DEPARTMENT OF BUSINESS ADMINISTRATION

TERM PAPER

OF

E-COMMERCE

On

Drugstore.Com

SUBMITTED TO SUBMITTED
BY
Dr. Syed Haider Ali Pawan Kr. Kushawaha
MBA (E-Busi)
Sem- III
Roll No. 28

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ACKNOWLEDGEMENT

During the course of this project there have been many people who have been

greatly helpful to me within their personal capacities in various ways. I take this

opportunity to express my gratitude for the cooperation and patience they have shown.

I would first and foremost like to thank Dr. Syed Haider Ali Sir, who has guided

me at every stage of this project.

I would also like to thank my seniors and friends, who have always provided me

valuable suggestions and helped me a lot in the completion of the project.

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 Table of Contents

Background and Giving Guidelines……………………………….. 04

Foundation Goals……………………………………………………. 04

Organization Funding Criteria……………………………………… 05

About drugstore.com…………………………………………………06

Products……………………………………………………………….07

Services………………………………………………………………. 09

Privacy policy………………………………………………………… 11

Security……………………………………………………………….. 15

Site Content………………………………………………………….. 19

Payment Method…………………………………………………….. 25

Overview……………………………………………………………… 26

Bibliography…………………………………………………………..31

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 Background and Giving Guidelines

The drugstore.com Foundation was formed in July 1999 with a gift of pre-IPO
stock from the company. The Foundation's mission is "Basic Needs & Healthy Starts",
with a geographic focus on the areas in which they have physical operations (Bellevue,
Washington and Swedesboro, New Jersey) and an overall goal of improving the health
and well-being of the communities in which we live and work. The Foundation funds
programs that facilitate emotional and economic self-sufficiency and improve the health,
dignity and well-being of people in need. They do this specifically by (1) promoting
"Healthy Starts" for those in need - e.g., improving life and prospects for children and
adults alike, enabling self-sufficiency for people in transition, providing supportive
homes for foster children, assisting in redefining lives for seniors who have lost a
partner or are without a care system; and (2) providing "Basic Needs" to those who do
not have access to things that most of us take for granted—personal care products,
food, shelter, education.

Employee Giving Committees in Washington and New Jersey enjoy selecting the
organizations that receive grants from the Foundation. The Foundation does not accept
unsolicited proposals. However, brief letters of inquiry will be accepted for 2009 grants
until March 27, 2009. The guidelines to ensure that organization meets the criteria
below. If it does, they are welcome to submit a brief letter describing program, funding
needs, and intended use for a grant. The Foundation accepts only electronic
submissions, which should be directed to foundation@drugstore.com. If any
organization is selected for review by the committee, they will be asked to submit more
detailed information. Due to staffing constraints, not all inquiries will receive a personal
response. Grant decisions will be made by June 30, 2009.

Foundation Goals -

Gifts from the drugstore.com Foundation:

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  Improve the quality of life in the communities in which drugstore has operations
Are to programs that are compelling to—and resonate with—drugstore.com
employees.

 Engage employees in the decision process and, ideally, involve meaningful

volunteer opportunities
 Position the company and Foundation as a thoughtful, creative leader are
effective, have maximum impact, and target specific immediate needs, or
address long-term solutions to systemic problems are, ideally, for operating
expenses - in keeping with our "Basic Needs" philosophy.

Organization Funding Criteria

Eligible organizations must be a non-profit, tax-exempt organization under

Section 501(c)(3) of the Internal Revenue Code have operations in Western
Washington and/or Southern New Jersey and have overhead expenses that do not
exceed 25% of the total operating budget.

Activities/Organizations not eligible for Support:

 individuals;
 fraternal, veterans, or labor organizations;
 political organizations/activities;
 scholarships, conferences and seminars;
 special events, sponsorships or similar fundraising events;
 religious organizations or sectarian programs for primarily religious purposes;
 loans of any kind;
 commercial or profit-making enterprises;
 programs/activities that directly support the business objectives of
drugstore.com, such as retail sales and marketing; event sponsorship; beauty or
talent contests or sporting events; and
 organizations that might pose a conflict with drugstore.com's mission/goals,
values, programs, products or employees.

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 About drugstore.com

Drugstore.com (styled as drugstore.com) is an internet retailer in health and

beauty care products headquartered in Bellevue, Washington. Its web operations were
launched on February 24, 1999.

Partnerships with other companies allow customers to pick up prescriptions at

Rite Aid stores, enables drugstore.com to sell Rite Aid products, as well as vitamins
from retailer General Nutrition Center (GNC). Drugstore.com ended a sourcing deal
with Amazon.com in 2005. In addition to the Drugstore.com website, the company also
maintains storefronts at beauty.com, sexualwellbeing.com and VisionDirect.com.

It is headquartered at 411 108th Ave. NE, Suite 1400; Bellevue, WA 98004; (425)
372-3200.Its customer service centers are located in Bellevue, Washington and Halifax,
Nova Scotia.DS Distribution, Inc., located in the Pureland Industrial Complex in Logan
Township, New Jersey,it is wholly-owned subsidiary responsible for the distribution of
OTC products, beauty.com products, and CNS (Custom Nutrition Services) products.
The subsidiary that manages the distribution of prescription pharmaceutical products,
DS Pharmacy, Inc., is located in the same building as DS Distribution. Distribution of
VisionDirect.com products is from a center in Ferndale, Washington.

It has an "FSA store" containing items that are likely to be eligible for purchase
using a medical flexible spending account and by extension a health reimbursement
account or health savings account as well. This in turn led to its invention of the very
first inventory information approval system (IIAS) in 2005; it wasn't used in brick-and-
mortar retailing until 2006 by Walgreens. Under a 2006 Internal Revenue Service ruling,
IIAS must be installed by every grocery store, discount store, and Internet pharmacy
that accepts FSA debit cards by the end of 2007, and by most chain pharmacies by the
end of 2008.

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 PRODUCTS

Drugstore.com is an online pharmacy of sorts. It is a health and beauty

superstore. They have 11 different departments to go shopping in.

Sale - Includes all of their Sale items.

Pharmacy - Where customer can place new prescription orders, transfer

prescriptions, or refill your prescriptions.

Medicine Cabinet - Includes all over the counter medications from Allergy & sinus
medication to Pain and fever medications. They also have first aid items, diabetes
items, Emergency preparedness items, and stop smoking items.

Beauty & Spa - Includes all customers’ makeup, fragrances, lotions, gift sets, skin
care, nail care, and bath & soap items.

Nutrition & Wellness - Has all customers’ weight loss, exercise, fitness, Nutritional,
and relaxation needs.

GNC - This is where customer can buy popular products usually sold in the GNC
stores.

Personal Care - Normal bathroom supply center. Customer can stock up on theirs
cotton balls, Q-tips, deodorant, hair removal items, Feminine care items, oral care, eye
care, ear care, etc.

Household –A site visitor can find everyday household items here. From magazines
to candles, appliances to DVD's, or toys and games to outdoor and garden supplies.

Sexual Well-being– A person can find gifts for the upcoming bachelor/bachelorette
party. He/she can also find books, condoms, lubricants, sex toys, sex games, sexual
enhancement items, and DVDs and videos.

Natural Store - from beauty aids to yoga kits, if its natural customer can find it here.

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Dr. Weill Recommends - This section is a sort of Ask the Dr. Section. It includes
advice, recommendations, and answers to some questions.

A customer can shop by the department or that can choose to search for a
certain product by entering the item name in the search box. Customer can also shop
by a certain brand. Drugstore.com also has a Gift Guide section where customer can
find the perfect gift for anyone.

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 SERVICES

After place order with Drugstore.com and return, customer will have a place
called "Your List". This is where can quickly re-order favorite items just by clicking. This
saves customer’s time. Customers don’t have to search the site for the same exact item
you have already ordered once before.

For instance: customer purchased Excederine on his/her last order. It will appear in
"Your List" for next time he/she order. All you have to do is go to "Your List" and check
the box next to the Excederine, it automatically goes into customer’s shopping bag.

Diamond Deals

Diamond Deals are special deals chosen specifically for customer. Customer can edit
what deals they are interested in. they have the option of choosing 1 Special deal from
list of 6 diamond deals. Customers are given a new set of Diamond deals to choose
from every week.

Shipping and Handling

Drugstore.com now offers Everyday free shipping on all orders over $49. With so
many items to choose from, it couldn't be easier to get the free shipping and handling.

Customer Service

There customer service is the best. Once customer received an item that he/she
had to return (one of the bottles' seals had broken open), they e-mailed a pre-paid
return label and had the new product in the mail to customer on the same day, free of
charge.

Packaging

They also do good packaging

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Notification & Shipping

DrugStore.com is excellent at communicating the order confirmation via email. 

They also follow up with shipment notification that includes the tracking number.
Packages have always arrived in good condition and in a timely fashion.

Pharmacy Services

 They offer customized prescription records for insurance or tax records.

 eMedAlert™ keeps to customers informed of drug recalls and other safety
notices.
 The ‘Ask Your Pharmacist’ service means that licensed pharmacists are on-hand
to answer customers questions at any time.
 Drug Interaction Checker lets discover how herbs, vitamins, other medications,
and more react with customers prescription.

Partner site

 www.beauty.com
 www.drwellvitiaminadvisior.com
 Revolution health care

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 Privacy policy
drugstore.com, inc. is licensed by the TRUSTe Privacy Program. This statement
discloses the privacy practices for the drugstore.com™ Web site (including the
Beauty.com™ Web store). When customer visit a Web site displaying the TRUSTe
Trustmark, customer can expect to be notified of the following:

 What personally identifiable information of customers is collected;

 What organization is collecting the information;
 How the information is used;
 With whom the information may be shared;
 What choices are available to customer regarding collection, use and
distribution of the information;
 What kind of security procedures are in place to protect the loss, misuse or
alteration of information under the company's control; and how customer can
correct any inaccuracies in the information.

Why they collect information?

They recognize customer’s right to confidentiality and are committed to protecting

their privacy. They use the information that they collect on their Web sites to provide a
superior shopping experience and to communicate with customers about products,
services, and promotions.

Information Automatically Collected

They automatically receive and collect certain types of information whenever

customer visit Web stores. For example, like many Web sites, they use "cookies" and
Web beacons (described below) and obtain certain types of information when
customer’s Web browser accesses Web sites. This information includes the Internet
protocol (IP) address of using computer, browser software and operating system, web
server, the date and time access site, session information (such as download errors and
page response times), information about customer’s viewing, search and purchase
history and information about the referring URL and the URL click stream to, through,

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and from Web sites. They use this information to monitor the usage and performance of
site, to enhance customer’s search and shopping experiences and to determine
aggregate information about user base and usage patterns.

Information from Third Parties

If they receive updated account information from third parties, they may revise
customer’s account for them so that they can efficiently process customer’s orders,
deliver packages or otherwise communicate with customer. For example, they may
receive customer information from shippers or from third parties with which they operate
co-branded businesses. In addition, they may acquire customer names, e-mail
addresses and mailing addresses for select mailings from third parties.

Other Information Customer Provide

They collect additional information that customer choose to give him. For
example, customer provide information to them when he/she complete surveys or
contest entry forms, sign up for special discounts or coupons, communicate with them
by e-mail, phone or otherwise, provide product reviews, or provide alternative delivery
addresses.

Sharing customer’s Information with Third Parties

They protect all of customer’s information against unauthorized access or release.

They share customer’s personal and prescription information with third parties as
follows:

 GNC - Because they sell and accept GNC Gold Cards on behalf of GNC, when
customer purchase a GNC Gold Card from the drugstore.com™ Web store, they
share customer’s name, address, phone number, gender, and birth month and
year with GNC. At customer’s direction, they also share e-mail address. When
customer use their GNC Gold Card to purchase GNC products at the
drugstore.com™ Web store, they share with GNC a list of the products
purchased in the GNC Live Well store. They do not share with GNC information
about products that customer purchase outside of the GNC Live Well store.

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 Brand Manufacturers – They may develop programs with some of brand
manufacturers through which customer may be offered special discounts or
coupons on products in exchange for providing customer’s e-mail address or
completing a survey about the manufacturer's products. When customers are
offered such discounts or coupons in exchange for providing information (for
example, giving customer’s e-mail address or completing a survey), customer will
be notified that if he/she choose to participate, name, e-mail address and
responses will be shared with the brand manufacturer. No other information will
be shared.
 Agents – They may enter into agreements with other companies or individuals to
perform functions on their behalf. These functions may include sending
promotional e-mails on their behalf to such companies' customers; serving
advertisements on their behalf, analyzing data; providing marketing assistance;
processing credit card or debit card payments; and fulfilling and delivering orders.
These companies and individuals have access to only to information necessary
to perform their functions. They are not allowed to use the information for any
other purpose and are contractually obligated to maintain the confidentiality and
security of the information. They may share non-personal, summary, or
aggregate customer data with partners and other third parties.
 Business Transfers – They may buy or sell stores or assets. In such
transactions, customer’s information is usually treated as one of the transferred
business assets. Should drugstore.com, inc., or Beauty.com, Inc., or substantially
all of either of their assets be sold, customer information will be one of the
transferred business assets. In that event, they will post a notification on this
page or send an e-mail so those customers are always aware of how his/her
information is being used.
 compliance with Law- Protection of Rights, Property or Safety – They will
disclose account and other personal information when they believe that
disclosure is necessary to comply with the law, to enforce or apply their Terms of
Use or other policies or user agreements, or to protect the rights, property, or
safety of business, customers, or others.

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 From time to time, They may partner with certain companies who, in conjunction
with their membership programs or rewards programs, require that we disclose
purchasing or other personal information about their members who visit Web store (for
example, to earn points for purchases made on site through links from the partner site).
They will disclose only the information required to make these programs work for
customers and support customer’s membership in them. In addition, they disclose this
information to such companies only if customer has consented first, including consent
implied by customer’s agreement to the membership or participation rules. If customer
does not want them to disclose that information to the strategic partner, then customer
must contact the partner directly.

Other than as set out above, customer will receive notice when information about
customer might go to third parties, and customer will have an opportunity to choose not
to share the information.

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 Security
When customer place an order online at drugstore.com™, customer’s personal
information and credit card or debit card information are encrypted using SSL
encryption technology before being sent over the Internet. They use SSL technology to
prevent visitor’s information from being stolen or intercepted while being transferred to
them. Customer’s credit card information is always stored in encrypted form in a
restricted-access database that is away from Web site database so it isn't connected to
the Internet, to keep it safe from hackers.

Cookies

To personalize and enhance browsing and shopping experience, they use a

feature on Internet browser called a cookie. Cookies are small files that Web browser
places on customer’s computer's hard drive. They use cookies to let us know that you
are a prior customer and to retrieve certain information previously provided by customer
to them, so that customer do not need to re-enter this information every time you shop
at the site. Cookies also let they know how customer found them (e.g., through a
particular web site or advertisement). Cookies are not used to access information
entered on the secure server. This information can be accessed only when customer
enter name and password. If customer choose to configure browser to remove or reject
cookies, customer will not be able to make purchases from our Web stores or take
advantage of many of their features, such as Your List™.

Web Beacons

From time to time they contract with third party companies to helps better
provide relevant products, services and information to customer and to helps effectively
measure advertising effectiveness. Some of these companies use cookies and/or Web
beacons (also known as action tags or single pixel gifs). A Web beacon is a transparent
image that has been placed on a Web page and sends a signal when a user has visited
that page. A Web beacon does not contain any personal information. No information
that is personally identifiable to customer is transmitted to the third party using the Web
beacon. The third party is required to protect the privacy of the information it receives

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using Web beacons or cookies and is not allowed to use the information it receives for
any purpose beyond what is necessary to assist them. In addition, they may use web
beacons in connection with the e-mails they send to customers, to determine whether
and when the images in their e-mail were rendered (which allows to determine whether
the e-mail was opened). This information may then be aggregated and used to assess
the effectiveness of e-mail communications.

Unsolicited E-mail (SPAM)

Customer’s privacy is very important to them. Be assured that, in accordance

with this privacy policy, they do not sell or distribute customer list to third parties.
customer should be aware, however, that unscrupulous marketers can sometimes
"harvest" customer’s e-mail address directly from his/her computer or another person's
address book or even obtain e-mail address through programs that automatically search
web pages and e-mail traffic for e-mail addresses.

All e-mail that originates from them will either display the drugstore.com™ or
Beauty.com™ logo (HTML e-mails) or contain the drugstore.com, inc. or Beauty.com,
Inc. copyright notice (text emails). In addition-mails will contain our corporate address in
Bellevue, Washington. If customer receive an unsolicited e-mail that customer believe is
connected with them in any way, please forward the e-mail (as an enclosure) to
abuse@drugstore.com and they will investigate.

Children

They do not sell products for purchase by children. They sell children's products
for purchase by adults. If anybody is under 18, may use Web site only with the
involvement of a parent or guardian.

Linked Web Sites

their Web stores may contain links to and from other sites operated and
maintained by separate companies. They have no responsibility for linked Web sites
(including the Web sites of participants in associate program) and provide these links
solely for the convenience and information of their visitors. The privacy policies of these

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sites may differ from their policy, so customer should always review the privacy
statement of each linked Web site they visit

Customer’s Consent

By using their Web site (including through our customer service line), customer
consent to the collection, use, and disclosure of information in accordance with the
terms of this privacy policy.They reserve the right to modify or amend this policy at any
time. If they ever change privacy policy, they will post any changes on this page or send
an e-mail so that customers are always aware of the information that they collect, how
they use it, and under what circumstances they disclose it. Unless they clearly state
otherwise, the changes to privacy policy will affect only the information they collect after
the effective date of the change.

What are drugstore.com's Terms of Use?

Drugstore.com is a leading online drugstore: a retail store and information site for
health, beauty, wellness, personal care and pharmacy products. The Site is designed to
provide a convenient, private and informative shopping experience for consumers to
purchase products essential to healthy, everyday living. Accessible 24 hours a day, 7
days a week, the drugstore.com online store offers a larger selection of products than
typical store-based retailers, along with a wealth of health-related information, buying
guides and other tools designed to help consumers make educated purchasing
decisions. drugstore.com, inc. and its subsidiaries and affiliates want each visitor to the
Site to have a safe, pleasurable visit, so they have established the following terms and
conditions so that they know what to expect from each other. By using the Site
consumers agree to be bound by the terms set forth herein. They may make changes to
the Site, these Terms of Use, or the policies and conditions that govern the use of the
Site at any time. They encourage you to review the Site and these terms periodically for
any updates or changes. customer continued access or use of the Site shall be deemed
his acceptance of these changes and the reasonableness of these standards for notice
of changes.

ELECTRONIC COMMUNICATIONS

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 When customer visit the Site or send e-mails to them, they are communicating
with them electronically. Customer consent to receive communications from them
electronically. They will communicate with customer by e-mail or by posting notices on
this site. Customer agree that all agreements, notices, disclosures and other
communications provide to customer electronically satisfy any legal requirement that
such communications be in writing.

Customer’s Account Obligations

In consideration of use of the Site, customer agree to: (a) provide true, accurate,
current and complete information about themself as prompted by the checkout form for
their account information (the "Account Information") and (b) maintain and promptly
update the Account Information to keep it true, accurate, current and complete. If
customer provide any information that is untrue, inaccurate, not current or incomplete,
or they have reasonable grounds to suspect that such information is untrue, inaccurate,
not current or incomplete, they may suspend or terminate customer’s account and
refuse any and all current and future use of the Site. Account Information and certain
other information about customer are subject to Privacy Policy.

Customer Conduct

Any conduct by customer that in their sole discretion restricts or inhibits any other user
from using or enjoying the Site will not be permitted. customer agree to use the Site only
for lawful purposes. customers are prohibited from posting on or transmitting through
the Site any unlawful, harmful, threatening, abusive, harassing, defamatory, vulgar,
obscene, sexually explicit, profane, hateful, fraudulent, racially, ethnically, or otherwise
objectionable material of any kind, including but not limited to any material that
encourages conduct that would constitute a criminal offense, give rise to civil liability, or
otherwise violate any applicable local, state, national, or international law.

customer agree that your use of robots, spiders, crawlers, wanderers, Web
agents and other such automated processes on the Site will be Standard for Robot
Exclusion (SRE) -compliant robots ("robots") and when connecting to the Site, prior to
downloading or indexing any pages on the Site, such robots will immediately visit

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http://www.drugstore.com/robots.txt ("the robot.txt file"). customer understand that the
robots.txt file is the only means by which robots are authorized to access the Site.
customer agree not to violate any of the robot access policies and acknowledge that
any violation of the policies may result in termination of customer’s access to the Site,
deactivation or deletion of account and all related information and files in account, and
preclusion of any further access to such files or the Site, without prior notice.

customer agree not to reproduce, duplicate, copy, sell, resell or exploit for any
commercial purposes, any portion of the Site, use of the Site, or access to the Site.
Customer agree not to access the Site by any means other than through the interface
that is provided by them for use in accessing the Site.

SWEEPSTAKES AND CONTESTS

From time to time, they may offer and/or co-sponsor contests, sweepstakes, and
games on the Site. Each of these activities shall be governed by specific rules
accessible from the Site offering the promotion.

SITE CONTENT

Customer’s acknowledge that the Site contains information, data, software,

photographs, graphics, videos, text, images, typefaces, sounds, and other material
(collectively "Content") that are protected by copyrights, trademarks, or other proprietary
rights, and that these rights are valid and protected in all forms, media and technologies
existing now or hereinafter developed. All Content is copyrighted as a collective work
under the U.S. copyright laws, and they own a copyright in the selection, coordination,
arrangement, and enhancement of such Content. Customer may not modify, remove,
delete, augment, add to, publish, transmit, participate in the transfer or sale of, create
derivative works from, or in any way exploit any of the Content, in whole or in part. If no
specific restrictions are displayed, customer may make copies of select portions of the
Content, provided that the copies are made only for your personal, information and non-
commercial use and that he/she do not alter or modify the Content in any way, and
maintain any notices contained in the Content, such as all copyright notices, trademark
legends, or other proprietary rights notices. Except as provided in the preceding

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sentence or as permitted by the fair use privilege under the U.S. copyright laws (see
e.g. 17 U.S.C. Section 107), visitors may not upload, post, reproduce, or distribute in
any way Content protected by copyright, or other proprietary right, without obtaining
permission of the owner of the copyright or other proprietary right. In addition to the
foregoing, use of any software Content shall be governed by the software license
agreement accompanying such software, if any.

COLOR/PRODUCT DESCRIPTION

They have made every effort to display as accurately as possible the colors of
products that appear at the Site. However, as the actual colors see will depend on
monitor, they cannot guarantee that customer’s monitor's display of any color will be
accurate. They have attempted to be as accurate as possible. However, they do not
warrant that the product descriptions are accurate, complete, reliable, current, or error-
free. If a product offered by the Site is not as described, customer sole remedy is to
return it in unused condition.

LIMITATION OF LIABILITY

under no circumstances shall they or any other party involved in creating,

producing, or distributing the site be liable for any direct, indirect, incidental, special, or
consequential damages for loss of profits, good will, use, data or other intangible losses
(even if we have been advised of the possibility of such damages) that result from (i) the
use of or inability to use the site, (ii) the cost of procurement of substitute goods and
services resulting from any goods, data, information or services purchased or obtained
or messages received or transactions entered into through or from the service; (iii)
unauthorized access to or alteration of your transmissions or data; (iv) statements or
conduct of any third party on the site; or (v) any other matter relating to the service.
Customer hereby acknowledges that this paragraph shall apply to all content,
merchandise, and services available through the site. Because some states do not
allow the exclusion or limitation of liability for consequential or incidental damages, in
such states liability is limited to the fullest extent permitted by law.

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 customer agree to indemnify and hold them, and their subsidiaries, affiliates,
officers, directors, agents, co-branders or other partners, and employees, harmless from
any claim or demand, including reasonable attorneys' fees, made by any third party due
to or arising out of Content customer submit, post to or transmit through the Site, use of
the Site, connection to the Site, violation of the Terms of Use, or violation of any rights
of another.

Rights of Drugstore.Com

They may elect to monitor areas of the Site by electronic or other means and
may disclose any Content, records, or electronic communication of any kind (i) to satisfy
any law, regulation, or government request; (ii) if such disclosure is necessary or
appropriate to operate the Site; or (iii) to protect rights or property or the rights of the
users, Sponsors, Providers, Licensors, or Merchants. They are not responsible for
screening, policing, editing, or monitoring such Content. If notified of allegedly infringing,
defamatory, damaging, illegal, or offensive Content, they may investigate the allegation
and determine in our sole discretion whether to remove or to request the removal of
such Content from the Site.

They may terminate access, or suspend access to all or part of the Site, without
notice, for any conduct that they, in their sole discretion, believe is in violation of any
applicable law or is harmful to the interests of another user, a third-party Provider,
Merchant, Sponsor, Licensor, service provider.

Because customer service is paramount to business, they reserve the right to

refuse to sell products to customer if it reasonably appears to them that customer intend
to resell the products. In addition, they reserve the right to limit quantities of items
purchased by each customer. In addition, they reserve the right to cancel any order or
part of an order, or refuse service to anyone for any reason. Such reasons may include,
but are not limited to, unauthorized coupon use, product availability, and price
discrepancy. They reserve the right to charge fees or extra shipping charges for any
product that is backordered. The posting of prices on our site is not an offer for sale of
goods, and the order confirmation is not an acceptance of an offer to purchase goods.

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The contract for sale of goods between them and any customer is not entered into until
they charge a valid credit card or otherwise accept payment.

Submissions

They are pleased to hear from customers and welcome customer’s comments
regarding our products and the Site. customer may post reviews of products or services,
comments, suggestions, or other material ("Submissions") so long as the content of
customer Submission is not unlawful, threatening, abusive, spiteful, defamatory,
invasive of privacy, obscene, profane, sexually explicit, fraudulent or otherwise
objectionable or injurious to third parties (including, but not limited to, any content that
encourages conduct that would constitute a criminal offense, give rise to civil liability, or
otherwise violate applicable law). visitor may not use a false e-mail address,
impersonate any person or entity, or otherwise mislead as to the origin of his/her
Submission. drugstore.com, inc. reserves the right (but not the obligation) to monitor,
edit and remove any Submission but does not regularly review posted Submissions.

By posting or sending any Submission, customer grant drugstore.com, inc. and its
subsidiaries a non-exclusive, royalty-free, perpetual, irrevocable and fully sub licensable
right to use, reproduce, modify, adapt, publish, translate, create derivative works from,
distribute, and display such Submission throughout the world in any media.
Submissions will also be posted on Buzzillions.com and are subject to PowerReviews
terms and conditions, and privacy policy. Visitors also grant drugstore.com, inc.,
PowerReviews, and its subsidiaries the right to use the name you submit in connection
with such Submission. By posting or sending a Submission, customer represent and
warrant that visitors own or otherwise control all of the rights to the content in
Submission, that the content visitor provide is accurate, and that use of the content in
Submission does not violate this policy and will not cause injury to any person or entity.
user agree to indemnify drugstore.com, inc. and its subsidiaries against all claims and
liabilities resulting from Submission. drugstore.com, inc. does not take any responsibility
and assumes no liability for any Submission posted by customer or any other person or
entity.

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Termination

These terms are effective until terminated by either party. If anybody no longer
agree to be bound by the Terms of Use, he/she must cease use of the Site. Subject to
applicable law, we reserve the right to suspend or deny, in sole discretion, access to all
or any portion of the Site with or without notice. He/she agree that any termination of
access to the Site may be effected without prior notice, and acknowledge and agree
that they may immediately deactivate or delete user’s account and all related
information and files in their account and bar any further access to such files or the
Site. Further, user/visitor agrees that they shall not be liable to you or any third-party for
any termination of access to the Site.

General Information

These Terms of Use constitute the entire agreement between user and
drugstore.com and govern the use of the Site. user also may be subject to additional
terms and conditions that may apply when customer use affiliate services, third-party
content or third-party software. Our failure to exercise or enforce any right or provision
of the Terms of Use shall not constitute a waiver of such right or provision. If any
provision of the Terms of Use is found by a court of competent jurisdiction to be invalid,
the parties nevertheless agree that the court should endeavor to give effect to the
parties' intentions as reflected in the provision, and the other provisions of the Terms of
Use remain in full force and effect. customer agree that regardless of any statute or law
to the contrary, any claim or cause of action arising out of or related to use of the Site or
the Terms of Use must be filed within one year after such claim or cause of action arose
or be forever barred.

COPYRIGHT COMPLAINTS

They respect the intellectual property of others, and they ask users to do the
same. If customer believes that his/her work has been copied and is accessible on the
Site in a way that constitutes copyright infringement, visitor may notify them by providing
copyright agent the following information:

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 1. An electronic or physical signature of the person authorized to act on behalf of
the owner of the copyright interest;

2. A description of the copyrighted work that user/visitor claim has been infringed,
including the URL (i.e., web page address) of the location where the copyrighted work
exists or a copy of the copyrighted work;

3. Identification of the URL or other specific location on the Site where the
material that customer claim is infringing is located;

4. Customer’s address, telephone number, and email address;

5. A statement by visitor/customer that he/she has a good faith belief that the
disputed use is not authorized by the copyright owner, its agent, or the law;

6. A statement by customer, made under penalty of perjury, that the above

information in customer’s Notice is accurate and that he/she is the copyright owner or
authorized to act on the copyright owner's behalf.

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 Payment Method
 Credit card
 visa
 master card

are the only mode of payment.

Secure Billing Information

All credit card numbers are stored on a computer that is not connected to the
Internet. When customer type or call in his/her credit card information, the complete
credit card number is transferred to this secure computer across a proprietary, one-way
interface. This computer is not accessible by network or modem, and the card
information is not stored anywhere else.

A secure server safeguards shopping transactions over the Internet by encoding

information passing between computers at different locations. Using secure server
means that customer’s credit card number, name, address, and other information is
guarded as it travels to their store. This is accomplished using a Secure Sockets Layer
(SSL). Secure Sockets Layer is the protocol they offer for safely transferring sensitive
information over the Web. When customer connect to drugstore.com using the secure
server, all sensitive information, including his/her credit card number, is encrypted so
that the only people who can read it are user and the drugstore.com  person customers
are contacting.

To confirm the SSL, when visitors are logged into the website by entering e-mail
address and password a "lock" icon will appear at the bottom of browser window when
visitors are on any of the protected areas of website (personal information in "your
account," prescriptions, and checkout.)

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 Overview

drugstore.com, inc. is a leading online provider of health, beauty, vision, and

pharmacy are their products.

Believe that they offer a better way for consumers to shop for these products
through web stores, including those located on the Internet at,

www.drugstore.com,

www.beauty.com,

www.riteaidonlinestore.com,

www.visiondirect.com,

www.lensmart.com,

www.lensworld.com, and

www.lensquest.com.

They operate on a 52/53-week retail calendar, with each quarter in a 52-week

fiscal year representing a 13-week period. Fiscal years 2008, 2007, and 2006 were 52-
week fiscal years.

Business Segments; Growth Strategies

They operate business in three business segments: over-the-counter (OTC); vision;

and mail-order pharmacy.

OTC- the OTC segment includes all non-prescription products sold online through their
web stores at www.drugstore.com,www.beauty.com,www.riteaidonlinestore.com,
www.visiondirect.com,www.lensmart.com,www.lensworld.com,& www.lensquest.com,or
over the telephone at 1-800-DRUGSTORE or 1-800-VISIONDIRECT, including
nutritional supplements sold through our subsidiary Custom Nutrition Services, Inc., or

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CNS. They source their OTC products from various manufacturers and distributors.
They also sell advertising on primary OTC site www.drugstore.com. Their business
strategy is to offer customers a wide selection of health, beauty, personal care,
household, and other products at competitive prices and a superior online shopping
experience. They are able to offer a significantly broader assortment of products, with
greater depth in each product category, than brick-and-mortar drugstores, and provide a
broad array of interactive tools and information on websites to help consumers make
informed purchasing decisions. They believe leveraging strong capabilities in Internet
marketing; merchandising, fulfillment, and customer care in the health, beauty, and
wellness arena will be a key growth driver for OTC segment. In 2009, they are focusing
on key initiatives such as international market expansion and further development of our
Medco, Rite Aid, and new beauty partnerships to accelerate OTC growth.

Vision-The vision segment includes contact lenses sold through wholly owned
subsidiary Vision Direct Inc. (Vision Direct), through web stores located at
www.visiondirect.com, www.lensmart.com, and www.lensquest.com, or over the
telephone at 1-800-VISIONDIRECT. They purchase their contact lens inventory directly
from various manufacturers and other distributors.

Mail Order Pharmacy- mail-order pharmacy segment includes prescription drugs and
supplies, other than prescription contact lenses, sold online through the pharmacy
section of the drugstore.com web store or over the telephone and delivered to
customers through mail-order facility. They procure prescription inventory through Rite
Aid Corporation as part of our ongoing relationship. They market to both cash-paying
and insurance-covered individuals, and they also serve as a third-party provider of mail-
order prescription fulfillment services for pharmacy benefit managers, or PBMs. They
sell over 5,500 prescription drugs, including many specialty drugs for the treatment of
chronic conditions such as cancer, HIV, and multiple sclerosis, which are not carried by
brick-and-mortar pharmacies and require special handling or service. In this segment,
they focus their marketing efforts directly on consumers online and through doctors to
maximize growth in cash prescription and specialty.

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 PHARMACY BUSINESS
In addition to the sale of prescription drugs, they sell advertising on website to
monetize the large volume of unique visitors per month researching drugs and other
healthcare content provided on the site. In 2009, they anticipate that their mail-order
pharmacy segment revenues was decline due to the loss of one of their PBM customers
as a result of an acquisition in late 2008, but anticipate continued year-over-year
contribution margin improvements.

Discontinued Operations- On September 3, 2008, they entered into an amended

and restated main agreement with Rite Aid whereby we transferred to Rite Aid the rights
to local pick-up pharmacy business (LPU), which includes prescription refills sold online
through the drugstore.com web store or the Rite Aid online store and picked up by
customers at Rite Aid stores, in exchange for $9.9 million, paid in ten monthly
installments beginning in September 2008. They recorded the purchase price as a
deferred gain that they are recognizing over the ten-month contractual payment period
ending in June 2009. Additionally, Rite Aid was paid drugstore.com ongoing marketing
service fees for the continued marketing of Rite Aid's LPU offering on the drugstore.com
site during the term of the agreement, which continues for two years unless extended
for another year by either party. The marketing service fees are considered indirect
cash inflows of discontinued LPU segment, as they anticipate the fees earned will not
be a significant source of ongoing revenue in the future. The results of operations of our
LPU segment have been classified as discontinued operations in the consolidated
financial statements and Management's Discussion and Analysis of Financial Condition
and Results of Operations for all periods presented.

Revenues. They generate revenue primarily from product sales and shipping fees. In
2008, they reported consolidated total net sales of $366.6 million, which reflected a
$27.2 million, or 8%, increase over 2007.net sales growth was driven by a 7% year-
over-year increase in our total order volume for 2008, to 5.3 million orders. Their
average net sales per order increased to $69 in 2008, from $68 in 2007. Their revenues
benefited from strong year-over-year growth in largest segments, OTC and vision of

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11% and 12%, respectively. These increases were partially offset by a year-over-year
decrease in mail-order pharmacy net sales of 12%.

Expenses- Their operating expenses, including cost of goods sold decreased as a

percentage of net sales to 105% in 2008 compared to 106% in 2007. In 2008,overall
cost of goods sold as a percentage of net sales decreased year-over-year by 130 basis
points due to a favorable shift in our product mix to higher margin OTC sales, as well as
improvements in OTC and mail-order pharmacy margins. As a percentage of net sales,
there are improved gross margins in 2008 were partially offset by increased fulfillment
expenses incurred in primary distribution center related to process improvement
projects, increased marketing expenses resulting from increased paid order volume and
increased employee-related costs, and increased technology and content expenses
resulting from increased depreciation and software maintenance expense driven by the
completion of internally developed software projects and the acquisition of software and
computer equipment to enhance websites and IT infrastructure, as well as increased IT
employee-related costs. In 2008, general and administrative expenses as a percentage
of net sales decreased primarily due to a $2.5 million charge in 2007 related to
estimated sales taxes and interest on an unfavorable ruling on New Jersey sales tax
case, and lower stock-based compensation expenses, partially offset by increased
professional fees related primarily to a consulting project focused on profitability
initiatives.

Net Loss/Cash Position-net loss for 2008 decreased by 28%, or $3.2 million, to $8.3
million, compared to $11.5 million for the year ended December 30, 2007. they ended
2008 with $38.2 million in cash, cash equivalents, and marketable securities, compared
to $36.2 million at the end of 2007. This balance reflects cash provided by operating
activities from continuing operations, and discontinued operations of $9.9 million in
2008, proceeds of $4.0 million from the sale of discontinued operations, proceeds from
borrowings on line of credit of $5.0 million, and proceeds received of $0.5 million from
the exercise of employee stock options and purchases under their stock purchase plan,
partially offset by $13.2 million for capital expenditures, and $4.4 million to repay debt
obligations.

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Economic Environment- In the fourth quarter, they felt some impact from the
current economic downturn, as they saw a less-than-normal seasonal increase in sales
of their discretionary items, such as holiday gift offerings, and greater utilization of free
shipping offers. They also saw and expect to see elevated response rates to coupons
and other promotional offers by increasingly price-conscious customers. That they are
finding that overall orders are less affected by the economic slowdown, due in part to
their value-pricing and the non-discretionary nature of many of our products.

Greater utilization of free shipping offers- They also saw and expect to see
elevated response rates to coupons and other promotional offers by increasingly price-
conscious customers. In 2007, compared to just under 3.5 million in 2006. Average net
sales per order for OTC segment increased to $57 in 2007, compared to $56 in 2006,
and average net sales per order for our core OTC segment increased to $58 in 2007,
compared to $57 in 2006.

The year-over-year increase in OTC order volumes in 2008 and 2007 was driven
by increased orders from both new and repeat customers as a result of increasing
active customer base and continued efforts to improve customer retention and
conversion by adding website enhancements and offering a broad selection of basic
necessity items and hard-to-find specialty items through the addition of new SKUs,
which encourages customers to return to websites and make repeat, replenishment,
and impulse purchases. The slight year-over-year increase in average net sales per
order in OTC segment in 2008 and 2007 resulted from selling higher-priced items, offset
slightly by a decrease in the number of items per order.

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 Bibliography

www.drugstore.com

www.google.com

www.wikipedia.com

www.scribd.com

www.4shared.com

www.ask.com

www.beauty.com

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