Alice.com Expands to Europe
Alice.com, the online marketplace that enables manufacturers of consumer household products to sell directly to consumers, recently announced it had agreed to a merger with a Spanish company, Koto.com, to give it a foothold in Europe.
Mark McGuire, president of Alice.com, said the Koto name will be going away and rebranded as Alice. The first site, Alice.es, will launch in Spain in September. The company, he told RetailWire, plans to "move into Germany and France in 2012, and then Italy and the U.K. following in the end of 2012 and beginning of 2013."
The merger will enable Alice.com to broaden the reach for manufacturers on its site, many of which are global brands selling through traditional retail channels. Mr. McGuire said many of the brands his company works with in the U.S. "have been asking and pushing us to expand our platform."
In some ways, doing business in Europe sounds as if it could be easier for Alice and its manufacturers.
"It seems that there is less of a concern with channel conflict in the European market than there is in the U.S. It is slowly evolving to where the manufacturers are having it be part of their standard business to have a direct to consumer relationship. I think in Europe, it is even more of a focus in that store brands and private label are even more advanced than it is in the States," Mr. McGuire told RetailWire.
Mr. McGuire pointed to Procter & Gamble as one of the leaders in the consumer direct market.
"They’ve been very aggressive with their eStore and, some of the things they are doing on Facebook, I think you’re seeing a shift there to retailers expecting and understanding that the manufacturers are going to be involved in direct-to-consumer relationships. It is not going to be the majority of their business, but it is going to be an important part moving forward," he said.
Many others are following similar paths to P&G, according to Mr. McGuire.
"We’re just about to cross over 400 manufacturers that have on-boarded onto the platform. That’s a nice milestone for us and that we’re getting a really significant amount of manufacturer traction. We’re powering around 90 e-commerce storefronts for brands and then we also launched one of several things we’re going to be doing on Facebook in the coming months. We allow all the brands that are on our storefronts to integrate their stores directly into Facebook and we’ve got about 70 of those Facebook stores up and running, as well."
As for future plans, Mr. McGuire said, "I think for right now our focus is going to be on Europe and the U.S. For the next year or two, for sure. As a startup, this is a big step for us with a lot of moving parts, so you have to be careful how you grow."
Discussion Questions
What do you think of the potential for manufacturer direct to consumer sales of CPG products in the U.S. and Europe? What intrigues you most about the activity taking place in this space?
I’m having a hard time seeing the benefit to the average consumer, except to that hard core group that is house-bound or bound and determined to live their lives online. I did a quick price check of their toilet paper prices v. Walmart’s listed prices online. You would pay a premium (including WM shipping) of about 20% to use Alice.com. If you are still going to the grocery store, why bother with this?
In 1998, I was VP of marketing for a small manufacturing company that needed an e-commerce presence. We hired a company that worked on consignment to be our back-end engine and provide the technical and logistical support we lacked at the time. Over time, we left that and built our own platform coming out of our own warehouse. Like many other manufacturers, we realized e-commerce was big enough that we shouldn’t pay someone else to be in the middle of it.
Fast forward 13 years: Alice.com is doing for CPGs what Ncom did for my company in the 90’s — providing a low cost way to dip a toe in the water and find out whether consumers will, in fact, shop for their cereal and cleaning products online.
The answer to that question is a qualified yes in my mind: that is they will be with the exception of short term intense need purchases (like diapers); market basket purchases more likely than individual website or Facebook purchases. Consumers are still going to want to put these goods in a shopping cart of all the things they need whether that cart is virtual or physical. So, a plus for Amazon and other aggregators less certain for individual manufacturers.
CPGs will be smart to figure out now the logistics of broken case, direct ship and a host of other complications that direct-to=consumer adds. I believe Alice.com is positioning itself to be the Amazon of CPG — more a channel aggregator than a back-end engine. At least if I were them, that’s what I would be thinking.
With retailer consolidation over the last 10-15 years, and the Walmart effect, manufacturers have had less and less negotiating power and margins have really been tightened. What is interesting about the direct approach Alice.com offers is an opportunity for the manufacturer to reach and sell to the consumer directly online. As consumers become more and more comfortable with on-line shopping, I could see this becoming a fast growing channel for manufacturers that provide staples, including soap, shampoo, cereal, laundry detergent, coffee & tea. A consumer will still need to visit their local store for heavier or very bulky items like sugar and paper towels, or perishables like fresh meats and vegetables, but lighter items that are safe and easy to ship would be purchased through Alice.com.
Upside for everyone involved? Maybe. Retailers could focus on smaller more efficient stores that carry fresh and frozen items and a smaller selection of non-perishables. Manufacturers could make higher margins and save on distribution costs by selling direct through Alice.com. And, finally, the consumer would save time and money by only visiting the grocery store for the freshest items and shopping for everything else online.
I am sure everyone involved does not see it that way, but it sounds good.
We also questioned the “pricing” aspect of Alice when we spoke with the company’s CEO Brian Wiegand last December. Here’s what he had to say on how manufacturers go-to-market using the platform: “Some have sales goals, some have database building goals, some have brand building … you know, everyone is a little bit different.”
If a CPG company can effectively go right to the consumer without a middleman (the supermarket), why would they not? If consumers can get the products they want from the manufacturer without going through a middleman, why would they not?
This is one more channel for the manufacturer to utilize. Will it become the dominant channel for most CPGers? Probably not. However, smarter companies, like P&G, are well down the path to driving incremental business in this manner. It makes sense.
It appears I disagree with 2/3 of our poll answerers: I don’t see this as having much potential. The cost of the items is so small I think S/H charges would overwhelm any savings, at least insofar as the America to Europe channel goes. Niche European products that (at least some) Americans always seem willing to pay through the nose for might make more sense; but as for ordering your “Tide” online, I thought we already answered that with a “no”.
I have a tough time seeing this work at competitive prices. It should be interesting to monitor.
Alice.com has to create a dialogue that convinces consumers that they’re a facilitator rather than another wholesale retail site.
Manufacturers won’t easily disrupt relationships and sales with their traditional distribution channel. It puts their company and brand at risk. They can participate to support their dealers, but they won’t under-price them.
Consumers buy things for a myriad of reasons, and it isn’t always about price. Being competitive is merely the cost of entry.