Drugstores wage a pricey online battle

By Published on .

Online drugstores, a category filling with a host of competitors, have been promoting price-slashing, free shipping and giveaways as part of their marketing. That strategy also is being reflected in their advertising and on their Web sites.

As a group, that advertising could top $150 million annually. A prime example is Drugstore.com, which Nielsen/NetRatings says has the highest unique audience of online drugstore sites. It's been spending $2 on ads for every $1 in revenue.


Drugstores don't always pay cash for ads; PlanetRx in June gave News Corp.'s News America a 5.1% equity stake for $7.5 million in cash and $7.5 million in TV time and traditional media. Even so, drawing customers with low prices has been a common lure.

"The price lever is the easiest one to pull," said Jupiter Communications analyst Michael May. "Lowering prices easily draws transactions and, for a new player in this space, transactions are new customers."

More.com, another online drugstore, followed its Aug. 17 launch with ads in The New York Times, The Wall Street Journal and USA Today. Ads declared that consumers "for a limited time" can lock in today's prices for an eternity.

"Buy your favorite items now at our low online prices and we'll let you lock in those same low prices for life. That's for life," the ads, created by Gardner, Geary, Coll & Young, San Francisco, proclaim.

The unusual offer is one that's virtually impossible in the bricks-and-mortar world where it's tough to track how much people paid previously, Mr. May said. "Online, it's a direct marketing environment. Offline, you can't track customers' [repeat-purchase prices]. Online, it's a single point of purchase and all the transaction data goes into the same database."

Retail promotions usually offer consumers a deal initially and then charge them full price later.


"What I like about this promotion is that it rewards loyalty rather than punishes it," Mr. May said.

Bruce Mowery, VP-marketing and business development for More.com, said that was the intent.

"We wanted an offer that would get noticed and be compelling enough to gain trial and repeat purchase," said Mr. Mowery of the site that sells health and beauty aids. More.com will sell prescription drugs this fall through a partnership with Bergen Brunswig Drug Co., a subsidiary of Bergen Brunswig Corp. Bergen already manages More.com's distribution.

More.com offers free shipping on purchases, but so do many competitors, who are shopping for or have just picked ad agencies to push their brands.


Competitors include yourPharmacy.com, a subsidiary of Express Scripts-ValueRx. YourPharmacy.com is searching for its first agency to handle the $20 million account.

Drugstore.com, partly owned by Amazon.com and Rite Aid Corp., earlier this month awarded its $30 million to $40 million account to Fallon McElligott, Minneapolis, previously handled on a project basis by McCann-Erickson Worldwide, Seattle. TV, radio, print and outdoor ads are expected within weeks.

An even larger ad spender is PlanetRx, which is searching for its first traditional agency for its estimated $50 million account. It sells prescriptions in addition to personal care items.

PlanetRx, which spent $5 million on advertising in the first half of 1999, will ratchet up spending with proceeds from its pending stock offering.

Rx.com, meanwhile, a site that touts itself as a healthcare resource, already sells over-the-counter medicines and will sell prescriptions this fall. As part of its Rx.com Rewards program, the site is giving away the "Reader's Digest Guide to Prescription & Over-the-Counter Drugs" for purchases of $30 or more. The Think Tank, Austin, Texas, will handle offline ads for a fall campaign as well as the relaunch of the site that went live in May. CBS Corp. holds a 20% stake in the site in exchange for $37.5 million in advertising over four years on CBS properties.


Drug Emporium, the online unit of parent Drug Emporium Inc., which operates Drug Emporium, F&M Super Drug and Vix drugstores, is undergoing a facelift. The company last week hired Amie Beth Franklin, former head of business development and chief science officer for health product e-tailer MotherNature.com, as president of the site to spearhead its relaunch, expected this week.

Competition will increase as retail outlets gear up. Analysts expect Wal-Mart Stores, despite its less-than-commanding presence currently on the Web, to set up an online pharmacy.

Online drugstores claim their prices are lower than bricks-and-mortar stores. Cursory Advertising Age research found that to be the case. But it's the promotions that are likely to continue to attract consumers.


Recent Jupiter research found that 73% of online consumers wait to see a promotion or a discount before making a repeat purchase at a site.

"Consumers see the Internet as a bargain basement," Jupiter's Mr. May said. "There is very little incentive for them to make an impulse purchase" when they know they can find a lower price elsewhere on the Web.

Of course, there is a price for every deal. Want to lock in product prices for life through More.com?

Make sure you are a U.S. resident, buy everything you need now and buy those same things at least once a year. There are no substitutions if a manufacturer stops making a product; the deal may end if More.com gets acquired; and the site takes no responsibility for computer bugs or technical failures that could cause it to inadvertently terminate the promotion. If that happens, all bets are off, according to the fine print.

Such a deal, right?

Copyright August 1999, Crain Communications Inc.

Most Popular
In this article: