How Walgreens.com Successfully Sells Consumables Online

April 13th, 2010

By Clark Fredricksen

Walgreens, the nation’s largest drugstore chain, was one of the first brick-and-mortar retailers to go online back in 1995. Today, prescriptions and photo processing are the top online traffic drivers, followed by vitamins, cosmetics and general merchandise.

Miguel Almeida, vice president of online merchandising and operations for Deerfield, Ill.–based Walgreens.com, oversees all aspects of online sales, merchandising, customer service and fulfillment for front-end products. Mr. Almeida spoke with eMarketer about the online marketplace and how the company drives e-commerce traffic and sales. Here’s a snippet from the full interview available on eMarketer Total Access.

eMarketer: What categories dominate your online business?

Miguel Almeida: Online, we are a health, wellness and beauty destination. Walgreens.com is also a place for consumers to fulfill their everyday needs in other products.

Once people establish a relationship through photo, pharmacy or front-end products like vitamins or cosmetics, they may add consumable items to their basket. Consumables are not a key online destination. We don’t use consumables to bring customers to the online channel.

eMarketer: Online, how do categories complement each other?

Mr. Almeida: There is a relationship between the business units in terms of attracting people. Online pharmacy is very strong and is a big area of Walgreens.com’s business. People need to come back for prescriptions.

The online photo customer has a portfolio of photos that they want to upload on our Website. We also do photo gifts. Then, they start seeing our general merchandise offerings.

eMarketer: How do you make money online with consumables?

Mr. Almeida: Once somebody becomes a Walgreens.com customer, they are refilling prescriptions and buying general merchandise. Having items for shoppers’ everyday needs is part of our value proposition. The profitability comes from the three categories playing off each other.

eMarketer: Do you consider consumables a growth area?

Mr. Almeida:Our online consumables business is growing. We provide a good assortment along with a good value proposition and convenience.

eMarketer: Which consumables categories perform well online?

Mr. Almeida: HBC [health and beauty care] is one of the largest, although there is no big one. Rather, HBC is part of the long tail of the online equation. Dental, deodorant, bath, health needs, shaving and diapers are very popular. Some of the items can’t be found in the store. Certain ethnic hair care items are a perfect example of the long tail.

eMarketer: How much of your consumables business revolves around products that are not carried by that many stores?

Mr. Almeida: Some stores are changing their assortments and trying to rationalize SKUs to make their stores more customer-friendly. There are items online that are no longer being offered in stores. This is how our in-store business ties to the online business. People immediately go to the Website to find these items.

eMarketer: Is the inability to carry so many SKUs in the store a direct result of all the brand extensions created in recent years?

Mr. Almeida: From a supply standpoint, CPG companies are adding a lot of SKU varieties to increase their market share. From a retail standpoint, it gets really complex to carry the whole assortment in stores. An overcrowded store is not that customer-friendly. As a company, we can manage high-velocity items in stores. But the customer who can’t find something in the aisles can find the exact items online.

eMarketer: How many more consumables do you carry on your Website versus in stores?

Mr. Almeida: Roughly 25% more consumables are available online versus in stores. I can’t provide specific numbers. But I will say we have thousands of items online. It’s one of our key focus areas.

eMarketer: How do you inform shoppers that a product they can’t find in stores may be available online?

Mr. Almeida: Our in-store signage helps. It tells people that they can go to Walgreens.com to find what they’re looking for. We have been more aggressive about actively placing these signs in all our stores.

eMarketer: Do consumables customers also turn to your Website for educational information?

Mr. Almeida: When we talk to online and multichannel customers, we find there is a growing group who is proactive about obtaining information before purchasing certain consumables. We saw this group starting to emerge in the late 1990s, early 2000s. Many are eco-conscious. They want to know what’s good for their skin. They use our Website to research products. The richness of online information, reviews and content is far beyond what you can obtain in a physical store.

eMarketer: How do you feel about some of the big manufacturers selling products online? Is this competition?

Mr. Almeida: Manufacturers are testing the waters of the online channel. Many manufacturers don’t have a lot of visibility there. This is a great way for manufacturers to learn directly from a consumer standpoint.

But I still think the value is in offering shoppers a purchasing experience that lets them buy a complete market basket. If I have to go to five sites to get shaving cream, the manufacturer-to-consumer concept won’t work. I see the value of testing the waters. But it can only go so far.

eMarketer: Are you doing anything in the area of mobile ordering?

Mr. Almeida: We have a strong mobile offering in pharmacy and photo. You can refill your prescription from your phone. You can send photos from your iPhone and pick them up in the store. This has been fairly successful. We also have a GPS-based store locator that lets you find a store based on where you’re standing.


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