ONLINE AND IN PERSON

Albertson's doesn't ship very many prescriptions from its state-of-the-art Internet pharmacy fulfillment center in Carlsbad, Calif., and that's just the way the company wants it.Rather than attempting to create a separate pharmacy operation serving Internet users, the Boise, Idaho-based company is using the Web to strengthen the bond between its customers and their local stores. For Albertson's, the

Albertson's doesn't ship very many prescriptions from its state-of-the-art Internet pharmacy fulfillment center in Carlsbad, Calif., and that's just the way the company wants it.

Rather than attempting to create a separate pharmacy operation serving Internet users, the Boise, Idaho-based company is using the Web to strengthen the bond between its customers and their local stores. For Albertson's, the Web is not a new delivery channel but a tool that is part of its total service package.

"The Internet is just simply another service point to the consumers," said Joyce E. Smith, director of e-commerce systems development at Albertson's, which has more than 2,000 pharmacies in its network of retail stores. "It's another touchpoint, another way for us to bring the strength of Albertson's and the strength of our drug store families to the consumers."

Through the use of sophisticated customer-relationship management (CRM) technology that is integrated with its phone and e-mail systems, Albertson's funnels its online prescription requests to its local stores, where the orders are actually filled. Customers can either pick up the prescription at the supermarket or they can have it mailed to their homes.

When customers visit the pharmacy page at www.savon.com, which is the e-commerce site for the entire Albertson's pharmacy system, they are prompted to select their local pharmacy or the one where they would prefer to pick up their prescription. If the customer does not indicate a preferred pharmacy, Albertson's assigns the order to a store based on the customer's ZIP code and where it would be most cost-effective for the chain to fill the order.

Now that some of the formerly high-flying Internet pharmacies have foundered, analysts say that chain pharmacies are in a prime position to take on a leadership role in the online niche.

"What we've found is that customers who order [a prescription] online would prefer to pick it up in person," said Elizabeth Boehm, analyst, Forrester Research, Cambridge, Mass. "That explains, at least in part, the failure of companies like PlanetRx and Rx.com, and the reason that Drugstore.com is fairly dependent on Rite Aid to keep its business afloat."

According to Jupiter Media Metrix, New York, pharmacy-related sites had nearly five million unique visitors in April, led by Drugstore.com, Bellevue, Wash., which had about 1.36 million visitors. MerckMedco.com, the site of pharmacy benefits manager Merck Medco, Franklin Lakes, N.J., had the No. 2 site with 674,000 visitors.

Analysts say the key to leveraging the Internet for pharmacy sales isn't getting customers to actually buy online but instead driving them to brick-and-mortar facilities.

"The big market isn't the online dollars, but Web-influenced spending," said Stacey Rich, a Jupiter analyst. "People who research or order products online and then pick them up or pay for them offline -- that has about three times the opportunity of pure online."

About one fourth of the people in a December survey told Jupiter they would switch drug stores if they had the opportunity to order their medications online and then pick them up in their local store.

When Albertson's first began planning its online strategy, the company was considering using its facility in Carlsbad to fulfill all of its pharmacy orders. It switched instead to a local-store fulfillment plan in which most customers are expected to pick up their prescriptions at Albertson's locations near their homes or places of work.

"We basically made the decision to channel those prescriptions up from the Internet to our [2,000-plus] pharmacies," said Smith. "We have a family of pharmacies out there operating under different nameplates, and they are key and strategic to us. It's the relationship that our customer has with those pharmacies that we want to support."

Albertson's installed customer-relationship management software from Astute, Columbus, Ohio, that connects its contact center in Carlsbad with its network of pharmacies. The chain asked Astute to form a strategic partnership with Albertson's telecommunications systems provider, Avaya, Basking Ridge, N.J., so that orders placed on the Web could be easily routed through the contact center and into the stores.

At the store level, pharmacists see the Internet orders in a queue just as if they had been placed by phone. In fact, analysts say the Savon.com model of fulfillment is not much different than a telephone-ordering system that uses interactive voice-response technology (IVR).

Boehm questioned Albertson's strategy of actually shipping prescriptions from individual stores, however. With the nation's shortage of pharmacists, adding mail-order volume to individual stores might be counter-productive, she said, especially as more chains consider using "central fill" solutions to reduce in-store workloads.

"That ultimately may not prove the most efficient way to scale," she said.

For now, Albertson's expects that very few customers will request that prescriptions be shipped to them, according to spokeswoman Karen Ramos. Although she declined to reveal how much pharmacy volume was being generated through the Internet, she said that the number of customers who request delivery "is a lot lower" than the number who come into stores and pick up their orders.

Why haven't you purchased prescription drugs online?

Rather go to a local drug store 62%

Don't want to pay shipping 35%

Don't trust credit card security 25%

Don't trust personal information online 25%

Good relationship with my pharmacist 23%

Didn't know I could 16%

Shipping takes too long 16%

Online pharmacies don't accept my insurance 11%

(Multiple responses accepted)

Source: Forrester Research survey of customers who have not purchased prescription drugs online.