Miao Health Leverages Sanpower Group's Retail Resources to Pioneer Health-Focused New Retail Amid Alibaba-Tencent Rivalry

The Just-Concluded2017, known as the inaugural year of New Retail, saw the emergence of numerous New Retail opportunities, with unmanned shelves and unmanned convenience stores becoming fiercely contested territories among the major players in the capital landscape.

"One mountain cannot harbor two tigers"; the head-on rivalry remains between Alibaba and Tencent.

In early 2017, Alibaba CEO Daniel Zhang publicly articulated the company’s investment rationale for the first time, centering on its “Five New” strategy (New Retail, New Finance, New Manufacturing, New Technology, and New Energy). Specifically, regarding investment criteria, the primary focus was on whether investments could drive incremental user growth, deliver new service experiences, and introduce new technologies.

In its core new retail business, Alibaba typically pursues acquisitions through full ownership or majority stakes, as seen with Sanjiang Shopping Club, Sun Art Retail Group, and Intime Department Store. Another example is the RMB 5.453 billion investment in Easyhome, announced in February 2018. Outside observers believe that Alibaba’s new retail strategy exhibits a “centralized” characteristic, involving deep intervention in the operations and strategic decision-making of its portfolio companies.

Over the past year, however, Tencent’s investments in the retail sector have taken on a “supporting” role. In 2017, Tencent sequentially invested in Missfresh, Meituan-Dianping, Yonghui Superstores, JD.com, Super Species, and Vipshop, among other retail or e-commerce ventures. This year, it has further invested in Carrefour, Wanda Commercial, and Heilan Home, while also increasing its stake in JD.com.

In the first three months of 2018, Tencent’s Smart Retail footprint expanded into multiple sectors.

New retail is a data-driven retail model centered on consumer experience. As the concept of consumption upgrading gains traction, how can the low-frequency nature of healthcare services be integrated with high-frequency business models typical of consumer goods? What synergies might emerge from this convergence?

For Sanpower Group, which has not yet taken a side, its subsidiaries LeYu Brookstone and Miao Health seem to have a natural connection. What does new retail in the big health sector mean for them? These questions remain to be answered one by one.

The essence of new retail lies in channel sharing and positive optimization. In addition to the emergence of new sales formats such as unmanned shelves, another approach involves the optimization of services.

For example, Hema Fresh, under Alibaba Group, represents a new retail format that completely reconstructs the traditional offline supermarket. In other words, Hema Fresh is a supermarket, a restaurant, and a wet market all in one. It also allows customers to place orders via its mobile app and enjoy rapid delivery services.

What is the effect of doing so?

While traditional retailers generate less than RMB 15,000 in annual sales per square meter, Hema Fresh achieved profitability within its first year, with annual sales per square meter exceeding RMB 50,000.

In contrast to high-frequency consumer spending, the new retail model in the broader health and wellness sector has taken a different path to the same destination.

In the current healthcare market, due to the low frequency of medical demand, service providers and brands—unless they are industry leaders—fail to establish a presence in consumers’ minds, posing significant challenges to commercialization.

At the Future Healthcare Top 100 Forum in late 2017, Jiang Tianjiao, an analyst at Founder Securities, raised several thought-provoking questions regarding the low-frequency nature of healthcare services:

First, healthcare comprises many specialized segments. Are all of them characterized by low-frequency demand, or are there segments with high-frequency demand?

Second, can low-frequency attributes be transformed into high-frequency ones?

Third, can some low-frequency items be aggregated and presented as high-frequency within the carrier?

Fourth, since low-frequency issues are difficult to change, can we simply leverage them?

The above logic can be summarized into four points:

In healthcare-related activities, the key to a successful business model lies in identifying high-frequency behaviors, creating high-frequency interactions, aggregating low-frequency activities into high-frequency ones, and leveraging low-frequency services to generate commercial value.

Since people cannot visit doctors frequently, high-frequency demand is difficult to generate. Therefore, adopting a health management philosophy and leveraging physicians or health managers as the driving force may be an effective approach to stimulate high-frequency demand.

Moreover, while the demand for healthcare services based on medical devices and consumables is low-frequency, the demand for the devices and consumables themselves is high-frequency. As a result, e-commerce has given rise to a category of high-frequency consumer goods in this sector.

Applying the logic of “high-frequency manufacturing” and “e-commerce sales” to new retail in healthcare is not without merit.

Sanpower Group’s Leyu Brookstone is China’s most professional omnichannel service provider for communications and smart products, with over 2,000 stores across 26 provinces.

As another subsidiary of Sanpower Group, Miao Health, which was spun off from Le Yu Brookstone in 2014, has secured RMB 450 million in financing within just three years, achieving a valuation in the billions and becoming China’s largest mobile health management platform.

The combination of the two has transformed Le Yu Brookstone’s offline stores into both 3C retail outlets and health management centers, while also incorporating e-commerce delivery capabilities.

Miao Health Experience Zone at LeYu Brookstone

In terms of big data applications and internet integration, Miao Health has extended its online products to offline channels by leveraging Le Yu Brookstone’s physical retail network, using health services to enhance consumer engagement. Through the Miao Health management platform, experience zones have been established in offline stores where consumers can undergo ten complimentary professional health screenings, including waist-to-hip ratio, BMI, total cholesterol, body composition, and a four-item lipid profile. Participants receive their test reports on-site during the experience.

Zhu Wei, Vice President of Sanpower Group, CEO of the New Retail Industry Group, and President of Leye, stated, “People may reject products or even discounts you offer them, but few refuse free professional health management. Leveraging Leye Brookstone stores as an entry point, we have created a new consumer scenario centered on health experiences. This allows users to enjoy free health check-ups, immersive experiences with smart health products, and online health management services while purchasing mobile phones and smart health devices. Customer satisfaction and engagement are exceptionally high.”

Miao Health currently boasts over 30 million users, emerging as the most data-valuable “new force” among mobile health management applications. Kong Fei, CEO of Miao Health, revealed to VCBeat that to help users import health data from various smart devices, Miao Health has built an open health data platform, “Miao+,” which offers SDK (Software Development Kit) interfaces to eligible industry users worldwide.

On the Miao Health platform, data from over 300 smart wearable devices across 13 categories—including smart bands, blood pressure monitors, glucometers, body fat scales, thermometers, and fetal heart rate monitors—have been integrated. Through targeted push notifications based on precise analysis, such as recommending relevant tech products to individuals with high blood pressure or high blood lipid levels, more than 20% of customers who experienced health check-up services at Le Yu Brookstone stores chose to purchase related tech products.

Furthermore, Miao Health has achieved full integration with the LeYu Brookstone CRM (Customer Relationship Management) system. Orders for smart hardware placed on the Miao Health App marketplace can be directly fulfilled and serviced by LeYu Brookstone stores across China.

When Miao Health users place orders in the online store, the system pushes the orders to the nearest Le Yu Brookstone stores, where sales staff provide immediate delivery. Compared with the simple delivery service offered by ordinary couriers, store associates can also instruct customers on how to use smart health products, thereby significantly enhancing customer satisfaction.

Kong Fei believes that service optimization has enabled Miao Health to truly become an internet enterprise backed by more than 2,000 offline stores.

As Alibaba and Tencent intensify their retail strategies, new retail has emerged as the hottest industry trend at this stage. The integration of online and offline retail channels has led enterprises to place greater emphasis on consumer experience.

Among these, a key term is traffic.

LeYu Brookstone is rapidly expanding across China, with its extensive network of offline stores serving as the optimal offline traffic gateway for Miao Health. In turn, Miao Health has become the premier CRM platform for LeYu Brookstone’s tens of millions of users. The partnership between LeYu Brookstone and Miao Health has thus created the largest and most effective sales channel and data-sharing platform for smart health products.

This also corroborates the statement by Yuan Yafei, Chairman of Sanpower Group: “Online and offline channels are merely means, akin to the relationship between airplanes and high-speed rail; omnichannel retail is an inevitable future trend. The retail industry is entering an era of consolidation, where inter-enterprise collaboration in operations, technology, and capital will define the future of retail. Data is the core asset of the future retail industry, but it only holds value when it is traceable, analyzable, and communicable.”

Leveraging LeYu Brookstone’s network of over 2,000 offline stores, Miao Health has successfully transitioned its e-commerce operations to brick-and-mortar channels.

Currently, Miao Health has created three new health retail models through health management + new retail:

Flagship Store Model: Featuring intelligent health screening robots, hundreds of smart devices, and services such as insurance, medical examinations, and health management, it functions as a compact health management center.

Supermarket and Hyperstore Model: Targeting the high foot traffic and strong customer turnover characteristic of supermarkets and hypermarkets, this model centers on intelligent health screening for product placement, meeting the needs for health screening, monitoring, and management in a fast-paced lifestyle.

Community Store Model: A curated selection of multi-category smart devices to meet the basic needs of community residents for daily health monitoring and management. Collaborative projects are currently underway with partners such as China Mobile and Renhe Pharmacy Network.

As the dividends of online traffic have faded, Miao Health has initiated an in-depth expansion into offline channels. By leveraging LeYu Brookstone to access three major channels—shopping malls, supermarkets, and carrier business halls—the company is strategically targeting the core gathering places of consumers driving consumption upgrades in the health management sector.

As Zhu Wei stated, “This is the core of Le Yu Brookstone and Miao Health, making them a true new species in retail.”