A Forrester report points out challenges faced by some business-to-business firms working online.
The retail chain expects to pay $429 million for the web-only Drugstore.com, which has struggled to post consistent annual profits since being launched in 1999. Walgreens expects the deal to boost its aggressive efforts in online retailing and mobile commerce.
One of the biggest names in the online retail category for prescription drugs and health and beauty supplies is being acquired by one of nation’s largest drugstore chains.
This morning Walgreen Co., No. 68 in the Internet Retailer Top 500 Guide, announced plans to buy Drugstore.com, No. 46, in a deal valued at $429 million. Under the terms of the deal, Walgreens will pay $3.80 per share for Drugstore.com’s common stock. Walgreens expects the deal to close by the end of June.
Walgreens will retain Drugstore.com’s offices, call centers and distribution hubs, the retail chain says. Under the leadership of president of e-commerce Sona Chawla, Walgreens has been aggressively expanding its online retailing and mobile commerce business base. The retail chain says it is acquiring Drugstore.com to gain the e-retailer’s recognized brand and expertise in the online health and beauty space.
“Our acquisition of Drugstore.com today significantly accelerates our online strategy to leverage the best community store network in America by becoming the most convenient choice for health and daily living needs whether customers shop online or in our stores,” says Walgreens CEO Greg Wasson. “This acquisition offers a unique opportunity that will provide us immediate access to more than 3 million savvy, online loyal customers, and will allow us to move even closer to our existing customers through relationships with new vendors and partners, adding approximately 60,000 products to our already strong online offering.”
The acquisition of Drugstore.com and its other brands, which include Beauty.com and Skinstore.com, will help Walgreens become a more diversified multichannel retailer of health and beauty products, says Chawla.
“Over the past two years, we’ve established the infrastructure from which to grow our multichannel products and services, and by combining Drugstore.com’s capabilities we are well on our way to achieving our goal of becoming the most convenient multichannel retailer for health and daily living needs,” she says.
For Drugstore.com, which has struggled to post a consistent annual profit since being launched in 1999, the acquisition by Walgreens gives the company access to a bigger company with deeper financial, marketing, supply chain and merchandising resources, says CEO Dawn Lepore. “Our growth strategies are perfectly aligned, and Walgreens will be able to accelerate and expand the investments necessary to achieve our vision and growth opportunities,” says Lepore.
For the year ended Jan. 2, Drugstore.com reported:
• Sales increased 21.5% to $456.5 million from $375.6 million in 2009.
• Net loss was $3.6 million compared with a net loss of $1.4 million in 2009.
• Sales from over-the-counter merchandise increased year over year by 25.5% to $385.2 million from $306.9 million.
• Vision-related revenue increased 3.6% to $71.2 million from $68.7 million.
• Total orders, excluding orders from other businesses, grew to 1.7 million.
• The average over-the-counter order was $62.
The pending purchase of Drugstore.com by Walgreens is the latest in a series of recent deals in which online retailer are being acquired. Earlier this week Shutterfly Inc. acquired Tiny Prints Inc. in a deal valued at $141 million. In February Nordstrom Inc. acquired private-sale site HauteLook for $180 million in stock plus additional incentives if the flash sale site meets certain goals.
Chawla will deliver a keynote address June 16 from 8:30 a.m. to 9:00 a.m. at the Internet Retailer Conference & Exhibition in San Diego in a session entitled “Mobile, web, stores: Coordinating all channels to capture today's always-on consumer.”