Walgreens Buys Drugstore.com. Now what?

This morning a colleague called to ask if I had heard the news that Drugstore.com was being acquired by Walgreens for $409 million dollars.

I hadn't heard the news, but was not completely surprized by it.

The team at etailing solutions has been talking about how the the etail space is maturing, and this sort of consolidation is a textbook example of market maturation. Last year Amazon went on a buying spree where it acquired Diapers.com and other smaller rivals. We expect to see more mergers, acquisitions and strategic alliances in this space in the months to come.

This also reinforces what our message has been to CPG companies all along, namely: the etailing winners of tomorrow are establishing positions today. What partnerships or alliances will you need to grow the brands you have today--or new brands you'll have tomorrow? Within the categories in which you compete, do you want to be the leader--and define the space and the rules of engagement? Or will you be content to cede the leadership role to rivals and compete in a space defined by your competitors and rival brands?

Yes, these are difficult questions with far reaching implications. That's where etailing solutions can help.

Click here for a link to the story in today's New York Times Dealbook.

Walgreens Buys Drugstore

In a huge development for Online CPG Sales, Walgreens announced today the acquisition of drugstore.com for twice the share price.


Investors in drugstore will receive $3.80 in cash for every share they own, which is about 113 percent above the closing price of drugstore.com on Wednesday, March 23rd. This demonstrates the growing importance of online sales and its impact on the retail community.


Walgreens will be combining Drugstore.com with their operations so they can increase economies of scale and drive profit.


The industry implications for this development include:

• Consolidation will accelerate on-line sales growth as pure play etailers and multi-channel retailers look to 1) have a successful acquisition strategy and 2) pay down debt
• Multi-channel retailers (Wal-Mart, Target and CVS) will look to respond to Walgreens move by focusing more resources against this growing online channel either by organic growth or buying small regionals who have a developed infrastructure
• CPG Manufacturers will be encouraged by retailers to place more emphasis against online supply chain initiatives and online sales strategy

The rapid consolidation in this space spotlights the growing need for CPG manufacturers and retailers to have a strategic vision for addressing the needs of the online shopper. Manufacturers and marketers who hesitate in embracing this channel of availability will be at a significant disadvantage with issues such as shopper "auto replenishment" initiatives like Amazon's "Subscribe and Save", merchandising and category management leadership and shopper insights.

Three Major Trends in Online Sales

A recent white paper by Limelight Network suggests that there are three major trends to watch in the growth of online retail: 1) the use of video in online marketing and sales, 2) the growing importance of mobility, and 3) an increasing emphasis on personalized shopping experiences. With each of these
trends, the impact is not just a matter of a particular behavior spreading to a larger group of people. It’s a full paradigm shift.

Do manufacturers have the resources and knowledge base to address all three of these growing trends?