CVS.com
Cross-channel loyalty builds sales

Among retail segments slow to persuade consumers to purchase online has been health and beauty. But one player—CVS.com—has been aggressive in the last year in integrating its online sales to its national chain of pharmacies and in offering additional online value. “Sales of health and beauty items have been small until this past year,” says Carrie Johnson, senior analyst for Forrester Research Inc. But once that business started to catch on, CVS was quick to move. “They’ve undertaken a major effort in the last year to integrate their web site with their stores,” Johnson says.

A major factor that has enticed customers to shop online has been CVS’s cross-channel loyalty program. It allows customers to accumulate points for purchases both online and at the store and redeem them for discounts or free items. A new feature of the web allows CVS customers to check the status of their loyalty accounts.

Another major factor enticing customers to shop online is the ability to order prescriptions and over-the-counter items online and pick them up at a store. “This is a major convenience. Now customers don’t have to wait in the store,” Johnson says.

But in the end what has helped CVS’s Internet sales is an increasing trust by consumers to purchase health and beauty products online. “Health products in particular are considered a risky purchase; customers have to be confident that they will arrive on time,” says Johnson. But while consumers were initially hesitant to purchase such items online, their growing trust as the result of buying other products, such as books and electronics, and having them arrive on time has emboldened consumers to try these critical purchases as well. Additionally, the increasing number of women shopping online has helped this business as they are more likely to purchase health and beauty items online than men.

Among customers who are ordering items from CVS online are those who buy in bulk. “These are busy people who don’t have time to run down to the corner drugstore and buy a bottle of shampoo, so they order five bottles online so they’ll always have some when they need it. Most of CVS’s sales seem to be items that can be purchased in bulk—like diapers, vitamins and basic hair products,” Johnson says.

CVS is considered strong in online customer support and in keeping the site easy to use. “It has a good search function in that customers can sort by brand or by product categories and it does a good job of helping customers find what they need,” Johnson says. m

Drugstore.com
Before you run out

Surveys show that most consumers don’t enjoy shopping at the drugstore. The 4 million customers of Drugstore.com don’t have to. CEO Kal Raman says the Internet is the perfect Rx for shopping the health and beauty category. “The web is about privacy and convenience,” he says. “Some of the products we sell you wouldn’t want to buy with your neighbor looking over your shoulder. This is where the web plays a huge role with a company like Drugstore. You are able to get all the private products you need in a discreet way from an organization that’s got a high reputation and high trust value.”

In addition to more than 2 million prescriptions shipped in four years, Drugstore’s rapidly growing OTC business shows the company is onto something. It’s grown 30-40% every quarter for the past year, compared with chain drugstores whose OTC business has been largely flat or down. Given the nature of the products it sells—items that need to be replenished regularly—it’s critical for Drugstore to get its customers to return. And it does: up to 73% of sales are repeat business, even as it has acquired new customers at the rate of about 1 million per year. Drugstore.com encourages repeat customers with a three-part loyalty program for OTC products.

At the center of the program is Diamond Deals, a personalized, online circular refreshed weekly that offers registered customers discounts on a selected basket of products in which past purchase and browse behavior indicate the customer might have an interest. After launching it in late 2002, Drugstore.com has continued to fine-tune the engine that populates that basket differently for every customer, layering in new variables such as frequency of purchase and what is already in the shopper’s cart.

A second program, Drugstore Dollars, gives customers back 5% of the previous quarter’s purchases, redeemable on new purchases in the first month of every new quarter. Free shipping on orders of $49 or greater also helps accelerate sales, as does a Your List feature that stores purchase history and allows customers to re-buy with one click, and an opt-in e-mail service that reminds customers when they are about to run out of scrip or product.

Raman says Drugstore.com is out to change the way people shop in the category with features that encourage shoppers to restock not after but before they run out. “We make it easy for you to buy it, give you the best price, and make it easy for you to re-buy it so you never have to worry about it,” Raman says. m

Godiva.com
No aroma, no taste, but everything else

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Innovation isn’t a word naturally associated with chocolate. Yet when the chocolate company is Godiva Chocolatier Inc. with a high-end product, a nationwide customer base and a large gift business, innovation on the web is a necessity. “Godiva shows a real understanding of their customers,” says Mary Brett Whitfield, senior vice president of consultants Retail Forward Inc. “They’ve thought about who’s coming to the site and how they’re using it.”

Godiva this year rolled out a couple of innovations that place its site above others. For one, a Gift Selector Service helps customers choose the right combination of gifts and shipping costs to fit a budget. For another, new information about the chocolate pieces allows customers to see both what’s in the boxes and what’s in each piece. “We want the web site to drive awareness of the brand, knowledge of what we offer and the opportunity to buy,” says Kim Land, vice president of Godiva Direct.

With the Gift Selector Service, a customer who wants to send multiple gifts can plug the number of gifts, the size of the budget and whether gifts will go to one address or multiple addresses into a calculator that displays choices within the budget including shipping. “We try to make gift giving really easy,” Land says.

Godiva has succeeded, Whitfield says. “At most sites it’s pretty cumbersome to send three gifts to three locations,” she says. “They facilitate orders in an above-average way.”

But Godiva isn’t pushing just sales. It’s also promoting its brand and acknowledging that customers will also shop in its boutiques or at candy counters of department stores. “Customers at the web site can easily understand what we offer and get the store experience,” Land says.

For instance, the web site features beauty shots of chocolate and high-quality images of the Godiva gold boxes. “They can’t taste the chocolate online, but we give them the visual impact,” Land says. Furthermore, product descriptions and details about box and piece contents are designed not only to entice buyers but also to deepen customers’ product understanding.

“The chocolate guide is all about bringing people into the Godiva experience online,” Land says.

The web site has been effective in selling the Godiva brand, as it has attracted younger customers, Land says. Interestingly, most orders come from areas where Godiva has a strong customer base. “The greatest knowledge of Godiva offline matches with the highest use online,” Land says. “Customers shop on the web for some purposes and go to the boutique for others.”

Hersheys.com
Satisfying the sweet tooth online

Manufacturers—especially food companies—are typically not known for their great Internet sales capabilities. But Hersheys.com breaks that mold by providing a web site that is interesting to consumers and inviting enough that visitors will want to purchase customized chocolate products. “Manufacturers usually don’t communicate well with consumers, but Hershey’s goes out of its way to bring value to consumers through the web,” says Kelly Mooney, president of Ten/Resource, an Internet marketing company.

The site’s content plays an important role in selling chocolate as it provides recipes for chocolate-baked goods that can be printed out to fit on standard index cards. It also allows visitors to view a video tour of its famous factory in Hershey, Pa., and lets customers take a personality quiz to see which chocolate products best suit them. It also provides a map that consumers can click to find out which chocolate products are most popular in each state.

“Hershey’s connects well with the consumer,” Mooney says. “It makes visiting its site fun, but customers can learn a lot about the company and its products.”

Despite all the neat gadgets, much of the real attention is on what Hershey’s does best—sell chocolate. While its gifts section sells Hershey t-shirts, teddy bears and other ancillary products, the emphasis is on chocolate, whether that be gift baskets, canisters of bite-sized candy bars or customized chocolate goodies.

“They don’t sell online the standard products you can purchase in most stores,” Mooney says. “ For example, there is a promotion telling consumers they now get white chocolate Kit Kat bars in their local stores, but they don’t sell the candy bars online. Internet sales are mostly things that need to be ordered special.”

Among the unique products sold online are chocolate greeting cards. Among the standard cards are holiday greetings, “Thank You” and “Best Wishes.” The greetings can be written against a number of chocolate backgrounds, including a card that looks like a chocolate computer, a romantic card with hearts and ribbons and a card for teachers that has apples, scissors, crayons and a blackboard.

The site could use a few improvements, however. “It is not terribly well designed in that it is too list intensive,” says Mooney. “And sometimes, when you click on a link, you have a hard time getting back to the home page. They also need to do more frequent updates. I checked the site on Nov. 5 and it still had Halloween promotions.”

Nonetheless, Mooney says, “I think Hershey’s is trying to elevate its brand through the site and still provide something for everyone.”

SimonDelivers.com
Shortening the supply chain

That California head of lettuce at a typical Midwestern supermarket may have taken a week to travel from field to store, and it was handled multiple times along the way. But Internet grocer SimonDelivers.com manages to shave off about half the time and touch points from field to consumer with a one-stage distribution model that cuts out middleman brokers whenever possible to supply its warehouse directly from producers. The result? A crisper head of lettuce for the consumer and a spot in Internet Retailer’s Top 50 for SimonDelivers.com.

The Twin Cities-based grocer, which has no stores, accepts orders for home delivery on the Internet and by phone. With the full range of supermarket inventory, it makes fresher produce a centerpiece of its value proposition by shortening the typical supply chain and investing heavily in what CEO Christopher Brown calls “chill chain management,” refrigeration storage technology in its warehouses and trucks, to support that.

SimonDelivers.com also keeps delivery costs down—a challenge that helped sink earlier web grocers—with a controlled route system instead of on-demand delivery. Consumers select a day and time from a window of several choices for regular weekly delivery, which lets SimonDelivers.com plan delivery truck routes more efficiently.

With an active customer base of about 40,000 households in the seven-county Minneapolis/St. Paul metro area, SimonDelivers.com earlier this year pushed its service area into five area satellite markets and in October expanded into Des Moines, Iowa, 250 miles from its home base. With Des Moines at the center of several other larger cities, SimonDelivers.com already is eyeing the possibility of further expansion to another city next year.

In the meantime, it’s taken on a challenge closer to home that strikes at the heart of any Internet retailer: consumers’ lingering apprehension about navigating the web. Since November, the company has promoted S.O.S., Simon’s Offline Service, on its web site and via e-mail. Under the service, shoppers who want help in negotiating the site for the first time can set up a time with a licensed, bonded SimonDelivers.com rep who will come to their home and walk them through the process. Within its first 10 days, S.O.S. handled a dozen home visits and generated five times as many calls with questions that customer service reps were able to handle over the phone, Brown says.

“People who were hesitant to call before now know that we welcome their questions,” says Brown. “It’s given the individual who has browsed the site but didn’t want to make the leap that extra support.”