BY LAURA KLEPACKI
hair-growth items and personal lubricants. Of the 40 consumer products categories tracked by
It’s been four years since Amazon.com stepped into Kline, the personal lubricant segment shows the the OTC business, and there is no looking back. highest online sales percentage, with an estimated
“Our OTC business continues to grow at triple 10 percent of the $175 million category purchased digits,” stated Jeff Fernandez, buyer of health and online. Online sales of cold medications, on the personal care and consumables for Amazon.com. other hand, a $2.5 billion category, accounts for 2
“This is a very important business at Amazon, and percent to 3 percent, Mahecha estimated.
each year more and more CPG companies are real- While CVS said its online OTC shoppers repre-
izing the benefit of engaging at Amazon and allo- sent consumers “across the board,” Fernandez
cating resources toward the future of the OTC said Amazon’s shoppers, too, “are right down the
online business.” In the first quar- middle regarding gender.”
ter, Amazon.com reported that However, they tend to have
sales in its electronics and general higher incomes—in excess of
merchandise category, which $80,000. In addition, “They are
includes OTC, rose from $564 mil- more educated than the average
lion in 2007 to $826 million in 2008. brick-and-mortar customer,
At Drugstore.com, which environmentally conscientious
serves as Rite Aid’s online andorganicallyminded.”
provider, core OTC sales climbed While Amazon’s shoppers may
16 percent to $64.4 million in the have deeper pockets, the compa-
first quarter compared with the ny still tries to offer the lowest
year-ago period. OTC represents online prices. “We are very com-
53 percent of its total business. petitive with the mass and club
“If you listed us on a stand- channels,” Fernandez said. Ama-
alone [basis] next to brick-and- zon also offers free shipping with
mortar companies, we would be orders of $25 or more and has
the 13th-largest drug store,” said implemented the “Subscribe and
Dawn Lepore, chairman and chief Save” program, an automatic
executive officer of drugstore.com. replenishment system that saves
Such dedicated online players customers 15 percent.
as Amazon.com and Drug- To compete, CVS.com now has
store.com apparently are not an offer of $10 off an order of $50
alone in experiencing online OTC or more, with the added bonus
success. Traditional brick-and- of free shipping.
mortar retailers, with adjunct Web Both Mahecha and Fernandez
selling sites, indicate their online said online services help house-
OTC sales are growing, too, bring- holds prepare for the future.
ing incremental business. “Obviously, if you wake up with
“We are seeing an increase in a sore throat, you will head to the
online OTC sales,” said Carol closest drug store to get immedi-
Hively, Walgreens spokeswoman. ate relief,” Fernandez said. “But
“We’re not seeing cannibalization on the other hand, if you are a
at store level.” mother, with three or four kids in
CVS, too, said it is experiencing The online OTC business allows Amazon.com and Drugstore.com to compete with drug chains, and also provides those drug the house, you might stock up on
positive results. “OTC sales online chains, like CVS and Walgreens, with a complement to their brick-and-mortar stores that yields a higher total spend overall. Amazon and have the products
are growing very quickly, especially as we expand maybe a “particular type of Q-Tip” no longer in your pantry ready to utilize when necessary.”
our offering based upon our customer requests,” available elsewhere, she noted. Walgreens said its OTC sales comprise both
said CVS spokeswoman Joanne Dwyer. In addition, Lepore said, Drugstore.com can “stocking up and incident-use” items.
Like Walgreens, CVS said there has been no loss partner with vendors to test products to get an Drugstore.com’s Lepore said that repeat cus-
of sales at the store level. “In fact, the annual bas- early read on what will sell and what won’t. tomers represented 81 percent of its total sales in
ket of the online customer is higher than that of Amazon’s Fernandez pointed out that 120 mil- the first quarter. “And new customers increased to
the customer who only shops in-store. They use lion U.S. households now have high-speed Internet, 374,000, up 11 percent year over year, which brings
online as a `door to the store’ and combine online which makes the online shopping process quick our total life-to-date customer base to almost 10. 2
purchases with in-store visits, yielding a higher and easy. Most mobile phones also now provide million unique customers,” she said.
total spend,” Dwyer noted. Internet access. “It is just one more advantage we Fernandez pointed out that the high gas prices
What’s driving the success of this segment is a have over brick-and-mortar competition,” he said. could contribute to further growth of online shop-
“combination of factors, including convenience, Laura Mahecha, industry manager of the ping. “We feel confident that the current pricing of time savings, managing lifestyles better and prod- healthcare practice for research firm Kline & Co., fuel has driven customers to look for alternative uct assortment,” she explained. “Our online busi- said that online selling sites have emerged as ven- avenues for purchasing and we are in the best posi-ness is an important way that CVS Caremark ues for buying more discreet products, such as tion to capitalize,” he noted.
gives our customers the choice to use whatever venue meets their needs on a particular day to access our products and services.”
Drugstore.com’s Lepore said an advantage of an online store is that it contains unlimited shelf space. “We have 30,000 SKUs, whereas the average brick-and-mortar would have maybe 5,000 or 3,000. So we can carry items at the beginning of their life and at the end of life. We can have hard-to-find items.” Shoppers can find discontinued items or an “obscure shade of hair color” or
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