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Online retailing builds, creates new opportunities

BY Michael Johnsen

Perhaps it’s the up-and-coming generation of consumers who don’t know what life was like before Myspace, Google or YouTube. Or maybe it’s that broadband technology finally has caught up with the expectations of techsavvy, make-it-happen baby boomers living in a wired world.

Whatever it is, online retailing, especially in the healthcare category, is clicking.

Online shoppers vary widely in demographics—from the twentysomethings who shop online as a matter of course to the baby boomers looking to multi-task their way to better productivity. One commonality among all online shoppers, however, is the computer, and that means higher income brackets and, consequently, better-educated consumers. “The folks that are more active online are probably the younger ones, who are more technology driven,” said Heather Dougherty, an analyst with Nielsen//NetRatings. “But certainly we have seen a lot of growth and activity with the older demographics.” Even today’s seniors are becoming more tech-savvy as they familiarize themselves with the Internet to take advantage of travel deals on such sites as Expedia or Orbitz.

One big driver behind e-commerce has been increased broadband capability in the home. “You definitely see more people shopping at home than in the past,” Dougherty said. “Now that you have faster connections at home, it’s helping to migrate people to shop at home as well.”

And consumers soon may have even greater access to the Internet and online shopping as such products as Apple’s iPhone gain traction in the marketplace. “Platforms like the iPhone make it far easier to browse the Web than other phones have,” Dougherty said. “To a certain extent that may help,” she said, but it may not drive incremental sales as much. Consumers shopping online via such interfaces as the iPhone are more likely veteran online shoppers who already were browsing e-commerce sites anyway.

Web stats for top three pharmacy operators

Time per person in minutes* in thousands** partner with Rite AidSource: Nielsen//NetRatings
Unique views* Dec ’06 Jan ’07 Feb ’07 Mar ’07 Apr ’07 May ’07 Jun ’07 Jul ’07
CVS/pharmacy 2,304 2,410 1,631 2,072 2,675 2,024 2,775 2,762
Drugstore.com** 5,443 4,628 4,390 4,805 3,820 3,860 5,051 3,278
Walgreens 5,207 4,214 3,938 4,195 3,983 4,438 4,435 4,949
CVS/pharmacy 4:42 4:28 9:54 5:45 7:34 6:21 7:29 7:29
Drugstore.com** 5:08 6:51 4:51 5:01 6:38 8:03 4:43 6:58
Walgreens 15:45 16:24 15:24 13:31 12:12 13:39 14:07 13:21

Five of the top 10 leading retailers by pharmacy sales feature e-commerce capabilities—CVS, Walgreens, Rite Aid (through its partnership with Drugstore.com), Wal-Mart and Longs Drugs. And with the exception of regional operator Longs Drugs, each of those e-retailers gravitate toward the top in rankings of overall online health and beauty aid sales.

And CVS, Walgreens and Drugstore.com each can lay claim to a leading Internet metric. Drugstore.com boasts the highest amount of online purchasing; CVS the most dollars-pertransaction; and Walgreens is tops in the amount of time each of its unique visitors spends on the site.

Consumers spend twice as much time on Walgreens’ Web site than either CVS or Drugstore.com. For the past year, visitors logging onto CVS.com spent an average six minutes, 31 seconds on the site, Drugstore.com visitors spend six minutes, 11 seconds and Walgreens 14 minutes and 14 seconds.

“[Walgreens] is huge in photo,” Dougherty said. “For example, in July almost 25 percent of people visiting [walgreens.com] were visiting the photo section. They’re very strong in photo.

“One thing that’s been big for the drug stores is photo services,” Dougherty said. “People can upload their photos to the Web site and have them printed and picked up locally.” That makes for a more convenient way to process photos. Walgreens has carved out partnerships with a number of online photo services, including AOL Pictures, Fuji and Snapfish, to offer its customers an option of picking up prints at local Walgreens stores and further cementing Walgreens as a go-to destination for photo.

But it is the expertise in the sale of health and beauty aids and a solid reputation as a source for healthcare information that extends CVS’ and Walgreens’ brand identity into the wide world of Web retailing. Neither CVS nor Walgreens breaks out its dot-com sales separately, but both have dedicated significant resources toward the creation of robust e-retailing sites.

Each of the retailer’s Web sites have become proving ground for new health and beauty items, especially as more dedicated dot-com buyers attend such industry conferences as NACDS Marketplace and ECRM events. Online certainly is a less-expensive format through which first-time suppliers can cut their teeth—instead of having to feed a supply chain serving more than 5,000 locations nationwide, new suppliers only have to feed a central distribution center. And it doesn’t cost the retailer nearly as much to create a Web page selling an item as it does to carve out space in a performance-driven arena like the store shelf.

For these reasons, product selection can be conceivably deeper online than in the store. Space requirements and price points also are not as much of a barrier online. For example, CVS.com features four pages of canes and accessories on its Web site, with some eight products slotted per page. There are five pages for bath and shower aids. In some CVS stores, there’s only 4 feet of retail space allotted for the entire durable medical equipment category.

Under its Home Medical tab on its Web site, Walgreens showcases a complete line of wheelchairs ranging in price from $519.99 to $779.99. Walgreens also has online items a professional caregiver might need—including scrubs and hospital gowns for his or her patients.

Leading online retailers in health/wellness/beauty in July

* in thousandsSource: Nielsen//NetRatings for the month of July
    No.of purchases* Unique customers* Average order size
1 eBay 864 538 $18.62
2 Drugstore.com 378 317 32.52
3 Amazon 321 315 40.25
4 Avon (beauty only) 208 196 25.38
5 HSN.com 166 126 55.72
6 QVC 161 106 46.87
7 Victoria’s Secret (beauty only) 125 63 29.24
8 Bath & Body Works (beauty only) 55 55 31.92
9 Sephora (beauty only) 34 33 66.07
10 CVS/pharmacy 28 28 48.99
11 Walgreens 25 25 44.24
14 Wal-Mart Stores 12 12 n/a
15 Target 11 11 n/a

Earlier this year, Walgreens rolled out its Ready Response Medical Alert System, a system that helps family caregivers seek solutions to maintaining independent living at home. The product offering was piloted in part through Walgreens’ Web site at www.walgreens.com/readyresponse and was available for purchase there long before a national store rollout this summer.

CVS went live with its own online caregiver initiative this summer with www.cvs.com/care, a Web site that features caregivers’ frequently asked questions and a downloadable medication management tool.

Caregivers visiting the site can link to such additional services as power of attorney forms and the National Council on Aging’s Benefits CheckUp tool, which can be used to enroll in federal, state, local and private programs to help pay for prescription drugs, utility bills, meals, health care and other needs.

Drugstore.com, meanwhile, only is going to become a more formidable drug competitor thanks to its partnership with a post-acquisition Rite Aid. Neither Brooks nor Eckerd boasted a robust e-commerce site, so the acquisition will boost Drugstore.com’s scale virtually. “Clearly as [Rite Aid has] more stores and…they offer local pickup, that will be local pickup business that will come to Drugstore[.com] as well,” said Dawn Lepore, Drugstore.com president, chief executive officer and chairman.

And Drugstore.com earlier this year embarked on two online ventures—one with RevolutionHealth.com, the online health project of former AOL chief executive officer and chairman Steve Case, and the other with Cystic Fibrosis Services.

The co-branded OTC Web store for the Cystic Fibrosis community launched March 19. Drugstore.com has agreed to donate 10 percent of all purchases on the site to the Cystic Fibrosis Foundation.

RevolutionHealth’s site went live April 19, and with that Drugstore.com’s online link. “We are anticipating that Revolution’s marketing and PR campaign will drive membership and that this, in turn, will drive new sources of traffic, orders and customers to Drugstore.com in the back half of the year,” Lepore said earlier this year.

Drugstore.com also kicked off a dropship program this year, which extends the e-retailer’s reach into bigger and margin-friendly products, such as gourmet food, gift baskets or such big-ticket items as durable medical equipment. “Drop ship…drives contribution margin dollars because many of those items are higher-ticket items,” Lepore said. The drop-ship capability grows Drugstore.com’s offering of more than 30,000 SKUs to 34,000.

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Kroger appoints Going as Michigan division president

BY Adam Kraemer

CINCINNATI The Kroger Co. announced Wednesday that it has named Rick Going president of the company’s new Michigan division.

Kroger currently operates 138 stores in the state; Going will oversee operations in them, effective immediately.

During his 26-year tenure with Kroger, Going has held a number of district- and division-level leadership positions at the store and has served as vice president of Retail Operations and vice president of Merchandising for Kroger’s Cincinnati/Dayton division.

“Rick brings extensive experience in operations and merchandising to this new role,” said Don McGeorge, Kroger’s president and chief operating officer. “We look forward to his leadership as he works with our associates to build on Kroger’s growth in Michigan by focusing on our customers to create even better shopping experiences for them.”

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NACDS responds to “misleading” New York Times article

BY DSN STAFF

ALEXANDRIA, Va. The National Association of Chain Drug Stores has fired back at The New York Times after the publication ran an article in its Sept. 18 issue titled, “The ‘Poisonous Cocktail’ of Multiple Drugs.”

The NACDS said the article misrepresented the role of chain pharmacies in the prevention of harmful drug interactions. The article blamed, “places where chain stores have replaced independent pharmacies or when the patient’s drug plan requires that medications be ordered by mail.” The NACDS retaliated by stating that all pharmacists, no matter whether they work in a chain or at an independent pharmacy, counsel patients for drug interactions and rely on medication information for this purpose.

The NACDS said the article misrepresented the role of chain pharmacies in the prevention of harmful drug interactions. The article blamed, “places where chain stores have replaced independent pharmacies or when the patient’s drug plan requires that medications be ordered by mail.” The NACDS retaliated by stating that all pharmacists, no matter whether they work in a chain or at an independent pharmacy, counsel patients for drug interactions and rely on medication information for this purpose.

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