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Amazon gets aggressive in online supplement retail category: Wells Fargo report

By Stephen Daniells , 24-Aug-2012

"If sales shift online at a faster rate than the companies expect, this could have negative implications for retail store productivity" - Wells Fargo Securities

Competition in online supplement retail category is hotting up as Amazon gets aggressive on core product prices, according to a new report from Wells Fargo Securities.

While supplement retailing giants GNC and Vitamin Shoppe are positioned to benefit from increasing shift in consumer buying habits from bricks-and-mortar stores to the Web, new analysis revealed that the category may be more exposed to Amazon than previously thought.

Indeed, the report notes that the supplement category is relatively easy for online retailers like Amazon to build market share, given the large number of SKUs and recurring purchase.

Delivery costs for the products is also appealing to the likes of Amazon since the products are typically small and light, and there is little minimum advertised price (MAP) pricing, allowing the online retailer to cut costs.

“Amazon’s core product prices were approximately 15% below those of both Vitamin Shoppe and GNC,” write the authors Kate Wendt, Matt Nemer, and Omair Asif.

“We believe GNC is better positioned against Amazon and poised to benefit from growth in online, with its high penetration (i.e., 57%) of unique, proprietary products, a dual strategy with private-label geared gnc.com and price competitive luckyvitamin.com (the prices of which were at parity with Amazon), more flexible real estate (five-year leases, versus ten-year leases at Vitamin Shoppe), and less reliance on new store growth.”

The full report, Organic Kale, Omega 3's, and Outsized Growth, is based on data from 1,364 consumers, and is available from Wells Fargo Securities .

Consumer habits

The Wells Fargo survey also showed that, of the consumers questioned 76% said they used some type of vitamin or supplement. Agreeing with a raft of surveys from other sources, the most popular category was multivitamins (71%), followed by fish oil or omega-3s (45%), vitamin D (40%), and calcium (33%).

This data echoes a recent survey from the Council for Responsible Nutrition’s (CRN) , which found that supplements use among US adults has increased to a record level of 69%.

CRN also found that multivitamins are the most popular form of supplement, with 71% of users reporting taking a multivitamin, with 53% saying they take it daily.

The Wells Fargo report found that 39% of survey respondents bought supplements at a traditional grocery store, and 38% purchased products from drug stores.

“We also found that 7% of our panel purchases vitamins and supplements on Amazon, which ranked higher than Vitaminshoppe.com, Vitacost.com, or GNC.com,” added Wendt, Nemer, and Asif.

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