Suning Universal Invests Over RMB 5 Billion to Enter the Medical Aesthetics Industry, Aiming to Build China's Leading Aesthetic Brand

Recently, Suning Universal released several announcements regarding investments and mergers and acquisitions: ① Taking a minority stake in South Korea’s ID Health Group and establishing a joint venture company in China; ② Acquiring an 80% equity interest in Yimei Ganghua Hospital through share issuance and cash payment; ③ Establishing a RMB 5 billion medical aesthetics investment fund as a joint venture with its controlling shareholder; ④ The medical aesthetics fund making a strategic investment in the “Gengmei” APP; ⑤ The medical aesthetics industry fund acquiring 11 medical aesthetics hospitals and clinics for RMB 570 million, including 100% equity interests in four Meilianchen Hospitals, 80% equity interests in two Hanchen Hospitals, an 80% equity interest in Shanghai Ganghua Hospital, and four clinics (100% of Guangzhou Yanya, 80% of Shanghai Ganglong Traditional Chinese Medicine Clinic, 80% of Shanghai Gubei Yueli, and 80% of Shanghai Yuemei).

1) The medical aesthetics industry has entered a fast lane of development, with significant market potential.

The penetration rate of medical aesthetics in China remains relatively low. In 2014, this figure stood at approximately 1.2%, representing a significant gap compared to South Korea, Japan, the United States, and certain European markets. However, the sector is experiencing rapid growth, particularly against the backdrop of a substantial increase in per capita disposable income (by the end of 2015, the per capita disposable income of urban residents was approximately US$4,660, exceeding US$5,000 in first-tier and some second-tier cities). Based on historical trends, the compound annual growth rate (CAGR) of the medical aesthetics industry is projected to rise by 3 percentage points to 16.7%, evolving into a trillion-yuan market by 2019.

Although the medical aesthetics industry in China has enormous room for growth, it is still in its nascent stage, with a relatively low level of market concentration.

According to Jason Jia, Vice President of Suning Universal, the company’s entry into the medical aesthetics sector is well-timed: “The broader health industry is becoming a new growth driver for China’s economy, exhibiting explosive growth. Since 2016, medical aesthetics consumers have become increasingly rational, making word-of-mouth marketing a key trend in customer acquisition. Consolidation within the medical aesthetics industry is accelerating, with poorly regulated institutions being phased out. A more rational consumer mindset is taking shape, and customer acquisition through online medical aesthetics platforms is emerging as a dominant trend. The industry is transitioning from a fragmented, low-concentration landscape to one characterized by standardization and high market concentration.”

2) Suning Universal’s expansion into the “medical aesthetics” sector aligns with its existing asset scale and generates synergies with its real estate and cultural businesses.

On the one hand, after years of development, Suning Universal has grown into a regional leader with total assets of RMB 25 billion, annual revenue exceeding RMB 7 billion, and net profit approaching RMB 1 billion. Its current business structure is primarily focused on real estate development, while also extending into healthcare, culture, and finance. In its strategic transformation toward the “Grand Culture & Sports + Grand Health + Grand Finance” model, the culture, sports, and media sector—being relatively asset-light—is less capable of supporting large-scale transformation. In contrast, the medical aesthetics industry offers substantial market potential and is capital-intensive, making it well-aligned with the company’s existing scale.

On the other hand, the development of the medical aesthetics sector will create synergies with the company’s other business operations: ① Suning Universal’s current core business is real estate development, which serves a large base of high-net-worth clients. This demographic demonstrates relatively high interest in health and beauty. Therefore, as the listed company’s medical aesthetics business continues to expand, its premium clientele accumulated through real estate operations will be able to further access high-quality medical aesthetic services provided by the listed company; ② Consumption in the medical aesthetics sector exhibits certain counter-cyclical characteristics. Catering to a broad consumer base, it is less affected by macroeconomic fluctuations, thereby forming a complementary synergy with the existing core real estate business.

Furthermore, the rapid growth of the real estate development business has laid a solid foundation for the company to expand into new business areas. Leveraging the advantages and resources of its core real estate operations, the company can secure prime offline store locations in high-quality areas and increase the number of physical medical aesthetic hospitals. Through its financial industry layout, it provides various consumer finance services to medical aesthetic customers while offering capital support for the company’s development in the medical aesthetics sector. The synergies among various business segments can reduce customer acquisition costs, accelerate customer aggregation, optimize management resources, and enhance operational efficiency.

Experience from countries such as Japan and South Korea indicates that medical aesthetics and the entertainment industry exhibit strong synergistic effects, and China is no exception.

1) Acquired a stake in South Korea’s ID Health Group and established a joint venture in China.

As is well known, South Korea currently boasts the most reputable resources in terms of technology within the medical aesthetics industry. Chinese listed companies planning to enter this sector, such as Evergrande and Lancy, have all announced their selection of South Korean firms as partners. Similarly, Suning Universal has chosen a South Korean enterprise, ID Health Industry Group, as its partner. Therefore, partnering with ID represents one of Suning Universal’s core competitive advantages in its entry into the “medical aesthetics industry.”

ID Health Industry Group is the No. 1 player in South Korea’s medical aesthetics industry, boasting advantages in “technology + talent.” As the largest healthcare and medical group in South Korea, its business portfolio spans ID Medical Aesthetics, cosmetics, stem cells, health screening, and training. With world-class industrial technological capabilities, a top-tier team of Korean professionals, and efficient global customer acquisition and medical aesthetics marketing capabilities, it stands as the number one medical aesthetics brand in the Republic of Korea. Its subsidiary, ID Medical Aesthetic Plastic Surgery Hospital, employs over 40 director-level expert physicians and more than 500 professional medical staff. It is the largest single-site plastic surgery hospital in Asia, featuring the highest number of Korean-licensed medical professionals, the most advanced medical aesthetics academic and technical expertise, the greatest number of experts with over 15 years of clinical experience, and the most comprehensive ISO standard certifications. Equipped with specialized departmental centers and related patented technologies, ID Medical Aesthetic Plastic Surgery Hospital ensures that all medical techniques and devices across its centers are at a world-leading level. It holds the global record for the highest number of successful jaw contouring surgeries and pioneered surgical protocols and patented technologies such as V-Line surgery, “Surgery First,” and V3. Its overall academic and surgical proficiency ranks first in Asia.

It is worth noting that ID will commit substantial capital in its partnership with Suning Universal. Under this collaboration, ID will contribute RMB 250 million, accounting for a 40% stake, while the two parties will jointly invest RMB 600 million (with Suning Universal holding a 60% stake) to establish a joint venture, Suning Universal ID Medical Investment Co., Ltd. (hereinafter referred to as “ID Medical”), to jointly develop the medical aesthetics business. ID’s 40% cash contribution underscores its confidence in China’s medical aesthetics market and its recognition of Suning Universal’s strength, execution capabilities, and ability to expand in the Chinese market.

Suning Universal stated that it expects to invest a total of RMB 15 billion to transform Aidi Medical into a globally leading medical aesthetic and plastic surgery group within three years through new establishments, mergers and acquisitions, and restructuring. The group will encompass business areas such as chained medical aesthetic and plastic surgery hospitals, medical aesthetic training, cosmetics, stem cells, and health screening. It is projected to establish a chain network of 50–60 medical aesthetic hospitals within three years. Suning Universal aims to eventually move upstream in the medical aesthetics industry, targeting segments with the highest net profit margins.

On July 15, Suning Universal released the Suyia Medical Aesthetics Plan. The company’s vision is to establish “Suyia Medical Aesthetics” as the leading brand in China’s medical aesthetics industry. To achieve this strategic vision, the company will leverage financial instruments to rapidly enter the market, penetrate offline hospitals through new establishments, mergers and acquisitions, and restructuring, while introducing its brand and standardized operations.

1) Suning Universal entered the medical aesthetics sector through industrial M&A and by establishing a medical aesthetics fund as the primary investment vehicle: On one hand, it directly acquired an 80% equity stake in Yiermei Ganghua Medical Aesthetics Hospital, held by Yiermei Investment and Ganghua Investment, through a combination of stock issuance and cash consideration (valued at RMB 208 million). Yiermei Ganghua Hospital committed to achieving net profits of no less than RMB 23 million, RMB 27.6 million, and RMB 30 million for the years 2016–2018, respectively. On the other hand, it jointly established a medical aesthetics fund with its controlling shareholder, increasing the fund’s capital to RMB 5 billion. This fund serves as the main entity for conducting investment activities, primarily targeting plastic surgery hospitals and related upstream and downstream assets.

2) Through its medical aesthetics fund, Suning Universal has rapidly expanded its presence in offline plastic surgery hospitals by acquiring equity stakes in Beijing Meilianchen Medical Aesthetics Hospital, Tangshan Meilianchen Medical Aesthetics Hospital, Shijiazhuang Meilianchen Medical Aesthetics Hospital, Wuxi Meilianchen Medical Aesthetics Hospital, Wuhan Hanchen Medical Aesthetics Hospital, Kunming Hanchen Medical Aesthetics Hospital, Guangzhou Yanya Medical Co., Ltd., Shanghai Ganglong Traditional Chinese Medicine Clinic, Shanghai Gubei Yueli Medical Aesthetics Clinic, Shanghai Yuemei Medical Aesthetics Clinic, and Shanghai Ganghua Hospital.

3) Establish a research institute and a standardization research center, develop a standardized management system, implement standardization practices, further strengthen brand advantages, improve service quality, and reduce the risk of surgical failure.

Regarding the layout of offline hospitals, Jason’s vision is to rapidly build a four-tier hospital chain system, covering a matrix that ranges from standardized clinics to flagship high-end medical aesthetic hospitals.

Based on the announced acquisition details, Suning Universal has currently established a presence in first-tier cities, central cities, and certain provincial capitals. The outline of a four-tier hospital chain system is beginning to take shape: flagship medical aesthetic hospitals in first-tier cities, high-end medical aesthetic hospitals in central cities and provincial capitals, mid-to-high-end medical aesthetic hospitals in second- and third-tier cities, and standardized clinics in key counties and county-level cities, with each tier of the four-level system offering specialized services.

Recently, Suning Universal made a strategic investment in the medical aesthetics O2O company “Gengmei Interactive” to drive online traffic and establish an online-to-offline consumption loop for the medical aesthetics industry.

Suning Universal subscribed to a portion of the Series C equity in Beijing Gengmei Interactive Information Technology Co., Ltd. at a valuation of $20.83 million, and provided an RMB loan worth $20 million upon completion of the subscription, thereby achieving strategic investment in its app “Gengmei.”

The “Gengmei” app has currently aggregated 15 million medical aesthetics consumers and over 10,000 medical aesthetics professionals. Users can purchase various consumer healthcare services on the Gengmei platform, such as plastic surgery, minimally invasive procedures, dentistry, ophthalmology, and anti-aging treatments. Additionally, they can share their consumption experiences with other users in the community, helping potential customers make informed decisions. Angel investors in the “Gengmei” app include Matrix Partners China; Series A investors include Sequoia Capital China; Series B investors include Vickers Venture Partners; and Series C investors include Suning Universal, Tencent, and Chj Jewellery, among others, through strategic investments in “Gengmei.”

Regarding Suning Universal’s grand health strategy, Jason vividly summarized it as “grasping technology with one hand and online platforms with the other.” Through strategic investment in South Korea’s ID Hospital, Suning Universal has acquired top-tier global resources in medical aesthetics technology. Meanwhile, by strategically investing in Gengmei Technology, the company can secure traffic platform resources for the medical aesthetics O2O (Online-to-Offline) sector. “This creates a consumer closed loop that reduces customer acquisition costs by at least 90%.”

To realize Suning Universal’s grand vision in the medical aesthetics industry, a robust talent reserve is indispensable. It is reported that Suning Universal will introduce a senior medical aesthetics operations team with over ten years of extensive experience, establish a talent training academy and a technology R&D center, and build a verticalized management system. The company will fully empower and incentivize its personnel while implementing a physician partner program.