Boots and Granada Media have announced an eCommerce joint venture.
Boots will take a 60% share of the new company and will wind up its existing transactional site, boots.co.uk. The move will combine Boots’ retailing expertise with Granada’s quality content. The site will cover sport, health and education. Revenues will be generated from product sales, advertising and sponsorship.
Boots will invest GBP18 million in the first year, and Granada GBP7.2 million. Key to success will be the ability of Boots to transfer the power of its high street brand into the eCommerce arena. So far, no health and beauty player has successfully achieved this, and cool reaction to the news from the city will not help.
For Boots this online venture is only one of a range of opportunities – it is not the major direction of the company. In order to defend its share price, and to offset the threat from the likes of Wal-Mart, the company has recently launched a number of initiatives. Besides eCommerce there are strong growth prospects if Boots can successfully incorporate services into its offering with its new Health and Beauty Experience stores and Body 360 health and fitness chain.
The new venture does not offer much that has not already been tried in the online arena, despite the fact that it will significantly advance online health and beauty. But with financial strength, quality content and a trusted brand name it does have advantages. Investors are skeptical of business-to-consumer eCommerce ventures, rightly so given the undeniable difficulties in making such activities profitable. Integrating an eCommerce venture with a successful physical operation is likely to be the most successful strategy for building a path to profitability.
