© IGD 2012 Special Analysis, July 2012. © IGD 2012 What will you learn from this Special Analysis? IGDs top 10 online drugstore websites to check out.

© IGD 2012

Special Analysis , July 2012

© IGD 2012

What will you learn from this Special Analysis?

© IGD 2012

What is all the online fuss about?

Health and beauty is one of the fastest growing categories online, experiencing 33% year-on-year growth in May 2012, up 6% from the previous month (IMRG-Capgemini eRetail Sales Index).

Health and beauty suppliers are looking to take advantage of the growth of online grocery sales, forecast to grow from £5.9bn in 2011 to £11.2bn in 2016, that’s growth of 89.7% and a CAGR of 13.7%.

44% of shoppers intend to use the online channel for grocery shopping within 5 to 10 years, compared to just 17% who are doing so in 2011 (ShopperVista Sep’11).

Given recent growth and future online forecasts, the category of health and beauty is receiving an increased retailer focus. Competition is ‘heating up’ and will continue to intensify, not just from existing bricks and mortar retailers but also from newly emerging online specialists and non-specialists, such as Amazon, who are testing what potential lies ahead for online health and beauty.

There remains a huge opportunity for health and beauty online. Despite the growth of online shopping, the majority of British women still buy health and beauty products offline.

11

22

33

44

55

Source: IGD Research, IMRG-Capgemini eRetail Sales Index June ‘12, IGD ShopperVista Sept ‘11

© IGD 2012

Five online drugstore retailers to watch…

Source: Company websitesClick on the logo’s to access each retailers website homepage

IGD’s top 10 to check out

© IGD 2012

Five more online drugstore retailers to watch…

Source: Company websitesClick on the logo’s to access each retailers website homepage

IGD’s top 10 to check out

© IGD 2012

Six factors for online drugstore success

Websites that succeed deliver the best value.

Research shows 63% of online shoppers now use the internet to compare prices, therefore price

transparency and positioning is key.

Websites that succeed deliver the best value.

Research shows 63% of online shoppers now use the internet to compare prices, therefore price

transparency and positioning is key.

A well structured website with specialty and fun

features will encourage people to spend more.

A well structured website with specialty and fun

features will encourage people to spend more.

Good service will keep customer coming back

for more. Ensure prompt and secure payment, delivery and process transparency to build customer confidence.

Good service will keep customer coming back

for more. Ensure prompt and secure payment, delivery and process transparency to build customer confidence.

Attracting people to your website is key to success,

there are many way retailers are looking to

increase user penetration.

Attracting people to your website is key to success,

there are many way retailers are looking to

increase user penetration.

Websites that deliver a niche offering and unique features will set them apart from

online and offline competition.

Websites that deliver a niche offering and unique features will set them apart from

online and offline competition.

Online customers can’t test, smell, touch H&B products. Websites must give customers

confidence in the retailers proposition.

Online customers can’t test, smell, touch H&B products. Websites must give customers

confidence in the retailers proposition.

Best practice in action

Source: IGD Research, IGD ShopperVista Research – The Connected Shopper May’12

© IGD 2012

Balancing a broad, niche and convenient offer

Source: Company websites


With drugstore websites often selling ten’s if not hundreds of thousands of products, the most successful websites need to find the right balance of selling broad ranges, having niche features

and/or products but at the same time make the offer simple and convenient to navigate.

Drugstore.com clearly displays all of its great features on one easy to understand webpage. The

homepage also allows customers to browse by category, brand and top rated products.

Beauty Planet relies on a clean and simple homepage, rather than overwhelm the consumer. With H&B

purchases online mainly being planned rather than impulse purchases, the website focuses on seasonal and

premium products to drive customer spend.

© IGD 2012

Personalisation of the shopping experience



To lock down customer loyalty, online retailers are looking to personalise the offer, especially where they can link this to smartphone applications, for increased on the move interaction. For retailers that have bricks and mortar

operations creating a differentiated online proposition is vital to ensure the customer comes back to your site again and again.

The new CVS.com website allows customers to

personalise their webpage. With the

new service you get a personalised

welcome to the website, deeper assortment and a drug information centre to educate

customers.

The new pharmacy feature allows customers to

transfer prescriptions to

CVS, manage prescription refills,

see their full medicine history and also receive reminders as to

when new prescriptions are

need.

Customers can now combine

their ExtraCare loyalty account

with the website, send rewards

direct to their card and see how much they have saved.

Through better understanding the customers needs CVS can provide exclusive deals, with deal-of-the-

day and online only offers available.

CVS is revamping its mobile apps to

deliver similar personal features, including a digital

ExtraCare card, product scanning facilities and text

reminders.

© IGD 2012

Gift solutions inspiring website interaction


With people increasingly turning to the internet for inspiration, drugstore retailers need to make products as easy to find as possible. Websites are looking to take advantage of this, specifically with

regards to gift ideas, and premium beauty specialists are looking to take advantage.

Beauty Planet provides gift ideas for men and women in an easy to navigate webpage with products divided by lifestage. This delivers a different

perspective and clear differentiation for the shopper.

Feelunique.com have taken a different approach where customers can create their ‘wish list’, not only

does this deliver a solution for shoppers but helps promote the website to their friends and family.


© IGD 2012

Strong price positioning vs. traditional retail


On its homepage OneClickPharmacy clearly displays savings the last 10 customers have gained from

shopping on their website versus the high street, It also guarantees to be cheaper than its competitors

or it will given customers an extra 15% off.

Online drugstore websites are looking to pass on cost savings they can generate through having less overheads compared to bricks & mortar retailers. This gives them the ability to offer

unparalleled prices and deliver highly attractive shopping destinations in the current economic climate.

Drugstore.com is a good examples of how online websites are providing additional discounts that are exclusively available online. E-coupons remove the

need for a paper alternative and are instantly redeemable. Alongside sale items, items that offer free shipping and clearance products, there are many ways

retailer can deliver enhanced value versus the high street.


© IGD 2012

Promotional flexibility, volume and free delivery


Stockn’Go’s new ‘buy the case’ initiatives is looking to drive volumes by offering bulk deals and free delivery.

Value to the shopper can be delivered in a multitude of ways. Although clear pricing at the point of sales in paramount, online retailing is offering many opportunities for retailers to offer

exceptional value through unique promotions, big pack deals, free delivery and internationally flexible websites.


Deal of the Day from CVS and Weekly Specials from Sephora are ways through which online health and beauty specialists can quickly and

easily swap over promotions and deliver value versus the high street.

Delivery charges remain a barrier for many online shoppers.

Feelunique.com offers free worldwide delivery and a website that offers flexible currencies and languages,

increasing global penetration.

© IGD 2012

Using popularity as a tool to unlocking navigationAs in offline drugstore retailing, navigating the shopper through an offer that can have thousands of

products can be the main challenge. Online drugstore retailers are increasingly looking for solutions to make new and relevant products easier to find. Increasingly many are turning to product popularity as a

solution.


Sasa,com is one retailer that does this well using its ‘Premium Charts’. Through the data Sasa.com collects on its websites it creates

league tables of; best sellers, top-rated products, top-favourited products and top-

searched products. Customers can flick between the countries it operates in to see what is also popular in other markets. This creates an easy and direct way to discover the latest trends.


© IGD 2012

One stop healthy-living destinations


Across many online health and beauty websites we have recently tracked an increase in the breadth of the offer delivered, but also the growing ability of retailers to deliver online doctor and nurse consultations. This provides solutions for people who either do not have time to visit their doctor, spares embarrassment when shopping for

sensitive health issues in-store and also helps people who need specialist prevention medicines (e.g. anti-malarials).


Pharmacy 2U provides a one stop shop solution

combining a quick online diagnosis with a prescription

service from its online doctor service. An easy to

navigate website with strong visuals gives the site

strong usability and encourages interaction. To

drive repeat business it then offers a free reminder,

renewal and delivery service to lock in existing business.

© IGD 2012

Increasing conversion through multi-mediaSephora’s website is true to its principles as a ‘visionary beauty-retail concept’. It is a world leader in terms of how it uses a mixture of blogs, expert discussion boards, mobile apps, supplier articles and its own Sephora TV to engage

with customers. Not only does it sell beauty products it acts as a source of knowledge and inspiration all on one website.



© IGD 2012

Allowing the customer to try before they buy


Birchbox operates an interesting subscription service through which to engage customers, earn their loyalty and help them find out about the latest products. The website is simple to navigate with two tabs, one for

women with a pink colour scheme and one for men with a blue colour scheme.


The service provides a fun and individual way by which the retailer and suppliers can talk to its existing and new customers. Through

customers being able to try products and get expert advice, which is tailored to their profile, they can buy with confidence. Birchbox also

awards loyalty points to encourage repeat business.

© IGD 2012

Multiple mechanics employed to build trust


Especially with regards to online only drugstore retailers, transparency is key in order to gain trust. Retailers are using multiple techniques, with serious references, to promote secure payments, delivery speed, seal of approvals

and the use of language that resonates with the core user demographic, all of which deliver ultimate peace of mind.


© IGD 2012

Social media a key tool for all drugstore websitesBest practice in action

All of our ‘ten to check out’ websites are widely using social media to engage with customers and to try and attract new business. With the drugstore category slower to move online compared to other

categories, retailers are using these tools to engage, inform and sell to the consumer across all platforms.

Source: Twitter, YouTube, Facebook, Sephora

© IGD 2012

Incentives to build stronger relationships Best practice in action


Retailers are using various initiatives on their websites to increase customer engagement and build trust.

Drugstore.com has an online loyalty scheme whereby customers can collect points on purchases and redeem on purchases every

quarter.

Sasa.com widely uses consumer reviews to promote products. In order to do this it offers incentives and prizes

for the reviews that have been best received.

Feelunique.com has regular competitions. These encourage customer interaction with their own

website, social media feeds and also supplier websites.

© IGD 2012

Online supplier-direct shoppers

Crowd sourcing contributors

Social network brand followers

Shoppers want to connect directly with brandsInterest in internet-based solutions to help shoppers engage with brands

AverageWould like to do it Can imagine doing it eventually

Supplier capabilities

Source: IGD ShopperVista Research – The Connected Shopper May’12

There is a growing desire from shoppers to connect

directly with brands. This is especially relevant for the

H&B category when compared to other retail

channels and grocery categories. There are lots of opportunities for suppliers to

increase direct customer interaction.

© IGD 2012

Direct to market supplier websites



Suppliers are increasingly developing propositions whereby they are selling direct to market online, either via websites that are clearly branded as their own or websites with their own fascia brand.

L’Oreal and direct marketer 3 Suisses own Le Club des Createurs de Beaute, a cosmetic site with a presence in Japan and France. In

2013 L’Oreal will start to sell products through its own website.

Reckitt Benckiser has a Durex website. It serves to inform

customers about its ranges, provide sexual education and deliver fun via

mobile apps and games.

P&G estore launched in the US in May ‘10. The website is P&G’s ‘living lab’ where it plans to

understand online retailing and pass on best practice learning to

retailers.

© IGD 2012

Supplier Subscriptions a new solution



One way that suppliers can engage directly with its customers is through the growing trend of subscription services. In certain categories such as male shaving, like retailers, suppliers are providing regular hassle free,

great value solutions on products that customers would be purchasing on a regular basis.

King of Shaves new ‘Sub’ allows customers to choose between three plans costing £3 or £4 / month.

Customers get a free razor with their first delivery and three blades a month. The service, launched in Apr ‘12,

is active in the UK, Canada, US and 15 Euro countries.

US-based Dollar Shave Club was set up by two entrepreneurs. Working with a leading blade supplier it

created three razors and monthly plans. To communicated with its target audience, in Mar ‘12 it

launched a viral, it has so far had 5m views on YouTube.

© IGD 2012

Social media interaction a growing trend

Source: Facebook,


Just how drugstore websites are leveraging more engagement with customers through social media, the suppliers are also looking at all methods to create strong brand allegiance and create added interest in their

ranges.

Through consumers liking, writing about, pinning or watching online viral videos, suppliers are using social media as a cheap

and quick way to spread the word about brands and understand which existing and new items are most popular.

© IGD 2012

Health and beauty websites need to develop propositions that differentiate from what the consumer can get on the high street, be that through breadth of range, niche features, great value or a personalised experience.

The online environments can open up brands, products and retailers to a truly international audience, those that succeed will have the most flexible approach and customer-focused offer.

Online health and beauty retailing is not purely about selling to the consumer, those that are generating the most success are engaging and communicating with consumers, creating an all encompassing experience that delivers friendly advice, fun and discovery.

Success requires a strong understanding of your current and future online customer - confidence is key for all online retailing. Do they want to know what is new or what is popular? A key point of difference will build trust and eventually deliver customer loyalty.

The best health and beauty websites are those that are simple yet effective, retailers need to cut through the noise and deliver easy to navigate solutions, with clear price positions.

Opportunities to grow online drugstore sales Considerations for winning online

11

22

33

44

55

© IGD 2012

Next steps.....

112222

33

This report was prepared by Nick Miles,

Senior Business Analyst

[email protected]

Need something else?

Email askIGD.com or call +44 (0) 1923 851954

Follow us on Twitter @RetailAnalysis

© IGD 2012 Special Analysis, July 2012. © IGD 2012 What will you learn from this Special Analysis? IGDs top 10 online drugstore websites to check out.

Documents

online health

online retailers

online customers

online shoppers

online channel

online drugstore websites

online fuss

online drugstore retailers