Waves of new customers are filling prescriptions and buying cosmetics, vitamins and other traditional health and pharmaceutical products on the Net, according to a new study by research firm ActivMedia.
The study, titled “Consumable Products: Building Consumer Loyalty Online,” reports that these e-pharmacies have established a strong foothold in cyberspace, with total online sales for health and pharmacy-related consumables reaching $1.9 billion (US$) in 1999.
Two in Five Shoppers Buy Consumables on the Net
The study also found that two of every five online buyers shop for consumables over the Internet. As a result, ActivMedia projects that sales of health and pharmacy-related consumables will explode to $4.5 billion this year.
The study defined consumables as prescription drugs, over-the-counter drugs, cosmetics, vitamins, toiletries and other health and beauty products. It also included non-pharmaceutical categories such as groceries, household supplies, gourmet foods and pet products.
The study also reported sales of $1.9 billion in 1999 for the non-pharmaceutical categories and projected that sales of these consumables would grow to $4.6 billion in 2000.
ActivMedia is not alone in projecting strong growth. According to Forrester Research, 32 percent of online consumers already shop for health products on the Web. The research company predicts that eight percent of all retail sales of healthcare products will move to the Web by 2004, generating $22 billion in revenue.
Prescription drugs will account for $15 billion, according to the study.
Going Offline To Attract New Customers
The online pharmacies are spending huge dollars offline to attract new shoppers, as evidenced by last month’s 39-page glossy advertising spread by drugstore.com in Glamour Magazine. The section, titled “Living Well in Y2K,” is part of a branding effort by the e-tailer to establish a presence among the growing number of online women shoppers.
Customer relationship management firm Cyber Dialogue, for example, recently reported that 15 percent of women online are seeking out information on health and beauty products, while four percent are making purchases. Considering that about 49 million women are now online, that figure represents about two million shoppers.
Showing its commitment to online consumables, drugstore.com recently expanded its presence in the field by acquiring cosmetics e-tailer beauty.com for $42 million in stock.
Online Stores Also Going After Prescription Drugs
There is also a fierce battle being waged to fill prescriptions online, with drugstores that have brick-and-mortar affiliations often undercutting offline prices. Drugstore.com, for example, has a deal that allows consumers to pick up their online purchases at a Rite-Aid pharmacy.
To show the potential savings, an online shopper can buy a bottle of 30 pills of Lipitor, a cholesterol-controlling drug, at drugstore.com for $75 instead of paying $100 at Rite-Aid. The shopper saves $25 and can still pick up the prescription at a nearby Rite-Aid location.
These savings, of course, are only of value to people who must pay for their prescriptions. People whose prescriptions are covered by health plans pay the same amount online as they do offline.
Interestingly, such online savings are considered a strong incentive for senior citizens to jump online. Since Medicare does not cover prescription drugs, many senior citizens with limited incomes must pay for their prescriptions.
Cutting Edge of the Digital Divide
The potential price savings from filling prescriptions online places e-pharmacies at the cutting edge of the growing digital divide debate. An estimated 70 million Americans, for example, do not have their prescriptions covered by health care insurance. Presumably, these people will benefit most from these online savings.
Many of these 70 million, however, are purportedly from the have-not side of the digital divide. While they are the people who most need the savings, they cannot get them because they are not online.