Jianke and Zhongzhi Pharmaceutical Sign Billion-Yuan Sales Agreement to Accelerate Supply Chain Development

Bolstered by the dual forces of capital and policy, pharmaceutical e-commerce is entering its “spring” this year. To seize the first-mover advantage, many pharmaceutical e-commerce companies are taking frequent actions, as the battle for strategic positioning has already quietly begun.

Following the establishment of China’s first “Authentic Products Alliance” last November, in partnership with nearly 30 renowned pharmaceutical companies including Pfizer, GlaxoSmithKline, and Bayer, Jianke has further strengthened its supply chain layout this year.

Recently, Jianke signed a major annual agreement with Zhongzhi Pharmaceutical, a listed pharmaceutical company, for the sale of its “Caojinghua” brand traditional Chinese medicine (TCM) decoction pieces, with sales targets reaching RMB 100 million. This deal marks the first major strategic partnership between a pharmaceutical e-commerce platform and a TCM product enterprise this year.

On February 20, Lai Zhitian, Chairman of the Board of Directors of Zhongzhi Pharmaceutical (03737.HK), led a senior executive team to visit Jianke’s Guangzhou Operations Center, where he signed an annual sales master agreement worth RMB 100 million for “Caojinghua • Cell-Wall-Broken Herbal Granules” with Jianke’s CEO, Xie Fangmin. This deal marked Jianke’s first e-commerce contract exceeding RMB 100 million for Zhongzhi’s “Caojinghua” brand and was interpreted by industry insiders as the starting point for a new strategic partnership between pharmaceutical e-commerce and the traditional Chinese medicine category in 2017.

Currently, the pharmaceutical e-commerce sector is experiencing rapid growth. According to data from the official website of the China Food and Drug Administration, as of January 2, 2017, a total of 896 “Internet Drug Transaction Service Qualification Certificates” had been issued. Meanwhile, estimates by the Southern Institute of Pharmaceutical Economics indicate that in 2016, drug sales through retail channels reached RMB 341.5 billion. Among this, the total sales volume of domestic online pharmacies amounted to RMB 11.1 billion, accounting for only 3% of total retail channel sales.

“Given the rapid development of the internet and e-commerce, this proportion is too low; it is entirely feasible for online pharmacies to account for 15% of total sales in the future,” said Xie Fangmin, CEO of Jianke. He believes that the continuously rising online share is gradually changing the past situation where pharmaceutical manufacturers paid little attention to pharmaceutical e-commerce.

Reporters learned that Caojinghua, a brand of Chinese herbal decoction pieces that Zhongzhi Pharmaceutical has been focusing on in recent years, has previously entered into strategic partnerships with domestic chain pharmacy enterprises such as Laobaixing Pharmacy and Neptune Star. The current strong alliance with Jianke marks the beginning of its significant expansion into the pharmaceutical e-commerce channel.

Why has the core camp of pharmaceutical e-commerce partnerships been established with Jianke? Lai Zhitian, Chairman of the Board of Directors of Zhongzhi Pharmaceutical, explained that as a giant in the pharmaceutical e-commerce sector, Jianke possesses robust corporate strength. Its rapid development in recent years has been widely recognized within the industry. In particular, the launch of the industry’s first Pharmaceutical E-Commerce Authentic Products Alliance last year has further bolstered confidence in this collaboration.

In Xie Fangmin’s view, for pharmaceutical e-commerce to break through the current landscape, it must build comprehensive core advantages in supply chain, technology, management, and capital, with the supply chain being the foremost among these four core strengths.

Last November, Jianke initiated the formation of China’s first “Authentic Products Alliance” in the pharmaceutical e-commerce sector, also aimed at strengthening the comprehensive competitiveness of its supply chain. The alliance currently has 300 members, and the number of pharmaceutical companies joining is expected to exceed 1,000 this year.

In addition to strengthening supply chain collaborations with pharmaceutical companies, Jianke has established modern warehousing facilities in Guangzhou, Wuhan, and Dongguan, and invested tens of millions of yuan in new assembly lines to enhance user experience and further improve the operational efficiency of its terminal supply chain, reporters have learned. Furthermore, Jianke plans to expand its internet hospital business across China this year, thereby further enriching its business portfolio.