In-store & Internet Marketing

Drug Store News, Nov 27, 2000

ATLANTA -- In many respects, the Internet has raised more questions than it has answered. This certainly is true in the retail channel, where many companies, both large and small, are struggling to develop winning Internet strategies by answering some basic operating questions.

Does the Internet represent an incremental growth opportunity? Will it change the way consumers get information and shop? Can it be a profitable business?

Those are just a few of the questions facing retailers today. To help find some answers, Drug Store News and the National Association of Chain Drug Stores co-sponsored the In-Store and Internet Marketing conference here last month. As part of the conference, a distinguished group of retailers addressed these issues and others during a panel discussion moderated by Drug Store News editor-in-chief and associate publisher Marie Griffin. Griffin led the panel of five retailers in a discussion of Internet retailing, electronic marketing and possible avenues of vendor participation in e-commerce.

The panelists included Larry Zigerelli, executive vice president of marketing for CVS; John Gleeson, vice president of corporate strategy for Walgreens; Tim Ziemke, senior vice president of marketing and merchandising at Drug Emporium; John Roehm, director of electronic marketing for the drug division of Albertson's; and Mike Concannon, director of manufacturer relations for drugstore.com.

Following is an edited report from that panel discussion.

Marie Griffin: How do you view the Internet?

Larry Zigerelli: Intuitively, we see e-retailing as a logical, natural channel extension of our overall convenience and value strategy.

Looking at our proposition of what CVS had to offer, it seemed clear from beginning that an integrated bricks and clicks model would be the best strategy. Our IT department has been integrating the CVS and cvs.com infrastructures so there will be one common business base, one centralized conduit to customers whether they shop in a CVS store or the CVS Web site.

Today, when a CVS customer buys a prescription and other items online, two-thirds of those shoppers elect to pick up their purchase in their neighbor CYS store rather than have it shipped to them.

Online shopping seems to be perceived as the same as phoning in a prescription refill to a store.

Online customers have a tendency to do more stock-up shopping. As a result, the online shopper buys in large quantities and generates a higher average ticket: the average front-end ring at CVS.com is $40 compared with $10 in the stores.

The model that has emerged is one we believed would happen from the beginning. It is a seamless shopping experience to the customer.

John Roehm: We had the same feelings as Larry. We wanted a platform that supported the whole organization. We have different name plates for our stores, so there were opportunities for our drug and food stores to take the expertise of both parts of our organization and to come together to provide more consumer value.

Mike Concannon: We are an Internet-centric business that has gone into partnership with Rite Aid. We use net technologies to build personal relationships with our customers so we can empower them to improve their health and well being. It was important for us to look for ways to work with partners like Rite Aid and with manufacturers to create added value for our customers.

Rite Aid has developed strong customer relationships over a long period of time. We think that's a competitive advantage for us.

We use our brick-and-mortar partner to create great service for our pharmacy-centric customers. It's worked out fantastically marrying those two things up.

We're the sole distributor of General Nutrition Center products on the Internet. Wellness is a very fragmented business. GNC with 5,000 stores is the biggest brand in wellness. Drugstore.com today has a GNC store within our online store. It's the same relationship we have with Rite Aid.

Tim Ziemke: Drug Emporium through its partnership with Vitamins.com and HealthCentral.com has the same kind of triangle base. For us to offer 10,000 to 12,000 SKUs of vitamins, nutraceuticals and related health products in our stores would be an inventory nightmare, but to have it sitting in a distribution center in Louisville, we're able to handle a global business. It's a pretty good deal.

Vitamins and pharmacy rank as No. 1 and No. 2 in what we are offering to our customers.

John Gleeson: Through our pharmacy, we have terrific relationships with customers. Over the past seven years, we built a large pharmacy database with over 45 million families, and leveraging that database has really extended over into our Internet business. Our big thing is not so much to have an Internet pharmacy per se, but to ensure that our customers are able to access our stores however they want, through a phone, a store, a fax. We want our customers to have all kinds of convenient access.

Griffin: Jupiter Communications projects that online consumer health commerce spending will climb from $200 million in 1999 to $9.8 billion by 2004. That estimate includes sales of prescription pharmaceuticals, over-the-counter drugs, nutraceuticals [vitamins and nutritional supplements], personal care products [health and beauty aids] and medical supplies. How realistic are such expectations? How big a role will e-retailing play in pharmacy?