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Wednesday, February 24, 1999 Published at 23:04 GMT


Business: The Company File

Amazon buys into drugs

A major move for the book-to-video specialist

Amazon.com has taken a major step beyond its core markets of books, music and videos by buying 46% of drugstore.com, the online chemist being launched on Thursday.

Drugstore.com hopes to revolutionise the purchase of drugs in the same way Amazon has transformed book buying.

The company said it had worked closely with Amazon to design a consumer-friendly site and would extend the alliance to jointly promote each others' businesses.

Amazon has invested in several stages in drugstore.com. Its most recent investment last month brought its stake to 46% of its common stock, or 40% on a fully diluted basis.

Amazon would not say how much the investment was worth or whether it consisted of cash or stock.

Major step

The alliance could be significant, giving Amazon a major stake in a pioneer of an emerging sector of online retailing.

Drugstore.com will be the largest drugstore on the Internet and has among its investors, managers and partners some of the biggest power brokers in Internet commerce.

It already has an exclusive partnership with the leading Internet portal Yahoo.

The firm is headed by Peter Neupert, previously a vice president of Microsoft's interactive media group.

Explaining why he thought drugs were a natural for the Internet, he said: "Unlike book stores where people like to go to shop, discover, get a cup of coffee, no one likes browsing the Preparation H section of the drugstore."

Drugstore.com will offer products in five categories:

  • Health
  • Beauty
  • Wellness
  • Personal care
  • Pharmacy

Doctors will call in or fax prescriptions as the company will not accept e-mails. "That would get a little dicey," a spokesman said.

Despite the problems, many people are betting that drugs could be the next big explosive area of online commerce.

Another online drugstore, PlanetRX, is expected to launch soon and several specialised retailers selling vitamins and health food supplements are already operating online.

Shares in Amazon.com fell $4.25 to $110.94 on Nasdaq.



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