Food/Drug/Beauty
Food, drug and cosmetics retailers leverage the online option to grow sales

Internet Retailer Best of the Web 2006

AllenBrothers.com
CVS.com
Peapod.com
Sephora.com
SimonDelivers.com
TheFruitCompany.com
Walgreens.com

Prescription, sundry, and grocery shopping once required a trip to the store—but not anymore. The Internet has made everything from prescriptions to mascara to meat and produce available online with a few clicks of a mouse, and this year’s category winners have become adept at getting shoppers to choose the online option.

At grocery site SimonDelivers.com, the operative word is “easy.” A clear navigation path and the ability to store personal shopping lists make both first-time and repeat purchases a snap. Says Jupiter Research analyst Patti Freeman Evans, “They’ve mastered simplicity.”

Ditto online grocer Peapod.com, which has organized site navigation and beefed up back-end functionality to shave milliseconds of response time off an already fast-loading site to get shoppers in and out quickly. “It’s like Quicken for managing this other part of you life,” says. Tom Parkinson, Peapod’s senior vice president and chief technology officer. “People hammer away at placing their order, and if the site’s not fast, customers go away.”

At billions of dollars, the cosmetics industry qualifies as big business—serious business—but multi-channel cosmetics retailer Sephora keeps customers coming back to Sephora.com by mixing fun with functionality. A gift registry keeps customers browsing the site for goodies with the option of registering a top 10 list for gift requests. A “Fragrance Finder” helps customers sort through thousands of options to determine the right one. “We think cosmetics are all about having fun,” says Brett Miller, general manager.

Much of the best beef goes to restaurants, and Allen Brothers has long been a supplier of U.S.D.A. prime beef to the restaurant industry. Its web site throws open the freezer door to individual consumers as well. AllenBrothers.com has boosted site functionality and in particular imagery in a way that lures the online carnivore. An online shipping calendar gives customers quick information on when to expect delivery, but for questions on products or preparation, Allen Brothers also makes product specialists and chefs available via phone.

Chain drugstore Walgreen Co. just keeps finding new ways to wrap the web into its multi-channel strategy so as to sell more and improve customer service across channels. Walgreens.com knits together the chain’s 5,000 stores—7,000 by 2010. For example, a new service with HP Snapfish allows shoppers to upload photos to Snapfish.com for printing and output at any Walgreen’s store equipped for the service. Walgreens.com also has strengthened its prescription tools, allowing customers to order new and refilled prescriptions for store pick up or mail delivery, and to view their prescription history securely online.

Getting shoppers to go to the web for groceries, medicines and cosmetics instead of piling into the car requires online retailers of food, drug and beauty products to offer an experience that measures up to, and even improves on the experience customers will have in the brick-and-mortar environment. That’s something this year’s category winners know, and deliver on.

Chicago-based Allen Brothers Inc. is a major source of U.S.D.A. Prime beef to steakhouses in the Windy City and beyond, a role it has maintained since 1893. “We’re high end, the top 15% choice,” CEO Todd Allen Hatoff says.

But Hatoff wants to be more than the invisible-to-consumers source of prime meat and seafood to pricey eateries. In a push to broaden Allen Brothers’ presence among consumers, he relaunched AllenBrothers.com this year to better merchandise a broadened line including complete meals prepared by its own chefs. “We needed to take the site to the same level of our name,” he says. “Allen Brothers stands for premium products, but our old web site didn’t reflect that.”

Judging by the site’s new appearance and the comments it elicits from industry experts, AllenBrothers.com has entered a new level of retail e-commerce worthy of a national brand. Its large, high-resolution images of steaks and other products load quickly, providing a real-life view not commonly found on other food sites. “Through the care they have taken on their mouth-watering product presentations, they have done a wonderful job of making me a believer that the quality of the product exists,” says Maris Dougherty, senior consultant at J.C. Williams Group.

Last year, Allen Brothers commissioned a complete re-design by Prominent Consulting, also in Chicago. Prominent deployed its own iChieve site merchandising software along with RichFX imaging and echoMountain application-serving infrastructure, providing for fast-loading, multiple views of high-resolution images that appear dynamically. For cross-selling purposes, for instance, the site lists supplementary products in order according to their recent popularity.

But AllenBrothers.com isn’t all about image. A dynamically generated shipping calendar at the point of purchase gives shoppers up-to-the-minute information on when they can expect delivery.

As the new web site provides a means of whetting the appetites of consumers at less cost than Allen Brothers’ image-heavy catalog, Hatoff sees it cooking up a future in retail that will eventually include retail stores. “It’s one of our major engines for growth,” he says.

Though it’s a national retail chain with more than 5,000 stores in 36 states, CVS Corp. is doing all the right things to make CVS.com the next best thing to an old-fashioned corner drugstore. The site, which attracts about 1.3 million unique visitors per month, according to comScore Networks, has added several personalization features over the years that make CVS.com one of the most frequented e-commerce sites in the online food and drug space.

The site carries off multi-channel retailing well. Visitors can click on CVS.com and see digital versions of the chain’s weekly fliers that enable them to buy the same products online or in a nearby store. CVS.com is also laid out much like an old-fashioned drugstore with a helpful pharmacist and clearly marked shopping aisles.

At the digital pharmacy counter, customers can order new prescriptions for mail order or pick up in a store, schedule refill reminders, check out a prescription price list and read health-related questions and answers on topics written by actual pharmacists. CVS.com was also one of the first online drugstores to move into digital photo services, which gives customers the ability to send digital pictures to CVS.com and pick up their prints the next day at a convenient location.

CVS.com earlier this year had to fix a security breach that let unauthorized users with e-mail access view the purchasing histories of customers using the chain’s ExtraCare loyalty card, according to several published reports. Specifically, unauthorized users could access certain purchasing information pertaining to a customer’s flexible spending account if the wrong party typed in the user’s account information, ZIP code and part of the last name. CVS says it moved quickly and fixed the problem with additional security safeguards. The fact that CVS did respond quickly to a security problem, coupled with the site’s well designed product pages, site search and personalization tools, says CVS.com is serious about privacy and customer service.

“The site is well balanced with a good blend of design, content and tools that enables shoppers to feel comfortable shopping by multiple channels,” says Barbara Zaccone, president of multimedia design communications firm Barbara Zaccone Associates. “CVS.com does a good job of personalizing the shopping experience.”

Take an online personal money management service, switch the focus of all those applications to grocery shopping, and you might have something that looks a lot like Peapod.com. “It’s like Quicken for managing this other part of your life,” says Tom Parkinson, Peapod’s senior vice president and chief technology officer. “It’s intense usage. People hammer away at placing their order. And if the site’s not fast, customers will go away.”

Instead, customers are coming to the site in increasing numbers. Chicago-based Peapod’s sales have been growing on average 25% a year. It now supports online grocery shopping in 15 markets, some in partnership with grocery chains Stop & Shop and Giant, also owned by Peapod’s parent, Netherlands-based Royal Ahold.

In an online sector marked by the gravestones of competitors, Peapod owes its 15 years to a model and management compelling enough to attract the needed investment, and to keeping customers happy. This year, it’s shaved the site’s already-fast response time even as site traffic has increased. It’s added non-standard grocery fare such as products from Chicago restaurant group Lettuce Entertain You. “People come to Peapod to save time, but we also differentiate ourselves on what you can get at Peapod that you can’t get in a grocery store,” says Parkinson.

Peapod this year equipped its delivery trucks with GPS navigation. The window of delivery now visible when customers log onto the site will be adjusted in real time based on the truck’s progress. Peapod will soon launch real-time ETA, generating an automated call, e-mail or text message to let customers know when the truck is 10 minutes away. Besides making delivery more convenient for customers, there’s an upside for Peapod: It gains a better understanding of delivery routes and times. “If I can shave minutes off delivery times, I can put another order on the same truck for the same overhead,” Parkinson says.

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“That last-mile strategy is what people have been working on,” says Neil Stern, senior partner with McMillan Doolittle—and a Peapod customer. “The better you can route the truck, the easier it is to get the trucks to people’s houses. It’s all part of making their business model more efficient, and ultimately, profitable.”

You might not expect to find a gift registry at an online cosmetics site. But that’s what shoppers find at Sephora.com as part of that company’s attempts to take a light-hearted approach to the big business of cosmetics. “We think cosmetics are all about having fun and gifts are fun to receive,” says Brett Miller, general manager.

At Sephora.com’s gift registry, shoppers can select items they like to receive as gifts and note special fragrances they enjoy. This registry has a lot of customer appeal. “Sephora takes the gift registry concept one step further than most by offering the top 10 gift requests if you’re not sure what you want,” says Shari Altman, president of Altman Dedicated Direct. “It also offers gift suggestions for every type of occasion imaginable including new job, baby shower and first kiss.”

Fragrances are a big part of the gift registry. Because fragrances are so highly personal, it is often difficult for the gift purchaser to find one the recipient will like without this help. “Experts told us that 75% of the women who received fragrances for Christmas last year received the wrong one, meaning they didn’t get the fragrance they most enjoy,” Miller says.

As part of its commitment to finding the right fragrance for shoppers, Sephora.com also has a “Fragrance Finder” that helps customers sort through the thousands of options to find the fragrance best suited for them. Customers can either describe certain fragrances that they enjoy and ask about similar ones or they can answer a serious of questions to identify a fragrance that fits their description.

And while it might seem difficult for customers to find the right cosmetics on the Internet where they can’t try samples, Sephora.com takes great pains to help customers find the right items. “We have beauty experts at our call centers that our online customers can call if they are confused,” Miller says. “A lot of shoppers will call and describe their skin tone and then ask how certain cosmetics will look on them.”

A recent addition at Sephora is the “Smile” category which combines teeth whitening products with lip-related cosmetics “We’ve tapped into the popular notion of having a beautiful smile,” says Miller.

When you’re selling food and other perishables over the Internet, three things are critical—presentation, delivery and ease in finding items. Those are three things that Simon Delivers does well and has continued to improve during the past year. While its search function has always been good, the online supermarket made it even better this year. “We’ve seen a 5% improvement in conversion since our search engine modifications,” says Christopher Brown, CEO.

In the past, a customer requesting cereal, for example, would be shown options based on the popularity of the various brands with other shoppers. Now, the brands selection and rankings are based on what that customer has previously purchased.

Also, customers can sort selections based on health factors. By requesting low-sugar cereals for example, a customer gets cereals rated as such by USDA standards. Other health sorts might include low-fat, low-sodium or high-fiber.

To improve delivery, Simon Deliver is using a new software system developed by UPS to narrow the window in which consumers can expect their deliveries to arrive. They are still given a two-hour window. However, on the day of the delivery, they can go to the web site to calculate their delivery time within 20 minutes.

And while visual presentations may not be important to customers buying a can of peas or a box of cereal, it is important to customers buying deli platters or prepared foods—areas that Simon Delivers has been expanding. “Improving the visuals of these products helps us sell because consumers really do want to see what they are buying,” Brown says.

As part of that expansion, Simon Delivers began delivering freshly made sandwiches and deli trays to area businesses and is looking to expand its prepared salads offering. Last summer, it also began offering full-cooked meals.

Despite the improvements and new features, in the end what makes Simon Delivers work is ease of use. “They’ve mastered simplicity,” says JupiterResearch analyst Patti Freeman Evans. “Shoppers don’t want a lot of products thrust at them the minute they get to the site. Simon Delivers has a clear navigation structure and they keep your shopping list for you to make repeat purchases easy.”

Sixty years ago, Roy Webster left his New York import/export fruit business for Oregon’s Hood River Valley, where he bought a pear orchard in the shadow of Mt. Hood. The original family business, Webster Orchards, developed as a national wholesale source to major supermarkets. When it was time for the third generation of Websters to take over, grandsons Scott and Addison Webster saw the web as their ticket to a future in retailing. “We saw the web as a way to leap-frog ahead of other fruit companies and build a national retail market,” Scott Webster says.

But they have never forgotten their valley roots. As TheFruitCompany.com launched in 1999, they decided to reflect the essence of the family business and the aura of the Hood River Valley life in what they presented online and delivered to customers’ doors. They commissioned a local artist to produce watercolor paintings to adorn their gift boxes, and they implemented a multi-step order fulfillment process that constantly checks that their fruit meets the family’s standards for size, texture and sweetness.

The strategy squeezed early profit margins, but it didn’t take long for it to pay off, Webster says. After a customer sent a fruit basket to the staff of The Oprah Magazine, for instance, the publication featured The Fruit Company on the cover of its 2003 Holiday List. Other recognition has come from leading e-retailers like 1-800-Flowers.com and Delightful Deliveries, which use The Fruit Company to drop-ship certain orders. Webster reports that the site is on course to hit $10 million in sales over the next year.

The Fruit Company’s web site itself earns praise from analysts. “This site radiates authority,” says Keven Wilder of retail consultants Wilder & Associates in Chicago, adding that the home page looks more upscale than other leading fruit and gift sites. “The home page romances the product with crystal clear photography that makes images almost jump off the page.” In addition, the web site includes a slick feature that enlarges a product image when the customer mouses over the “large image” wording; the shopper doesn’t even have to click it.

Even though the web generated less than 1% of Walgreen Co.’s total 2004 sales of $37.5 billion, Walgreen nonetheless is getting very adept at using the Internet as a multi-channel tool. In recent years, Walgreen’s insatiable appetite for real estate and building new bricks-and-mortar locations has resulted in a national network of 5,000 stores in 45 states and Puerto Rico. More than 1 billion cars pass the chain’s high-traffic corner locations every week and just over 40% of the U.S. population lives within two miles of a Walgreen’s store, the company says.

With a growing network of stores that the company expects to grow to about 7,000 locations by 2010, Walgreen is also utilizing the Internet and e-commerce effectively to drive more multi-channel sales. For instance, a new service Walgreen is rolling out with HP Snapfish lets customers upload photos to Snapfish.com for printing and then pick up the pictures at a nearby Walgreen location an hour later. “Our partnership with Snapfish gives customers a very convenient online photo service at a competitive price,” says John Sugrue, divisional merchandise manager for one-hour photo operations.

Walgreen is also expanding Walgreens.com with bigger and better online prescription tools. At Walgreens.com customers can order a new prescription and a refill for store pickup or mail delivery, view their prescription history over a secure web link and update their health histories. Customers and patients can also e-mail a Walgreen pharmacist with prescription questions and receive back confidential replies, as well as access extensive health care information from links on Walgreens.com to the Mayo Clinic’s online library.

Overall Walgreen is doing a good job of balancing its multi-channel initiatives with an e-commerce site that is easy for customers to access and navigate, says Manivone Phommahaxay, consultant, user experience, Molecular Inc. “The product category names are simple and mirror familiar category names that users would expect to find in the stores aisles,” Phommahaxay says. “The navigation exposes the breadth of product categories on sub-category pages and Walgreens.com provides easy browse-and-purchase features that don’t require users to click through too many pages in order to add an item to the shopping cart.”