Shampoo, soap and medicine may not be the most exciting purchases, but when consumers use them every day, they need to replenish them frequently. Capturing those regularly-restocking customers is at the core of Drugstore.com’s strategy, and it’s doing that with increasing success, CEO Kal Raman tells Internet Retailer.
“The average revenue we get from a repeat customer is $185, up from $50 four years back,” he says. “Everything we do is centered around facilitating replenishment purchases with minimal pain to customers.”
Raman points out that Internet ordering and home delivery is the perfect way for consumers to buy products of a personal nature such as those that they might be reluctant to pick off a shelf at a drugstore. “With a bunch of the products we sell, you don’t really want to buy the product with your neighbor looking over your shoulder. So that is where the web plays a huge role with a company like Drugstore,” Raman says. "We believe the web is about privacy and personalization and we work hard at exploiting those two attributes.”
In addition to highly personalized loyalty programs that encourage repeat purchases--one factor to which Raman attributes Drugstore’s increasing average basket size--Drugstore has found free shipping on orders of $49 and above, a threshold it settled on after trying other options, to be a significant driver of business. Some 70% to 73% of Drugstore.com’s business is from repeat customers, even as it has acquired new customers at the rate of about 1 million per year.
Though pleased with the increasing basket size and customer base, Raman says it’s still just the beginning for Drugstore. “The average household spends $2,000 to $3,000 a year on basic health, beauty and prescription products. The category is $270 billion and growing at the rate of about 10% to 15% a year,” he says. “The maturation of this category on the web is going to happen in the future.”