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DrugStore Cowboys.
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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upside.com
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