A winning formulaWith thousands of products - from bubble bath to birth control - drugstore.com is changing the way that Americans shop for personal care items by shipping everything to their doors. CEO and founder Peter Neupert, a former Microsoft executive, is battling it out with Planetrx.com for supremacy in the online drugstore business - and so far, drugstore.com is winning. The company's investors and partners include Amazon.com, venerable Silicon Valley venture capital firm Kleiner Perkins Caulfield & Byers, and Rite Aid (customers can order prescriptions off drugstore.com and pick them up at their local Rite Aid). The company's July 1999 IPO - which came only five months after launch - raised nearly $70 million. A second public offering early in 2000 raised $100 million. And according to industry analysts, by November 1999 drugstore.com's share of the online drugstore market stood at 65 to 70 percent.
Aromatherapy, aisle six
Drugstore.com divides its site into seven categories: health, beauty, wellness, personal care, pharmacy, solutions, and boutique. Each offers a range of products and advice, from what to do if you get motion sickness to how to pluck your eyebrows so that they look like Lara Flynn Boyle's. In the non-pharmaceutical categories, the site offers mostly drugstore brands like Cover Girl and L'Oreal, as well as items like vitamins, diet products, razors, and anything else usually available at your local CVS. The launch of the boutique section in late 1999, with high-end brands like Philosophy, Ahava, Zirh, and Peter Thomas Roth Clinical Skincare, signaled drugstore.com's eagerness to reach out to a more upscale customer. The acquisition of Beauty.com, a posh purveyor of makeup, skin care, and fragrances, in January 2000 for $42 million in stock also helped solidify the company's upmarket strategy. Beauty.com will keep its web site, brand, and offices separate from its parent, but will benefit from drugstore.com's distribution network and back-office systems.
Profitability? On the horizon
While CEO Neupert is confident that the company will turn a profit within three years, like most e-commerce companies drugstore.com is still hemorrhaging cash. The hope is that as consumers grow more accustomed to ordering everything from groceries to power tools to lipstick off the Web, they'll also buy into drugstore.com's promise to change the way they shop for their family's sundries. The site also got a boost with the January 2000 announcement that Amazon will integrate its mega-store with drugstore.com's products, even creating a drugstore.com "tab" on its web site - the first time that Amazon has agreed to permanently feature an investment partner on its site. Amazon also upped its stake in drugstore.com, from 26.8 percent to nearly 28 percent, becoming drugstore.com's largest shareholder.
Does your drugstore offer this?
Drugstore.com now has over one million customers and is growing quickly, as new customers join the repeat users. All this interest in the company comes thanks to features such as product comparisons, shopping guides, and rewards for frequent and multiple purchases. The web site is also taking customers from traditional stores by its larger selection, wealth of product information, 24-hour availability, and home delivery. A well-liked feature is the "Test Drive" product review program. Customers sign up to receive products ranging from toothbrushes to condoms and reveiw them for the site, so other visitors can make more informed purchases.
More than just an online pharmacy, drugstore.com makes its pharmaceutical pricing data available to be downloaded on the Palm operating system so physicians can quickly calculate patient costs when making prescriptions. To further assist doctors, the company helped in the development of a standard method for sending prescriptions from offices to drugstore.com's pharmacy. That pharmacy was among the first to earn Verified Internet Pharmacy Practice Sites (VIPPS) certification from the National Association of Boards of Pharmacy. Another worthwhile service offered by the company is its eMedAlert Service, which target emails customers when the Food and Drug Administration or manufacturer releases new information or warnings about their drugs. These features made drugstore.com the online powerhouse it is today, but not without help from allies CIGNA and WellPoint, whose 24 million and 22 million customers are steered to drugstore.com for health and wellness products. Drugstore.com opened its own distribution center in February 2000 to help fill orders.
