While Drugstore.com struggles to conserve cash until it can turn a profit. It must also juggle the conflicting challenges of cutting costs while increasing revenues.

One technique that has helped is e-mail marketing.

The Seattle company, once a flashy dot-com that poured money into television advertising and boasted of spending more than US$100 (US$1 = RM3.80) to acquire a single customer, today spends a tiny fraction of that amount on e-mail to keep people coming back to its online store.

Twice a month it sends customers who have requested notification a "Great Deals" newsletter highlighting some of its bargains. Once a month, General Nutrition Center specials are sent out. Shoppers may also customize their own e-mails, to be delivered as frequently as weekly, featuring a list o f past purchases and reminders of when refills are needed.

It is a lot less high-tech than many of the fancy advertising formats born in the Internet age, and this practice of stuffing consumers' email boxes with virtual sales flyers is also quite cheap. Businesses that use e-mail marketing services provided by such companies as Digital Impact, DoubleClick Inc and Responsys Inc say they typically pay well below US$25 per thousand mailings sent.

Many others say it is far from rocket science and they can manage the mailings in-house. Once the infrastructure is in place and the customer lists are composed, the cost of e-mail marketing is nominal, they say.

It also appears to work a lot better than some of the priciest ad campaigns.

"It reflects the single biggest return on investment in our business," Sieff said, adding that the company at first proceeded tentatively into email marketing, for fear of alienating its customers.

"What we initially viewed as a potential intrusion to our customers has turned out to be viewed by many of them as a service," he said. Although Bluefly tries to offer a prominent opt-out for customers who don't want to receive the mailings, Sieff says most are more than happy to hear about the new shipments of Furla bags or Michael Korr cash mere sweaters.

DoubleClick, one of the leaders in the field, now provides e-mail marketing services through its DARTmail product to 350 companies includ-ing Proctor & Gamble Co, Starwood Hotels & Resorts Worldwide Inc and J. Crew.

While results of many other forms of online advertising have been mixed at best, DoubleClick says e-mail marketing has been a smashing success.

Although response rates vary widely based on the ad, DoubleClick said that one recent DARTmail campaign for car maker Saab was opened by some 70% of recipients.

"Most of our customers are seeing an incredibly positive return on investment - 200 to 300 per cent, 1,000 per cent in some campaigns," said Court Cunningham, senior vice president of technology solutions at DoubleClick.

"Anytime you get clutter in your mail boxes, it is not beneficial to e-mail marketers like us. While some wonder if e-mail will remain an effective marketing tool as volume rises, others question whether there is a viable business in such marketing, or if it will all migrate in-house.

Already large numbers of companies such as Drugstore.com are managing their own e-mail campaigns. Companies that outsource the services risk steadily declining rates as mail volume rises, warns US Bancorp Piper Jaffray analyst Safa Rashtchy.

Marketing companies like DoubleClick counter that the value they add is real since their software helps companies segment their customers in order to build highly targeted campaigns and provides quick feedback on who opened the messages and clicked through to the link.

Some of these claims recall the early promises of the Internet banner ads a few years ago, before consumers lost interest and rates plummeted.

Today, though many companies say there is just no comparison between banner ads and e-mail ads.

"The cost of sending an e-mail is far less than the cost of buying a banner." Seiff said. "And the clickthrough and conversion rates are much higher."