PMOR had big internet news today. Looks like a great future for
drug companies on the internet.
Will drugs sell big on the Web?
By Matthew Broersma, ZDNN
January 14, 1999 3:45 PM PT
URL: zdnet.com
Computers, books and CDs have been the products that kicked open the door of online shopping, but the next big Internet seller may be more of a surprise: Online pharmacies.
Observers and investors say the meeting of the Web and the roughly $150 billion U.S. drug, vitamin and nutrition market could well be the next big market opportunity on the World Wide Web.
The two most prominent companies targeting the market already have generated a buzz among industry observers and would-be investors -- all without having even launched their Web sites.
Drugstore.com is led by CEO Peter Neupert, who built the MSNBC Web site, and competitor PlanetRx, headed by CEO Bill Razzouk, has already cut an exclusive distribution deal with America Online Inc. (NYSE:AOL).
'We absolutely see a momentum building in this market'
-- Analyst Kate Delhagen
The two companies met with plenty of interest at this week's Hambrecht & Quist health care conference in San Francisco, just ahead of PlanetRx's planned launch later this month.
Drugstore.com's debut is also said to be imminent, though neither company will give exact dates.
Analysts say the companies tap into Americans' growing fascination with health care products as well as the Internet and e-commerce craze that seems to have a firm grip on Wall Street.
Ripe for the pickin'
"We absolutely see a momentum building in this market," said Kate Delhagen, director of online retail strategies at Forrester Research. "We think the category is ripe for the picking. A number of products from the corner drug store make perfect sense to sell online: Replenishment items and prescriptions, for example."
The logic goes like this: Consumers abhor the experience of going to the corner drugstore to buy toothpaste and razor blades and refill their prescriptions, and will be glad to dispense with the whole process with a mouse click or two, and see the stuff in their mailbox the next day -- much the same way they enjoy the convenience and tax-free status of buying books or CD's on the Net.
Away from peering eyes
"Typically on a trip to the drug store you have to go stand in line, and it may take half an hour," said Stephanie Schear, co-founder and vice-president of business development for PlanetRx. "What's more, you might not want your neighbors or the other people in line to know what you're buying -- Viagra, or medication for an ulcer, or depression, or asthma. And for chronic patients, it's very painful to have to go in every 30 days."
What's more, the corner shop might not have the brand of exotic vitamin you want. Not a problem with its online counterpart: Taking after Amazon.com, the Internet drugstores claim they'll be worthy of the title, "The largest pharmacy on earth."
"Prescription drugs is just one of the categories we'll offer," said Drugstore.com representative Debby Fry Wilson. "There will be a full complement of health, beauty and wellness products as well."
Impressive margins
From a business point of view the market is also attractive. While a jar of cold cream might not be worth its weight in postage, the margins on prescription drugs are quite lucrative, observers say.
"We expect this market to succeed much more quickly than online grocery stores, which are the only comparable market out there," said analyst Delhagen.
But it might also be more difficult to convince users to buy drugs online than to sell them heads of lettuce or the latest Danielle Steel.
For one thing, an online shop might be more private than the neighborhood Walgreen's, but customers might feel wary about handing over medical information to a little-known startup.
And observers pointed out that a significant portion of the prescription-drug market might be in older age groups, which are typically underrepresented in cyberspace.
Mass market
The startups downplayed both issues. Customers will be assured of the privacy of their medical information, they said; after all, "if they don't feel secure, they won't come back," according to Drugstore.com's Wilson.
And as for demographics, any bias towards the older population probably won't make much difference considering the market's overall size, the shops argue.
"We do have a mass market," Schear said. "The market is four times as large as books in the U.S."
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