BOOTS WEB AND T.V. DEAL COULD REGISTER $115 MILLION IN SALES

Byline: Andrea M. Grossman

LONDON — Boots PLC, the U.K.’s largest drugstore chain, has formed a deal with Europe’s largest commercial TV producer to launch an information and e-commerce Web site, together with an interactive digital TV channel dedicated to health, beauty and wellness.
Boots and Granada Media PLC expect that within three to four years, the Web site and digital TV channel — which will launch February 2001 — could generate approximately 2 percent of the retailer’s annual revenues, or approximately $115.8 million, through the sale of online products and broadcast and online advertising, according to Francis Thomas, a Boots spokesperson. (Figures were converted from local currencies at the current exchange rate.)
Boots will own 60 percent of the newly formed business, which has yet to be named, while Granada will own 40 percent. Both companies are investing a combined total of $26 million for the venture’s first year in operation.
The new Web site will be merged into Boots’ existing e-commerce site, boots.co.uk, which was launched in December 1999.
Richard Holmes, former marketing director for Boots the Chemist, will serve as a joint managing director of the new company, along with Paula Carter, director of Granada’s health business. The company will be based in both Nottingham and Leeds.
Subscribers to the yet-to-be-named channel will initially be offered between 12 and 18 hours of daily health, beauty and wellness programming performed by celebrities and field experts. Broadband digital communications will allow program viewers to log onto the channel’s sister Web site — directly from their T.V. — where viewers can purchase from a portfolio of 10,000 beauty and wellness products.
Many of the programs scheduled for the channel will run live so viewers can interact with program hosts. For example, a half-hour cosmetic makeover program will not only enhance a guest’s looks, but will answer makeup questions from curious at-home viewers, and tout certain brands of cosmetics, which can be immediately purchased online.
Boots plans to promote the new business through its 1,400 drugstores.
Analysts disagreed on whether the venture would add to Boots’ bottom line.
One analyst said the venture sounded sensible, but doesn’t have much potential.
“It is sensible, but it’s difficult to get terribly excited about. Boots has 30 percent of the health and beauty market now through its 1,400 stores. So anything that competes with that raises a question,” said the London-based analyst, who asked not to be identified.
Thomas pointed out that the new company won’t take away current sales from physical stores, but will address the needs of customers who wish to shop in alternative channels. “I’ve heard analysts say that for a while [that anything competing with our store business is a concern], but the fact is we still grow despite unprecedented levels of competition, primarily from supermarkets. Our strategy is to create channels because we all want to buy in different ways,” Thomas said. Another analyst said Boots will lose money at first, but will ultimately bring in profits.
“It is an exciting move. They have been slow to get online [even though] they do have an investment in handbag.com and they have their own site. But, they weren’t really putting their backs behind [those ventures.] It was as if they were secretly planning to do something really big, and here it is,” said Nicholas Bubb of London-based SG Securities. “It will lose a lot of money at first but they are talking about revenues of 80 million pounds sterling in the next three to four years, so it will amount to something,” Bubb added.

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