At the convergence of two of the most innovative market segments in the new economy, dietary supplements and the Internet, you would expect innovation to be running rampant, right? Unfortunately, one has to look very closely at the major players to even see a spark of innovation lately. For web-based supplement retailers, virtually every company offers the "widest" product selection and the "lowest" price-and has done so since opening their doors. The challenge for these e-tailers has been to differentiate themselves from one another in order to convert "browsing" visitors into "buying" customers. These attempts at innovation and differentiation have proceeded in five distinct phases-commerce, content, convenience, customization and certification.

Phase I-Commerce

To anybody even remotely familiar with the Internet, this first phase of innovation in the world of dietary supplements is now ancient history. For you history buffs, you'll recall that during this phase of innovation, virtually every supplement e-tailer claimed the "widest selection" of products at the "lowest" price-a strategy that has lost hundreds of millions of dollars (mostly spent on marketing), taken a heavy toll on these company's stock prices and served to create an overwhelming "sameness" be­tween competitors.

Phase II -Content

Some of the earliest attempts by supplement e-tailers to differentiate themselves from one another included development of extensive electronic libraries brimming with gigabytes of health and wellness information. Alas, soon after the primary innovators like MotherNature.com and GreenTree. com (now a part of More.com) developed and posted their unique and extensive content databases, competitors quickly followed suit. Many, like Vitamins.com, DrugStore. com and HealthShop.com, simply licensed the bulk of their supplement-related content from third-party providers such as natural products publisher Health Notes Online. In some regards, supplement e-tailers are right back where they started, but now in addition to a wide selection and a low price, they all possess a vast, if somewhat generalized, supplement encyclopedia. There is certainly no lack of relevant and interesting health content for e-tailers to draw on (note MotherNature's recent partnership with health publisher Rodale Press). The trick is in turning these educational resources into something more than online books and making them more useful to consumers trying to make a purchasing decision.

Phase III-Convenience

During this third phase of innovation, which we are still in, supplement e-tailers are trying to simplify the purchasing decision for their customers. Who in the world wants to click through 14 pages and 162 different brands of multivitamins to find the right one for you (it's cap­italism run amok!). As such, most re­tailers now have their own "store brand" of the most popular supplements as well as some form of "personal shopper" to suggest specific products that might be on sale or to remind you to reorder a product that you ordered in the past.

In perhaps the most important step to­wards making supplement purchases con­venient for consumers, DrugStore. com has refined previous relationships with GNC and RiteAid and developed a new one with e-tailing behemoth Amazon.com (where DrugStore will have a shop­ping tab sometime this quarter). The DrugStore/Amazon deal, of course, begs the question, "Why would you buy your sup­plements from anybody else?" As­suming you can still get a wide selection and a low price, your purchase can be shipped to your home or you can pick it up at the local RiteAid or GNC-and you can do it all with the convenience of "One-Click" online ordering. The reason (perhaps) that you'll shop elsewhere is that you may be concerned about getting the "best" supplement in terms of ingredient levels or overall quality (read more about companies addressing this issue in Phase V-Certification).

Phase IV-Customization

Although most supplement e-tailers have just recently entered this fourth phase of innovation, where product selection is tailored to the unique health and lifestyle needs of the individual consumer, More.com's Acumins division has "been there, done that" with its customized vitamin packs for several years now. Newcomer LifeScript.com, the "personalized nutritional supplement experts," appears to be trying to re­plicate the Acumins approach with a somewhat more detailed lifestyle survey and health profile report, but lacking the distribution network and site traffic of well-funded More.com, it certainly will have its work cut out for it.

In an attempt to compete with customized supplement providers, many e-tailers have added health and lifestyle surveys to their websites, but they range in quality from the good to the bad and even to the truly ugly. Bringing up the rear, surprisingly, is DrugStore.com – with its four question (really, just four questions) Vitamin and Supplement Advisor. A bit higher on the list is MotherNature.com, which asks 14 general health questions on its Supplement Planner, yet only seems to recommend products under the MotherNature brand name.

Breaking into the realm of true "personalized supplement recommendations" are the likes of Vitamins.com and PlanetRx.com, both of which license their extensive Vitamin and Mineral Advisor from Utah Health Informatics. The survey, which takes users through several pages of questions on diet and health history, provides a lifestyle assessment and some generalized nutrition recom­mendations (e.g. get more vitamin C), but no specific product recommendations. HealthShop.com fills the open niche through its 36-question Health Planner, which not only emphasizes your "chief health concern" but also provides a personalized product selection that they call ESP (Everyday Solutions Pack), which sells for about $25-30.

Phase V – Certification

The most recent phase of innovation, third-party product certification, has only just begun, but it is proceeding rapidly and has the potential to change the very nature of the way consumers think about, evaluate and purchase dietary supplements. Among e-tailers, HealthShop. com is perhaps the only leading company addressing this issue. HealthShop actually goes out of its way to tell customers that they do not have the widest product selection. Instead, the company prides itself on its "Quality Standards Program," which requires quality assurance documentation from all suppliers and conducts monthly independent lab testing of specific products to provide choices that customers can select "with confidence." As more e-tailers begin to follow suit and provide independent laboratory analysis of products that they sell (and others that they don't), consumers will finally be able to base their product selections on information rather than luck.

Leading the current certification wave are two companies-ConsumerLab.com and SupplementWatch.com. While neither company is involved in the retailing of nutraceuticals, each provides an independent third-party analysis of specific supplement products, but does so from different perspectives.

ConsumerLab.com focuses its efforts on the manufacturer end of the supplement chain by coordinating independent laboratory analysis of specific products to show which supplements measure up to label claims for active ingredients. The company posts "passing" products on it public website (about a 70% pass rate thus far), sells analytical reports to manufacturers and offers to license its own "CL seal of approval" to those products that pass its testing. Thus far, ConsumerLab has looked at ginkgo biloba, saw palmetto and glucosamine/chondroitin products.

SupplementWatch takes a somewhat different approach to reviewing specific products, focusing instead on the consumer and retailer ends of the supplement chain. The company, which has yet to roll out its own lab-testing program, concentrates instead on reviewing and rating specific products on criteria such as claims, theory, scientific support, safety and dosage, in an effort to help consumers make educated purchasing decisions and help retailers know how specific products compare to one another. Posted reviews have included various products for weight loss, sexual health, joint function, muscle building and others. To maintain the unbiased nature of its reviews, SupplementWatch accepts no advertising from supplement manufacturers and instead generates revenue from content licensing arrangements with retailers and Internet health portals.

Innovation on the Internet is no different than innovation in other business disciplines. It means changing your mix of products/services to address market forces and consumer needs. Far from being a "Eureka!" moment of brilliance, innovation is a systematic approach to continuously evaluating and re-evaluating business methods. On the Internet, we have already seen a blurring of the lines between commerce (Phase I-wide selection at a low price) and content (Phase II-health information) and we will continue to see these lines blurring even further as online information becomes more convenient (Phase III-merging of online and offline retailers) and customized (Phase IV-interactive tools) and products receive independent scrutiny and certification (Phase V-third-party reviews and analysis).

The coming changes will mean that the relationships between the three primary points in the supplement value chain-manufacturers, retailers and consumers-will change, and change drastically. Consumers will come to demand a different level of products from manufacturers and an enhanced level of service from retailers. The companies that are able to innovate to meet the needs of these sophisticated and demanding consumers will become the new leaders in the industry.

NW