Pinduoduo Beefs Up for Online Health Sales

Chinese discount e-commerce site Pinduoduo Inc. is moving into online health care sales, following similar moves by Amazon.com Inc. and Alibaba Group Holding Ltd.

Pinduoduo has been on a hiring spree of employees who have an online pharmacy background, according to Chinese media reports, and the company now features a “health care” section at the bottom of its search pages, which offers nutritional supplements, herbal medicines, condoms and contact lenses.

Pinduoduo made a strong debut on the Nasdaq Stock Market in July, but soon after faced accusations of selling fake goods. Its stock price has fluctuated in the months since, and recently fell below its initial public offering level. The company has reportedly been looking for new business avenues to improve its brand.

Pinduoduo told Caixin that its “health care” product section isn’t new, but that it only provides items from certified “third party” merchants. China requires online platforms to hold a special certificate to sell over-the-counter medicines to consumers. Many e-commerce giants, including Alibaba and JD.com Inc., have secured such a qualification through acquisitions; Pinduodou has not.

However, Caixin found certain products in Pinduoduo’s health care section — for instance, creams that claimed to treat skin diseases — that hadn’t been granted certification and that also weren’t offered by certified third-party pharmacies.

After years competing in traditional online shopping, established e-commerce platforms have ventured into new areas, including consumer drug sales. Alibaba and JD.com ventured into the sector in 2011, and control more than half of the China market. In June, Amazon.com purchased online pharmacy PillPack.

The size of China’s general health and wellness market was $1.5 trillion in 2017 and is expected to reach $2.6 trillion in 2022, with an annual growth rate of 12.1%, according to consultancy Frost & Sullivan. Alongside this growth, the market has shifted from a hospital-centered model to a consumer-focused one.

Government policies are part of the driver. Last year, China began telling public hospitals that drug sales could account for no more than 30% of their overall revenue, paving the way for a boom in independent drugstores.

But the online pharmacy space hasn’t been especially profitable. Alibaba Health Information Technology Ltd. has not yet turned a profit, nor has Ping An Healthcare and Technology Co. Ltd. — both major players in the field. Platform 111 Inc., which listed on the Nasdaq in September, lost $19 million in the first half of 2018, 5% more than the year before.

There is huge opportunity for online pharmacies in China, given the swift increases in disposable incomes, according to Li Junguo, deputy general manager of health care information provider Sinohealth.

But as a platform famous for discounts and cut-rate prices, Pinduoduo may not satisfy consumers’ demands if it does not offer higher quality products, he said.

Contact reporter Coco Feng (renkefeng@caixin.com)