Will it play in Palo Alto?

Will it play in Palo Alto?

Saw the news today that Elephant Pharmacy raised a $26 million Series C round. The company, which bills itself as “the leading complementary pharmacy and one-stop wellness store” has two stores now, both in Northern California. I visited the Berkeley store last year and it was a heck of a lot different from anything we have on the East Coast, even in Cambridge, our closest local approximation of Berkeley.

There was a regular pharmacy counter, but that’s about the only thing that was similar to the typical CVS or Rite Aid. The herbalists were busy in their own department, concocting potions of various kinds. A nutritionist, who “uses a caring, nonjudgmental approach to food to help clients prevent illness and improve wellness through diet and lifestyle” was working that day, as was a massage therapist, but I missed the nutripuncturer.

The shelves were lined with a variety of herbal preparations, vitamins, pilates and yoga equipment, “fair trade” goods. and other sorts of alternative fare. Reference books were interspersed among the merchandise and there was also a dedicated book section. I purchased some natural lozenges (sweetened with rice syrup) and a “Bucky” pillow and eyeshade I use on long flights.

The press release for the new investment describes the opportunity as follows:

Americans spend $27 billion annually on alternative and complementary medicine. Increasing numbers of Bay Area consumers who are looking to take the next step in self-managing their own health and wellness are turning to Elephant Pharmacy as a key resource…In addition to its present locations in Berkeley and San Rafael, Calif., Elephant expects to announce the opening of locations in Los Altos in 2006 and Walnut Creek in 2007.

I got a kick out of the store. The customers looked dead serious as they loaded up on high margin merchandise and listened to advice from some of the whacked out staff members. You should visit if you’re in the neighborhood.

It does seem to make sense to merchandise alternative/complementary items with prescriptions, since lots of people use both. But it’s something that mainstream pharmacies haven’t done. Pharmacists tend to be uncomfortable with alternative therapies, often with good reason.

I don’t have any special insights into the economics of Elephant, but my hunch is that the concept will have limited appeal outside its home market. I wonder how many new locations are required to achieve a return on the new investment. Do they really need $26 million to open two stores? They probably have some other plans.

Elephant seems a little too funky for the mainstream, unlike some other California-based retail concepts like Trader Joe’s. I also expect that increased scientific scrutiny of the safety and efficacy of herbal medications will hurt the category in the long term, although there’s a big group of true believers that won’t be easily deterred.

September 13, 2006

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