Drugstore.com discusses focus and pricing in e-tailing (1Q05 conf call quotes)

May. 4.05 | About: drugstore.com, inc. (DSCM)

Drugstore.com (ticker: DSCM) CEO Dawn Lepore outlined his strategy on the company's Q1 conference call (April 28th). The plan: focus marketing investment on higher growth segments and reduce emphasis on products suffering from acute price competition. The comments are significant for all e-tailers and investors in e-commerce stocks, as they illustrate one approach to trends that are impacting the entire sector - increased price competition and rising marketing costs.

The key driver of our strong results was a 26% year-over-year increase in our OTC sales, our most profitable and fastest growing category… Our other key growth segment is Rx mail order where we posted an encouraging 24% year-over-year increase… I'm going to concentrate our investment in those businesses… Our other segments Vision and local pickup, give us healthy revenue streams and customer acquisition channels but will not be areas of significant revenue growth or investment. We will grow our OTC and Rx mail order businesses through prudent investments in marketing, advertising, and technology.

…our overall pricing strategy is sound. Our customers perceive us as providing value and don't look for us to be the absolute lowest cost on every single item.

…the online Vision customer is very, very price conscious, and our testing in the first quarter bore this out. So rather than build a very strong Vision brand, which would be very expensive, I believe we need to focus on balancing customer acquisition with margin.

Our three-day west coast shipping plan was not providing us with sufficient return to justify the added expense. So we have discontinued this initiative and replaced it with a tiered shipping plan.

(Quotes are from the CCBN StreetEvents transcript.)

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