Amazon.com expansion continues

Apr 01, 1999 10:30 PM  By

Online bookseller Amazon.com hopes it can sell Prozac and Pepto-Bismol over the Internet the way it now sells John Grisham novels.

Not content to sell books, videos, and CDs over the Web, Seattle-based Amazon.com in February bought a 46% stake in Redmond,WA-based Drugstore.com, a newly launched online marketer of over-the-counter pharmaceuticals, prescription drugs, and beautyproducts. Amazon.com would not disclose the cost of the investment.

“The opportunities are tremendous,” says Lauren Cook Levitan, an analyst with San Francisco-based investment bank BancBoston Robertson Stephens. “This is Amazon.com flexing its muscle in trying to become the dominant e-tailer in the marketplace,” she notes.

In the past year, the ñ610 million Amazon has added music, toys, videos, and electronics to its original product line of books. And just this past January, it bought a 7% stake-worth about ñ5 million-in Alameda, CA-based GeoWorks Corp., a maker of software for cellular telephones and other wireless devices.

A giant market The online drug business could eventually outpace the online book and music business. “The pharmacy drug business is an enormous one,” says Ken Cassar, an analyst with Internet consultancy Jupiter Communications. “It’s at least ñ100 billion- which is about four times the volume of the U.S. book market.”

And according to the National Association of Chain Drugstores, Americans bought ñ13.8 billion worth of prescription drugs through the mail last year, which represented more than 13.4% of all prescription sales. (When ordering prescription drugs via the mail, customers must mail the doctor’s prescription form to the mail order supplier; once the prescription is on file, they can then request refills via phone or mail.)

Amazon.com is also seeking to buy other companies. In fact, in January, the online retailer raised ñ1.25 billion through the sales of convertible notes to spend on acquisitions. In the face of Amazon’s spending, industry observers don’t expect the company to become profitable until at least 2001.–MDF