In a growing market, web merchants are targeting certain healthcare niches for opportunity as consumers manage more of their health business affairs online and use the web more to research and buy health and wellness products.

“The healthcare industry is digitizing rapidly and the customer is getting comfortable with going online for their healthcare needs by doing research on symptoms or specific doctors, paying bills and buying products and generally getting more educated about their options,” says Amy Madonia, founder and principal of Madonia Consulting, a New York business-to-consumer e-commerce and digital marketing consulting firm. “There is an opportunity for niche web merchants in healthcare to succeed.”

There is an opportunity for niche web merchants in healthcare to succeed.

The U.S. healthcare system is now a $3.2 trillion industry and accounts for about 17.2% of the country’s gross national product of $18.56 trillion in 2016. Consumers also are spending more out of pocket—and over the counter—on medical, health and wellness products and services in a variety of segments.

For 2015—the latest year available for full statistics from the U.S. Department of Health and Human Services—consumer retail spending for durable medical equipment, which includes items such as contact lenses, eyeglasses and hearing aids, reached $48.5 billion, up about 4% from the prior year. Consumer spending for other nondurable medical products including over-the-counter medicines, medical instruments, and surgical dressings, also grew 3.7% to $59.0 billion in 2015 and prescription drug spending grew year over year 9% to $324.6 billion, says the federal government.

Metrics on how much consumers are spending online for medical, health and wellness products or services are hard to come by, but there are some examples. The 60 online health/beauty retailers ranked in Internet Retailer’s 2017 Top 1000, which ranks North American merchants on their annual web sales, grew collectively year over year 18.3% to $9.17 billion. In comparison, all e-commerce sales in the U.S. grew 15.6% to $395 billion.

advertisement is an example of a specialized online retailer meeting the demand for products related to healthcare. sells 4,000 healthcare products that consumers can purchase using their pretax flexible spending account or Health Savings Account dollars. Health Savings Accounts, or HSAs, are individual savings accounts that allow consumers to set aside tax-free dollars to purchase medical products and services.

Since launching in 2010 as the result of a Columbia Business School project, has grown at a compound annual growth rate of more than 80% over the past five years, the retailer says. While he won’t release actual results, CEO Jeremy Miller says the company has grown dramatically over time in part because of revenue-sharing deals the retailer has with the flexible spending account managers at more than 200 major employers, including payroll services and human resources management company ADP LLC.

Under the arrangements, flexible spending account managers incorporate into the company’s employee benefits programs and, in return, the company receives an undisclosed percentage of the money employees spend on the site.

“Each year Americans spend nearly $15 billion using their flexible spending account to purchase healthcare products and services and we are the first and biggest online retailer to really focus on this market,” Miller says.


In the past year has added new features to become more mobile, attract a larger audience of employers and become a leading provider of content on healthcare savings accounts. In October, launched an updated learning center that features educational tools that enable site users and visitors to understand FSA benefits. Tools include frequently asked questions, articles, videos in addition to a savings account calculator that families can use to estimate how much money to put into an account and another tool the web merchant calls a “deadline tracker which allows customers to input their FSA spending deadline to ensure they stay on track with FSA spending.

A newly expanded eligibility list provides consumers with detailed information for more than 700 different products and services and explains in-depth what the products are and how they work, Miller says. “We want to be positioned as the web’s hub for flexible spending account and health savings information and offer the largest selection of eligible products,” he says.