Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Consumers spent $1.3 billion online for over-the-counter and personal-care items last year, and that is expected to reach $3.3 billion by 2011, Forrester Research says. Multiple growth categories include natural medicines, vitamins and beauty products.
Consumers’ interest in looking and feeling good is fueling healthy online product sales. “It’s not just about prescriptions and over-the-counter drugs,” says Jonathan Tinter, chief marketing officer at Drugstore.com Inc., No. 32 in the Internet Retailer Top 500 Guide. “Natural products, both in terms of homeopathic medicines and natural cleaning, hair, and makeup products; vitamins and supplements; and beauty have been huge growth areas for us.”
Industry analysts predict that will be the case for online health care retailers overall. For example, consumers spent $1.3 billion online for over-the-counter and personal-care items last year, and that is expected to reach $3.3 billion by 2011, according to Forrester Research Inc. Online sales will make up 10% of the market five years from now, the research firm predicts. While that’s much less than the 53% of computer hardware and software that consumers will buy on the Internet, it represents a greater share of the market than the 2% of groceries or the 5% of pet supplies that will be purchased online.
JupiterResearch also tracks “nutraceuticals,” putting annual sales today at $696 million and predicting 18% annual growth through 2011, to $1.6 billion. Medical supplies, which have online sales of $652 million, will grow 17% a year to $1.4 billion in 2011, says Patti Freeman Evans, senior retail analyst at JupiterResearch.
Growth overall has been strong, especially considering that over-the-counter health care products had very little catalog-purchasing history to translate into online sales, Freeman Evans says. “A lot of these products are also immediate-need, low-priced products that people aren’t willing to wait for or pay shipping for. But Drugstore.com, for instance, has done a great job of making those things easy to buy on a repeat-purchase basis. I can set up my account so that every three months, I can quickly order them again.”
“It’s a convenience-driven business,” Freeman Evans says. “So as customers get more and more aware of how this serves their needs in terms of finding the products they want as well as convenience, they begin to buy more online.”