are further accelerating the online transition of pharmaceutical retail.

For instance, starting in 2024, medical insurance payments will gradually connect to online drug purchasing channels, creating more opportunities for the three major platforms to attract more price-sensitive users.

Meituan and Ele.me have successively launched medical insurance personal account payments in more than 40 cities, including Shanghai; JD's instant delivery of medications with medical insurance personal account payments is available in as many as 24 cities.

On the supply side, the continuous increase in the density of offline chain pharmacies and the increasingly fierce competition have further enhanced the scarcity of traffic for the platforms.

By the end of 2024, the number of offline pharmacies for Dashenlin (603233.SH), Laobaixing (603883.SH), Yifeng Pharmacy (603939.SH), and Yixintang (002727.SZ) reached 16,600, 15,300, 14,700, and 11,500, respectively.

The era of ten thousand stores for chain pharmacies has a stronger demand for traffic entry, indirectly promoting O2O platforms to enjoy a richer SKU.

The support of platform traffic for chain pharmacies is evident.

For example, in this instant battle, although the three major platforms have not taken subsidy actions for pharmaceuticals, the influx of traffic may have increased the frequency with which users open the APP.

An insider from a leading chain pharmacy told Xinfeng: "We can indeed feel that the traffic for pharmacies on Ele.me and JD has increased."

With the momentum accumulated in pharmaceutical retail, the three platforms have also begun to seek more resources upstream in the industry.

Meituan's self-operated pharmacies directly connect with upstream pharmaceutical companies to seize the listing of blockbuster new drugs like Semaglutide; JD Health has also utilized its self-operated pharmacies to secure the launch rights for several new drugs, including low-concentration Atropine and Zhilida; Alibaba Health is actively introducing new drugs with more consumer attributes, such as the contraceptive drug Xinmafulong.

"Although all three platforms are competing for the launch rights of new drugs, there has not yet been a situation where brands are required to 'choose one.' Therefore, while each platform claims to have the first launch, it can be seen that the same brand's drugs are listed on all three platforms," pointed out an insider in the Beijing pharmaceutical retail industry.

Gradual Formation of the Landscape

Now, the three platforms have become an undeniable force in the healthcare industry.

Meituan's O2O system has achieved deep penetration into third-party retail pharmacies in both first-tier cities and county markets In 2024, the cumulative number of trading users exceeded 300 million, with over 250,000 partnered physical chain pharmacies.

According to Meituan's internal data cited by Jianwen Consulting, the GTV (Gross Transaction Value) for Meituan's medicine purchases in 2023 was approximately 30 billion yuan.

JD Health, on the other hand, is making multiple bets with its "self-operated + B2C + O2O" model and is increasing its third-party collaborations. Currently, the number of third-party pharmacies exceeds 150,000, and the number of partnered chain pharmacy brands exceeds 1,200.

In March 2024, JD Health publicly called on partners, stating that it would adhere to a strategy that balances self-operation and an open platform, especially increasing support for third-party merchant partners.

The inclusion of third-party collaborators has driven the growth of JD Health's platform service revenue.

In 2024, the total revenue from JD Health's platform, marketing, and other businesses reached 9.4 billion yuan, a year-on-year increase of nearly 20%; the revenue from self-operated pharmaceutical sales, as a basic foundation, was 48.8 billion yuan, a year-on-year increase of 7%.

In contrast, Alibaba's relatively fragmented layout in pharmaceutical retail B2C and O2O has somewhat constrained Alibaba Health's speed in catching up with the other two platforms.

In the fiscal year 2024, Alibaba Health's revenue was 27.042 billion yuan, only over 40% of JD Health's.

“Internally, JD Health indeed no longer considers Alibaba Health as a competitor,” a person close to JD Health told Xinfeng in September 2024.

However, this person acknowledged that Ele.me remains a strong competitor.

Ele.me is receiving strong support from Alibaba.

In this delivery battle, Taobao Flash Sale collaborated with Ele.me to subsidize users, but in the Flash Sale module of the Taobao APP, the medicine purchase entry is still only connected to Ele.me and does not include Alibaba Health's pharmacy.

Overall, although the business models of the three parties are gradually merging, B2C and O2O in the internet pharmaceutical retail industry still complement each other.

“Different categories have different consumer habits,” a person in the pharmaceutical retail industry in Beijing told Xinfeng. “For some medications with high time sensitivity, O2O is more popular, but for chronic disease medications, the B2C e-commerce model is still very valuable, and this model has a wider range of SKUs, offering more choices and some price advantages.”

Vision Boundaries

Compared to the current fully operational instant retail, internet health has a richer commercial form.

For example, the frequent occurrence of respiratory diseases in recent years, combined with the risk of cross-infection in offline medical institutions, has created a demand for home testing of respiratory pathogens.

As patients develop the habit of home testing, internet platforms can not only capture the market share of external diagnostics but also feed back into online medicine purchases after diagnosis.

Starting in November 2023, Meituan and JD Health partnered with external diagnostic institutions to provide O2O services for home testing of 12 respiratory viruses, relying on the rider network, currently mainly concentrated in first- and second-tier cities.

From August 2023 to May 2024, over 500,000 users utilized respiratory home testing through Meituan, and related reagent products saw more than a tenfold increase; during that time, JD Health's 12 respiratory virus tests also sold over 200,000 orders In fact, Alibaba had also briefly launched this business in early 2024 in places like Shanghai. It used Ele.me as a traffic entry point, and after placing an order, services were provided by Alibaba Health's Internet Hospital.

This seems to be one of the few collaborations between Alibaba Health and Ele.me, but such cooperation ultimately failed after a trial run.

Alibaba Health also acknowledged that optimizing certain innovative businesses was a reason for the decrease in medical health service revenue in 2024.

Meanwhile, Meituan and JD Health's O2O testing businesses are continuously iterating and upgrading.

Meituan is relatively cautious, only involving home testing for respiratory and gynecological issues, covering 8 cities;

JD Health, on the other hand, is more comprehensive. It has launched 149 tests in 12 cities, including home services for routine blood tests and urine tests.

"JD's rapid testing services are richer, but the challenge it faces may be that many users are unaware that JD offers this testing service, and user habits may take time to develop. This delivery battle may be an opportunity for users to notice the various services under JD Health," pointed out a person in the pharmaceutical retail industry in the south.

Medical aesthetics have also become an important battleground for O2O health consumption in recent years.

Meituan has been quite aggressive in this business.

In 2024 alone, Meituan incorporated nearly 3,000 medical aesthetic institutions and set up a dedicated medical aesthetic entry point on its app interface.

In contrast, Alibaba Health and Ele.me have shown relative restraint; JD Health's coverage of cities is also relatively limited.

Looking back at the decade-long game of internet health platforms, this has been a long reversal of the inertia of pharmaceutical and medical entry points, and has also become an earlier interpretation of instant retail efficiency innovation in local markets.

And just as the delivery battle points to the "high-frequency entry into low-frequency" strategy—beyond the money-burning "selling drugs," whether more valuable testing, medical aesthetics, and other scene demands can be further developed may be the key to measuring the growth potential of all parties.