Does Drugstore.com have the right prescription for a
crowded market?
The folks who are rushing to open online drugstores are in the
right business, because as the battle for this market intensifies,
they'll need the very stuff they're hawking--especially the
bandages and tourniquets. "There are around 10 significant
players, and there's going to be bloodshed," says Gary Arlen,
president of Arlen Communications Inc., a Bethesda, Md.,
research and consulting firm.
So far, the leader in this niche is Drugstore.com Inc., a
Redmond, Wash., startup with over $100 million in funding,
mainly from venture capital firm Kleiner Perkins Caufield &
Byers, Amazon.com Inc. (which owns 46 percent), and Paul
Allen (whose Vulcan Ventures put in $40 million). It plans a
midyear IPO, with hopes of raising another $67.5 million.
Competitors in the space include PlanetRx.com Inc., a South
San Francisco startup with funding reported to be around $40
million from Sequoia Capital, Benchmark Capital and a few
other tech investors. Another is Soma.com, a Seattle company
started with private funding (much of it ponied up through
founder and CEO Tom Pigott) and recently acquired by
Woonsocket, R.I.-based CVS Corp., a major drugstore chain.
Under pressure to react to the CVS-Soma deal, both Deerfield,
Ill.-based Walgreen Co. and Camp Hill, Pa.-based Rite-Aid
Corp. have announced that they will enhance their Web
presence. A few big drug wholesalers, led by Maryland
Heights, Mo.-based Express Scripts Inc., have also caught the
"dot-com" bug.
The lure is obvious: money. Lots of it. Sales climb above $200
billion annually, and "when you have a category that big, there
will be a dogfight, you bet," acknowledges Peter Neupert,
CEO of Drugstore.com. But if Drugstore.com is a leader in this
space, it's largely because Neupert, a onetime VP of news and
publishing at Microsoft Corp., "has a 'take no prisoners'
attitude toward winning this," says Arlen.
The 43-year-old Neupert isn't just a hired hand brought in to
steer this business to e-commerce riches. He's personally put
up big dough--more than seven figures, he says--to buy a
chunk of Drugstore.com. And he's got a point to prove, to
himself as well as to the world. "At first, I turned down this
job," Neupert says. "[Kleiner Perkins partner] John Doerr
asked [me] if I would talk about it, and I said no. But I listened
to what he had to say, and I got enthused. You always wonder
when you're at Microsoft: Am I successful only because of all
the resources? Because of the Microsoft brand? Because you
can rely on Bill? Now, I'll get to see if I can do it myself."
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