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Get Four
|  | SEPTEMBER 24, 2004
A Top-Shelf Tonic for Drugstore.com? Charles Schwab Vice-Chairman Dawn Lepore's motive for jumping to the online pharmacy: "I wanted to be a CEO" Over her 21-year career at Charles Schwab (CSC ), Dawn Lepore wore a number of hats. She was chief information officer during the company's biggest growth years in electronic trading -- from 1993 to 2001. Since then, she has become vice-chairman, overseeing areas including technology, operations, and administration. This week will be her last at Schwab. On October 11, she will begin her new gig as chairman and chief executive at drugstore.com (DSCM ). The trade-up couldn't have come at a better time. David Pottruck, former co-CEO whom Lepore has known for as long as she has been at Schwab, left in July under duress. The brokerage has been having what Lepore calls a "couple of tough years," though she says recent management turmoil had nothing to do with her decision to leave. "I have wanted to be a CEO," she says. She calls both Charles Schwab and Pottruck "important mentors" that she thinks "very highly of." She will need to bring all her skills to bear on her new job. Drugstore.com is the only online health-products store to survive the dot-com bust, and revenues will grow by 44%, to about $350 million, in 2004. But it will still report losses. Analysts figure it will lose $0.24 per share this year. "So far the company has done a good job moving toward the goal of profitability," Lepore says. "It will be the absolute focus of my management team." BusinessWeek Online reporter Amy Tsao spoke with Lepore about her new job on Sept. 22. Edited excerpts of their conversation follow: Q: You have worked at Schwab for two decades. How does it feel to leave a place you've worked at for such a long time? A: I have the range of emotions you would expect. I'm tremendously excited and nostalgic and sad to be leaving people I've worked with for so long. Q: What about your background prepares you to lead drugstore.com? A: Both drugstore.com and Schwab are consumer companies that pride themselves on excellent customer service. From that perspective they aren't very different. Focusing on the customer is something I learned from Chuck Schwab in the early days. I was at Schwab in some big growth years. I understand how to grow a company. I can apply that experience to drugstore.com. Q: What do you think of where the company is at today? A: I think drugstore.com has grown remarkably well. The numbers would say it's a growth company. Revenues are expected to grow about 40% from 2003. Some categories are growing even faster than that. That's nothing to sneeze it. The site has many loyal customers, and it has done a lot to reduce cost structure. I think there's a lot of opportunity as well to focus on merchandising and marketing and opportunities to continue to develop new technology. Those are all areas I'll be looking at. Q: How will the company keep growing? A: We've had a long-term relationship with Amazon.com (AMZN ). They own 16.5% of our stock. We provide the fulfillment for a lot of their products. The relationship has changed over the years, but it has proved advantageous. We're also providing fulfillment services for a lot of large pharmacy-benefit managers. I think the company is better served by doing both direct-to-consumer sales and business-to-business. Q: Your predecessor last fall told me that the sites selling prescription medicines at huge discounts from outside the U.S. were hurting drugstore.com. How will you deal with the issue of prescription-drug reimportation? A: The very low prices of these Canadian Web sites do put pressure on a lot of different businesses, ours included. Reimportation is something we're thinking a lot about. Since I'm brand new, I need to do a lot more in-depth review of the issue. But like every issue, we will look at this from our customer's point of view. What they want is low price and safety. We need to make sure they can get both. We have also talked a lot about a certification program for pharmacies that sell online through the National Boards of Pharmacy. That sets a standard for online pharmacies. None of the offshore pharmacies are certified. Q: Obviously, buying cough drops and toilet paper online has not had the reception that buying merchandise like books and CDs have enjoyed. Is that going to change? A: People who buy health and beauty aids are late adopters. It has taken a little longer for this consumer to get online. I think this category will continue to grow from here. Our goal is to have drugstore.com be the largest on the Web. Most of our shoppers are women. What they want is efficiency and access to hard-to-find items. I think those demands will continue to drive growth. Also, the whole population is aging, so prescriptions are growing fast, and convenience will continue to fuel our growth. The market and demographics are working in our favor. Q: Do you shop on drugstore.com? A: Absolutely. I have two young children, I'm on a number of boards, and I have a full-time job. It's frequently 11 at night before I have time to think of things I need. I buy things like shampoo, a certain mouthwash the kids like -- a ton of stuff. I haven't been getting my prescriptions filled online, but they're being transferred to drugststore.com. 
BW MALL
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