drugstore.com, inc.

Author:Rayna Bailey

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411 108th Ave. NE, Ste. 1400

Bellevue, Washington 98004


Telephone: (425) 372-3200

Fax: (425) 372-3800

Web site: www.drugstore.com


When drugstore.com launched its website in 1999, the competitors in the online-drugstore segment were primarily a site introduced that year by CVS, a traditional "brick-and-mortar" drugstore, as well as several "pure-play" Internet retailers (those with online stores only), including PlanetRx.com and Rx.com. By 2000 PlanetRx.com and Rx.com had closed their sites, drugstore giant Walgreens had introduced an online presence, and drugstore.com was growing, with reported revenues of $34.8 million its first year and nearly 724,000 unique visitors to its site in one month (February 2000). To drive business during its first year, drugstore.com spent $28.5 million on advertising created by ad agency McCann-Erickson. Despite its marketing efforts and growing consumer interest in the site, however, drugstore.com lost $115.8 million in 1999. Pushed by its partners—General Nutrition Center (GNC) and Rite Aid drugstores—drugstore.com dropped McCann-Erickson and signed on Fallon McElligott as its new agency in August 1999 (the agency shortened its name to Fallon in 2000).

To help establish drugstore.com as a force on the Internet as well as a solid alternative to traditional drugstores, to further increase brand identity, and to drive shoppers to drugstore.com's website, Fallon created a new marketing campaign for the e-tailer that began in March 2000. The $30 million campaign targeted drugstore.com's core customers, women aged 25 to 54. It included television and radio spots, print ads, and online advertising, all with the theme "A Very Healthy Way to Shop."

The campaign won a 2001 Bronze EFFIE Award and achieved its goals, increasing overall brand awareness by 48 percent and pushing the number of weekly visits to the site up 18 percent. Sales also increased, jumping to $110 million in 2000. But drugstore.com continued to operate in the red, losing more than $193 million in 2000. As part of its budget-cutting measures, drugstore.com canceled its campaign and eliminated all off-line media spending.


Drugstore.com hung out its virtual shingle in 1999 with the goal of providing consumers with first-rate pharmacy services and a wide selection of health, wellness, and beauty products not often available at traditional brick-and-mortar drugstores because of space limitations. Coupled with the variety of products was convenience; busy consumers could shop for what the company described as "drugstore stuff" from the comfort of their own home or office simply by logging onto the Internet.

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Partnerships with companies such as General Nutrition Center (GNC) and the Rite Aid drugstore chain helped drugstore.com expand its market reach. Within 13 months of drugstore.com's introduction the company announced that its one-millionth customer had shopped at the site. Chain Drug Review reported that, according to Peter Neupert, drugstore.com's CEO, by May 2000 more than two million Internet users were visiting drugstore.com's site each week.

Helping drive consumers to the new website was an advertising campaign created by the agency McCann-Erickson, Seattle. San Francisco-based Left Field Advertising, which had been responsible for all of drugstore.com's advertising prior to McCann-Erickson taking over off-line efforts, continued to handle drugstore.com's online advertising. Shortly after drugstore.com began its partnership with GNC and Rite Aid, McCann-Erickson lost the drugstore.com account based on complaints by the two chains that the advertising strategy touted online shopping at the expense of...

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