Drug chains move to open up shop online

Drug Store News, July 6, 1998 by Lisa I. Fried

Drug Emporium started selling merchandise online a little over a year ago. While the DEdirect online store is not a profit center, Tim Ziemke, senior vice president of marketing and merchandising for Drug Emporium, believes that drug chains have an opportunity to run an online operation more efficiently than their grocery counterparts. Look at the retail price for an OTC item vs. a typical grocery item, he said.

Drug Emporium is currently shipping nearly 100 orders per week to online customers, he said. And the average dollar transaction is a little higher for online customers--$25 per transaction (plus $3 to ship via regular mail or a higher fee for overnight service) than for the chain's retail customers--$20 per transaction. To keep online sales steadily flowing, the chain is offering online customers free freight on every third order.

What kind of merchandise are customers buying? It cuts across categories, but the percentage of sales coming from the chain's private label merchandise is greater on the Web than it is in the retail stores, according to Ziemke.

Longs executives think selling private label merchandise online gives their chain an online advantage over other retailers with websites. The brainchild of a store manager, Longs online commerce site (www.longscen-tralvalley.comlstore) offers customers across the country the ability to order the chain's 350 top-selling private label SKUs in categories such as analgesics, cough, first aid, feminine hygiene, foot care, eye care, nasal spray, photo, batteries, toiletries, vitamins and supplements and stationery.

"We wanted to put something out there that no one else could sell," explained Craig Thomsen, store manager for the Fresno, Calif-based Longs store that is shipping out merchandise to the chain's online customers.

Private-label oriented

Having a private-label oriented online site will also make it easier for Longs to make this a profitable business, Thomsen said. "There are different margins on different types of merchandise and there is a higher profit margin in private label. It wouldn't be wise to offer our ad merchandise online."

Another unique service of this online site is the special order page, which allows customers to e-mail requests to Longs for branded items once sold at the chain but discontinued after a planogram change. Longs will even go to a competitor to find the item to provide this special service.

The site launched three months ago, and has shipped merchandise from California to customers as far away as Florida and Connecticut. Typical average online transactions are running between $20 and $25, Thomsen said.

The chain just started promoting the online site through local television commercials, the chain's circulars, in-store signage and search engines. To encourage customers to buy online, Longs is currently offering free shipping and 20 percent savings on merchandise.

For now, Drug Emporium and Longs are the only daring drug chains in the industry to try online shopping.