Drugstore.com finally is profitable
Internet Retailer is reporting that Drugstore.com showed a profit of $156,000 on $118 million in sales. Of course, that is a pretty modest net income percentage (.1%), but it is a step in the right direction. For the year, Drugstore.com lost $9 million on $445 million in sales.
I love looking at these kinds of numbers. There are a few interesting takeaways that I see:
1) Slow growth. Drugstore only grew 7% in 2007 and they are projecting a modest 12% increase in revenue during 2008. This growth rate is far below the 20% that online sales are expected to grow across the board.
2) Online phamacy sales dropped. I am not sure what to make of this but pharmacy online sales are not doing well. In the case of Drugstore, they lost 26% of that business last year. I heard a presentation from Drugstore several months ago, and they indicated that over-the-counter health products are their future because of higher margins and less competition.
3) Repeat customers represented 80% of Drugstore’s business last year. Now, that might sound healthy, but I would not be encouraged by that number. Yes, it means that Drugstore is doing some things right in customer service, but it also means they are having problems growing market share.
4) In-store pickup pharmacy sales increased 18%. This bears out a trend that I have been noticing where online stores that also have a brick and mortar presence have a big advantage. For some reason, customers want to buy online and then go pick up the product at a physical location.
I want to mention one other thing that should be sobering to online retailers that are more fiscally conservative. Drugstore.com has lost millions of dollars for years, but they are now in a pretty good position. Is it really feasible for a small player that is unable or not willing to risk millions of dollars to compete with the big guys?
The answer is yes, but it is highly unlikely. How can you improve your chances? I will cover that in a future post.