PREMIUM SEARCH Search by job title, geography and build a list of executive contacts
The Internet has been a boon for selling everything from books to consumer electronics and computers to automobiles, so why not health-related products? One reason, according to Internet research firm Jupiter Communications Inc., is that consumers aren't impressed with the current online offerings in the sector.
In a recent Jupiter survey of 1,600 online consumers, some 45% say they go to the Internet for health information but remain highly skeptical about purchasing health products online. The survey found 49% of respondents don't buy such products online because they feel it's more convenient to do so when doing other shopping. Consumers also cited difficulty returning items to online merchants and slow product delivery as significant deterrents. "The players haven't reached the point where they are offering the features that would secure consumers' wallet share for health products online," says Claudine Singer, an analyst with Jupiter's Health Market Module.
That leaves a huge opportunity for enterprising companies to grab a significant share of the online health-related products business, which Jupiter estimates will jump from $200 million in 1999 to $10 billion in 2004. Jupiter says the spending surge will be fueled by a growing online population that is more comfortable with shopping on the Web, the emergence of women as online buyers, and a burgeoning health sector with well-financed players and huge marketing budgets.
PILLS WILL POP.
Still, the online health segment will remain highly fragmented. For example, pharmaceutical sales will account for a dominant 45%, or $4.5 billion, of the total $10 billion in online health spending in 2004, according to Jupiter's forecasts. Some $2.3 billion worth of personal-care items will move over the Internet in four years. Meanwhile, vitamins and herbal supplements will represent 17%, or $1.7 billion, and over-the-counter products will reach $600 million.
Jupiter's research also suggests that online advertising dollars for health products will jump by 86% over the next four years, to $700 million. That figure, however, represents a mere 5% of overall online ad dollars, a figure too low to have a significant impact on the multitude of existing content players. Singer says this suggests that the market can't sustain the current glut of health-care dot.coms and that a shakeout is on the horizon.
The survivors, in Jupiter's view, will be companies that provide a single destination on the Web linking consumers to health-care providers and insurance payers. Jupiter's Singer says many health partnerships have focused on exclusivity, which offers short-term benefits but limits the long-term value for consumers by compromising the site's future prospects. "Players in the online health field must develop both online and offline relationships, as necessary, to enable the delivery of comprehensive, seamless convenience across products and services," says Singer. That could turn out to be the wonder drug the sector needs to grow online.
By Stephanie Anderson Forest in Dallas EDITED BY PAUL JUDGE
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2000, Bloomberg L.P.
Printer-Friendly Version
