Haft Son, Father Rivals Again--in Cyberspace

One might think Robert and Herbert Haft--the son and father who led the big retailer Dart Group until their nasty public feud ultimately drove the business into the ground in the ‘90s--would quietly enjoy their remaining fortunes in welcome, tranquil obscurity.

But that’s not the Hafts.

Robert Haft, 47, now runs a company called Vitamins.com that combines an Internet site, 10 bricks-and-mortar stores, a toll-free telephone number and a catalog to peddle vitamins and health supplements. Estimated sales this year: $40 million.

And who else has a new Internet site devoted to selling health-care goods? None other than Herbert Haft, 78, who started his HealthQuick.com--an online drugstore--about the same time as Robert.

A coincidence? Perhaps. But Robert indicates that his dad launched his business for little reason other than to show up his estranged son--the same animosity that led to the demise of Dart and its subsidiary retailing chains: Dart drugstores, Crown Books and the Trak Auto parts supply stores.

“It’s unfortunate,” Robert said in a telephone interview from his Falls Church, Va., headquarters. “My perception is, if I’d gone into sporting goods, he might be in sporting goods.”

Not so, Herbert said in a separate interview from his base in Rosslyn, Va. Noting that his site is essentially a drugstore and that he planned to go online before Robert, the result “is a coincidence,” he said. “I believe there’s a place for both of us.”

Regardless, their online efforts are the latest twist in a remarkable family saga that Robert described as a cautionary tale for any family business, and one that’s left the pair not even speaking to each other.

“I’ve tried to contact my father; he has no interest in [talking],” Robert said.

But clearly they’re both interested in exploiting the Internet to make another splash in retailing. It won’t be easy for either of them. The number of Web sites devoted to selling vitamins, health supplements and other drugstore items is exploding, and the competition is ferocious.

The stalwarts of drugstore and health supplement chains--such as CVS Corp., Walgreen Co., Rite Aid Corp. and General Nutrition Cos., a unit of the Dutch company Royal Numico--are going online to peddle their goods. They have much more financial horsepower than the Hafts.

And a wave of fledgling Internet-only companies, including Drugstore.com. and PlanetRx.com Inc., are devoted to selling health-care items.

“There are an awful lot of players out there,” said David Cooperstein, research director for online retailing at Forrester Research Inc. in Cambridge, Mass.

But that’s not surprising, he said, because when it comes to items such as vitamins that customers are constantly replenishing, “it’s a natural place for the online community.”

Both Hafts, though, are unmoved by the competition. Robert contended that Vitamins.com, which began operating last year, has an edge because its bricks-and-mortar Vitamin Superstore chain enables the company to gather valuable firsthand information about what vitamins consumers want and what they’re willing to pay. (All the stores are in the East, and no more are expected to be built.)

Also, Vitamins.com has about 9,000 vitamin products and related items available for sale, he said, versus less than 1,000 such items that a drugstore might carry. The site carries a familiar Robert Haft refrain. “We offer the lowest price or it’s free,” he said. “That’s about as good a guarantee as you’re going to get.”

Herbert, not surprisingly, echoes Robert with the discount theme the elder Haft been practicing for four decades--and that he taught Robert.

“First, we will never, never be undersold,” the elder Haft said. “No. 2, we have free delivery. No. 3, [as with all e-commerce sites] there’s no sales tax, and if anybody does beat our prices, we’ll give you 150% cash back. No questions.”

In the mid-1980s, Herbert--known for his white pompadour and autocratic, crusty manner--managed Dart’s sprawling empire alongside his son Robert, a young, supercharged executive. The pair even gained brief fame as hostile corporate raiders, and the Haft family had an estimated net worth exceeding $500 million.

Robert, with his more polished demeanor and Harvard University MBA, gained notoriety as the televised pitchman for Crown Books, which helped pioneer discount prices for best-selling books. With his broad smile and shock of black hair, Robert was constantly on TV, announcing that if “you paid full price, you didn’t buy it at Crown.”

But the wheels fell off the Haft machine in 1993, when Herbert decided not to cede control of Dart to Robert and then effectively kicked him out. That set off a series of events that tore the family apart, sparked the elder Haft’s divorce and launched a flurry of lawsuits among several members of the clan.

The feud ultimately resulted in settlements that left Robert, his mother and other family members with millions of dollars, but that also sent the Dart empire into disarray.

All of Dart’s pieces were dismantled, were merged out of existence or went bankrupt. Crown Books, for instance, filed for bankruptcy reorganization in 1998 and closed many of its outlets. As Crown Books Corp., now owned by creditors, the company still runs a limited number of stores in Southern California and elsewhere.

Robert moved on to become head of Phar-Mor Inc., an Ohio-based drugstore chain that was in bankruptcy reorganization when he arrived in 1995. He led the company out of bankruptcy that year and also took it public before leaving in 1997. (Phar-Mor, like most other drugstore chains, has its own e-commerce site on the Internet.)

His time at Phar-Mor gave Robert the idea for Vitamins.com, he said, because one of the most successful lines for the chain was vitamins. The products carry “high margins, between 40% and 50% pretax,” he said. “Secondly, the [online] shipping costs are low, and then there’s the health component” that appeals to consumers, he added.

“The vitamin industry is a $10-billion industry, and it’s growing 10% to 15% a year,” Robert said.

He also claimed that Vitamins.com is enjoying “an unheard of” 10% conversion rate, meaning that 10% of the Web surfers who visit its site buy a product. The average for e-commerce in general is 2% to 3%.

Because Robert’s company is private, his claim can’t be validated. But Forrester’s Cooperstein said, “I could see vitamins being a little bit higher” than average in terms of conversion rates because they’re items consumers are constantly restocking.

Still, “given all the players out there, [Vitamins.com] would have to be doing something pretty unique to build a following that would have the kind of a conversion rate” Robert is claiming, Cooperstein said.

Robert kicked in $5 million of his own money to get Vitamins.com started, but he’s also raised more than $30 million from venture capital funds to keep its expansion going. Indeed, the company also recently bought vitamin catalog firm L&H; Vitamins Inc.

Herbert, meanwhile, has raised more than $20 million in venture capital. He claimed HealthQuick.com can offer the lowest prices because it keeps costs down by outsourcing nearly all its operations--purchasing, warehousing, distribution and so forth--to Saleslink.com, a unit of CMGI Inc. HealthQuick.com also does not take prescriptions because of their cost and hassle.

Do the Hafts plan to raise more cash by taking their companies public and exploiting the frenzy for Internet stocks?

Herbert said it’s likely that HealthQuick.com will eventually go public. Robert was more coy, but on this question anyway was back in sync with his father. Said Robert: “Everyone plans to go public someday.”

In the meantime, Herbert dismissed the notion of retirement. “To me, it’s not work,” he said. “I enjoy it, I like to come up with a business plan . . . and make the dream come true. It’s fun seeing something grow.”

Herbert also remains diplomatic when talking about Robert. “He’s limited to vitamins; we sell everything,” Herbert said. But he added: “I wish him well.”

Robert, in turn, said, “My years with my father were incredible, and my father was my best teacher. On the flip side . . . it is not really fun being on the other side of him.”

Oddly enough, that’s where Robert Haft again finds himself--this time in cyberspace.