Online health retailers are facing big competitors for the growing e-commerce health market.
Earlier in 2018, Walmart Inc. was reportedly in talks to buy PillPack, which manages multiple prescription medications for customers by pre-sorting, packaging and delivering the drugs as a way to bring its already robust in-store pharmacy operation into the digital world. But less than two months later, Amazon.com Inc. announced it had acquired the online pharmacy in a $753 million deal. The acquisition came shortly after Amazon, No. 1 in the Internet Retailer Top 1000, announced a partnership with Berkshire Hathaway Inc. and JP Morgan Chase & Co. to take on the healthcare industry.
Amazon entering the healthcare space will likely shake things up for the 21 health retailers in the Top 1000, who cumulatively grew 18.8% in online sales in 2017 over 2016 and were led by many web-only e-retailers. Web-only pharmacy retailers like Pharmapacks LLC (No. 268) and MyOTCstore.com (No. 633) have some of the fastest-growing online sales within the health category. What’s more, within the health category, pharmacies were the fastest-growing subcategory at 23.3% year over year growth. In addition, online eyewear stores also boosted growth in the health category, as four of the seven Top 1000 eyewear retailers are among the 10 fastest-growing health retailers.
GlassesUSA leads online eyewear growth
While Warby Parker (No. 174) may be the marquee online glasses retailer, it isn’t alone. GlassesUSA LLC (No. 229) tops Warby Parker in growth with a 64.8% 2017 online sales increase compared with Warby Parker’s 30% increase. However, both are fractions of eyewear manufacturing giant Essilor (No. 58), which owns brands like Ray Ban and Oakley, along with retailers Sunglass Hut and FramesDirect.
Essilor also owns contact maker Coastal, which competes with the fourth-largest health retailer: 1-800 Contacts Inc. (No. 100). However, the contacts giant has had slowing growth in recent years, dropping to 3.6% year-over-year growth in 2017 from 5.6% growth in 2016. Coastal grew an estimated 6.0% in 2017, it’s first full year after being acquired by Essilor.
Walgreens and CVS adopting Amazon strategies
While Amazon made inroads to the health goods market, the two retail pharmacy giants in the rankings, Walgreens Boots Alliance Inc. (No. 37) and CVS Caremark Corp. (No. 114), are shifting their strategies to move on Amazon’s turf. Walgreens, which grew online sales 16.0% last year to nearly $1.7 billion, is partnering with online natives such as Birchbox Inc. (No. 204) to offer more options at its stores. Walgreen also sees its storefronts as a competitive advantage to Amazon, which is opening more and more stores around the country.
CVS is expanding its loyalty offerings with a new service akin to Amazon Prime. The $48-per-year CVS CarePass offers discounts, a pharmacist hotline and the all-important free shipping. (Amazon Prime is a $119-per-year program that provides two-day free shipping on millions of items and a streaming video program, among its benefits.)
To read more about online health sales, explore our related new stories and check out our sister site Internet Health Management.
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