Building a Web of convenience online

Drug Store News, April 24, 2000

SEATTLE -- When soma.com presented itself as the first pure Internet version of a drug store in January 1999, it would have been hard to imagine its rapid evolution into the online leg of one of the sturdiest and multi-faceted platforms in the click-and-mortar world. Purchased by CVS in June, the country's largest pharmacy retailer, soma.com was renamed CVS.com.

When the soma.com purchase was announced, CVS chairman and chief executive Tom Ryan said: "Online retailing is a natural extension of our convenience strategy, providing new opportunities to better serve our customers and expand our business. Our goal is to provide customers with a total healthcare solution for all of their prescription and healthcare needs. Our strategy has always been to differentiate CVS through maximizing convenience and value for our customers, and we intend to take that one step further through a truly exceptional Internet offering."

The first step was to retain the former soma headquarters and staffing in Seattle, far from CVS's Woonsocket, R.I., base geographically and in mindset. To attach the online leg firmly to the brick-and-mortar body, technicians were given the charge to develop an easy-to-use, compelling site that also provided a seamless customer service link to CVS's 4,000 stores. Because roughly half of all prescriptions are for acute conditions, CVS wanted to marry the ease of online ordering with the convenience of CVS store pick up. That feature, part of a relaunched Web site, was available in August.

CVS also set out to address another critical issue facing online drug stores--lack of coverage of their prescriptions by big pharmacy benefit management companies. In October, CVS inked a long-term alliance with Merck-Medco in which CVS.com became the exclusive provider of over-the-counter medicines and general health products for users of merck-medco.com. The agreement also made CVS.com the only online pharmacy to accept prescription orders from Merck-Medco's 51 million health plan members.

This past January, CVS became the exclusive online pharmacy for Healtheon/WebMD and its partners Excite@Home, Lycos and The Microsoft Network. Meanwhile, electronic transactions between CVS pharmacies, doctors' offices and third party payers are to be facilitated through the Healtheon/Web MD network. In addition, Healtheon/Web MD became the chain's exclusive online provider of distribution, content, community and connectivity. According to CVS executive vice president of corporate development Larry Zigerelli, the Healtheon/Web MD alliance "allows CVS.com to provide complete healthcare content and community to supplement all of our expertise in pharmacy and commerce."

He added that CVS's online alliances not only enable the company to offer a comprehensive healthcare solution to a range of customer groups, but that they also "enable us to be a major player in the emerging Internet channel without suffering staggering losses."

Last month, Doug Callihan, who was the sixth employee to join soma.com and the first pharmacist in the organization, became president of CVS.com, succeeding founder Tom Pigott.

CVS.com

Headquarters: Seattle

1999 sales: not reported

Average non-pharmacy check: $40

% of orders picked up at stores: 50 percent

% of sales from pharmacy: 50 percent

Date of Web site launch: January 1999 [*]

(*.) as soma.com