On March 24, 2011, Walgreens announced it will acquire Drugstore.com for $429 million. This acquisition will bring together one of the largest online pureplay drugstore websites with one of the largest brick and mortar drugstores. Sounds good on paper, but what does this really mean for Walgreens when it comes to its online marketplace?
First, let’s look at the shopper base. Currently, Walgreens.com attracts about 8 million shoppers, CVS.com 6 million, and Drugstore.com comes in at about 4 million. Discounting the overlap between Walgreens and Drugstore shoppers, the acquisition will add around 3 million more shoppers to the Walgreens customer base. With these additional shoppers, Walgreens’ online presence will be just shy of twice the size of its largest rival, CVS.
Second, what will the acquisition do for Walgreens’ product offerings? As the owner of Beauty.com, SkinStore.com, and VisionDirect.com, Drugstore brings a lot to the table. It is estimated that between all of these outlets, Walgreens will add about 60,000 products to its online inventory. This will definitely help Walgreens better compete with Amazon and other online heavy hitters in the $12 billion online CPG space.
The expanded product line will also help Walgreens improve its search rankings. I looked at the retail sites getting the most traffic from searches on a variety of health, beauty, and household product terms. In most cases, Drugstore.com was among the top retailers, ahead of Walgreens or CVS.
Many analysts have called the acquisition risky, especially given than over the past 11 years, Drugstore has not been able to turn a profit. But from what I can tell, it appears that the acquisition will be positive for Walgreens, helping it expand its online presence and cementing its place among more established players.
Debra Miller Arbesman is senior associate, retailer and consumer products at Compete, a Kantar Media company that helps brands improve their marketing based on the online behavior of millions of consumers.