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More CPG Players Embrace E-commerce

Alice.com to Set up E-stores for 29 Marketers; Powerhouse P&G to Launch Its Own Online Retail Channel

By Published on . 3

BATAVIA, Ohio (AdAge.com) -- This looks to be the year of the e-store for package-goods marketers, as an online retail environment once deemed largely irrelevant to them suddenly gains traction with at least 30 of the industry's players.

Alice.com
Alice.com
Procter & Gamble Co. and General Mills announced plans over the past week to expand their online retail efforts. But what could make 2010 more significant is that a far wider swath of the industry is embracing e-stores than these usual suspects.

For example, Alice.com, which launched last summer with a proposition to pool the efforts of CPG marketers into a single site with a single shopping cart and free shipping, is setting up e-stores for 29 marketers, mostly in package goods, linked to their brand websites, said CEO Brian Wiegand, including players such as Johnson & Johnson, Nestle, Novartis, Bausch & Lomb, General Electric and Sara Lee in addition to General Mills.

And P&G is opting to develop its own e-store to launch this spring powered by a different company, PSweb, and featuring exclusively P&G products, following a pilot of the site with 5,000 consumers.

One-on-one relationship
Currently P&G has about $500 million in e-commerce sales globally through its own sites and others -- far from inconsequential, but still less than 1% of an $80 billion behemoth. "We want it multiples of 10 times bigger than that," said P&G Chairman-CEO Bob McDonald in an interview. "The eventuality is a one-on-one relationship with every consumer, and obviously e-commerce needs to be a big part of that."

He said he's not sure how much of that will be incremental rather than swapping out business done in traditional retail, but added that "so far our experience is that a good measure of it is incremental. I think the point is that we want to be everywhere our consumers want to shop or gain knowledge, and in that sense we have to be ubiquitous ... and that requires a big presence in e-commerce."

Both P&G and General Mills were active experimenters with online retailing during the industry's first wave of interest in the late 1990s, and P&G has continued to have at least some presence in direct e-commerce ever since, including adding a growing number of its products the past two years to a site inherited from the 2005 Gillette acquisition, TheEssentials.com. P&G has also added click-to-shop buttons on a number of its brand websites linked to TheEssentials and other online retailers. But most other CPG players have had minimal involvement in direct e-commerce over the years.

Merging industry efforts
P&G is perhaps the only U.S. CPG marketer with a broad enough assortment to make a single-company solution sensible, said Alice.com's Mr. Wiegand, though he still believes piling all industry efforts into a single site is more likely to gain traction with consumers.

"We launched Alice to show there was a platform for consumers to buy [package goods] online with free shipping, and the grand plan was to let manufacturers create branded experiences at their sites and build out web stores," said Mr. Wiegand. "Consumers buy in a basket, maybe 10 things from eight or nine different manufacturers. The secret sauce for ours is that we tie the back end in a shared way across all the manufacturers."

Now, nearly 30 manufacturers are going along with the "grand plan," he said, and building web stores linked generally to their brand websites. "I feel by the end of 2010 every package-goods marketer will either have a store or have a plan for a store," he said.

Since launching in June, Alice has gone a long way toward proving its business model, Mr. Wiegand said. It includes letting the manufacturers keep the retailer margin and making money off selling marketing services to the CPG marketers.

An unmet need
Alice reports 2 million unique monthly visitors (a figure confirmed by Compete.com and Quantcast.com data) despite putting up a registration wall in front of its product assortment in a move designed to attract only serious shoppers and deter casual browsers and, said Mr. Wiegand, is collecting $10 to $12 in marketing dollars from manufacturers for coupons, loyalty programs and free samples on a typical shopping cart, which has 10 to 11 items and a ticket just less than $50. "I'd gladly take that [$10 to $12 in marketing funds] vs. trying to make a margin in a commodity market vs. Walmart," he said.

The growth shows there's an unmet need, but "the secret is free shipping," said Mr. Wiegand. "If I have to pay to have my shampoo shipped to me, I'm just going to go to the store."

Some of the early dreams of e-commerce -- like auto-replenishment of staples that get used at predictable rates -- really aren't occurring widely, though Alice has been testing the concept. Mostly, Mr. Wiegand said, such deals appeal to single men with little interest in the categories.

Greater e-commerce competition
But the increased manufacturer interest in e-commerce has launched more competition. Walmart.com, for example, added more CPG products to what it sells in the past year. Manufacturers have the power to set prices at Alice, and "no one is coming in lower than Walmart," Mr. Wiegand said. "If you want the absolute lowest prices, you're still going to find them at Walmart. Target is generally 5% higher than Walmart, and that's generally where we fall in."

Because he makes his money on marketers, not markups, Mr. Wiegand said he also has no incentive to develop private labels -- something that differentiates him from other retailers.

There are some obvious advantages for manufacturers hoping to capture purchases induced by online display or search ads and to sell their wares in an environment where retailer house brands are less likely to siphon off sales. But in announcing its e-store plans last week, P&G said it wants to test concepts and programs that can be applied to all of its online retail partners.

At Alice, marketers are experimenting actively too, using a marketers-only analytics and targeting section of the site titled, predictably enough, Wonderland. Predictably, they're bundling razors and shaving cream, said Mr. Weigand, "but I had no idea they would be doing this hyper-targeting where they would say 'I want people in these three Florida ZIP codes who have purchased one of these three competitive products two times and then switched and never purchased an organic product.'"

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