According to a filing with the Hong Kong Stock Exchange, Alibaba is moving its online pharmacy business into its Hong Kong-listed Alibaba Health Information Technology group. The $2.5bn deal will give Alibaba Health Information Technology group exclusive rights to operate an online pharmacy on Alibaba’s Tmall.
The significance of this move is big. The healthcare supply chain in China is a fragmented one and offers great potential for Alibaba and other players. In 2014, Alibaba invested in Hong Kong-based CITIC 21CN which was later renamed Alibaba Health Information Technology. According to Bloomberg, the company provides system integration, software development and services for drug authentication, tracking and logistics.
Want China Times publication further notes the technology group recently formed a partnership with Guangzhou Women and Children’s Medical Center which will adopt the company’s hospital information system. In addition, Alibaba Health has established partnerships with pharmacy chains in Shijiazhuang and Hangzhou to begin its online drug service.
According to Daniel Zhang, Alibaba Group’s Chief Operating Officer, “Healthcare is especially important to Chinese consumers, and we expect that this integration will enable Alibaba Group to build a healthcare ecosystem that can utilize e-commerce, big data, and other technologies to improve the healthcare supply chain, and ultimately provide users with a better healthcare experience.”
Indeed, according to Alibaba, there are 186 online-licensed pharmacies offering over-the-counter medicines, medical devices, contact lenses, and other general healthcare products on its Tmall platform.
In comparison, in 2014, Walmart’s Yhd.com received official permission to sell over-the-counter drugs online. According to the company, there were at least ten pharmaceutical retailers that had set up store fronts on Yhd’s platform. JD.com also has a license to sell over-the-counter drugs online.
So, by creating a “healthcare ecosystem” as Alibaba’s Zhang notes, efficiencies are expected to be gained from the manufacturer to the distributor, to the hospital and to the consumer. Will it utilize its Cainiao/Cuntao logistics networks for this ecosystem or will a specialized logistics network be created to meet the regulated healthcare supply chain needs? For logistics providers such as FedEx, DHL and UPS, healthcare specific offerings are available in China. In addition, other providers such as Kerry Logistics and niche providers Marken and World Courier also provide targeted services.
Also, the data gathered from this ecosystem will be valuable to Alibaba and partners within this market. How it will be used remains to be seen but, just as Alibaba successfully conquered China’s B2C market, the company will likely be successful in conquering China’s healthcare supply chain inefficiencies in a similar manner.