P&G Opens eStore to the Public
Back in January, a Procter & Gamble spokesperson told The
Wall Street Journal that the consumer packaged goods giant was looking
at its new eStore (www.pgestore.com) pilot project as a "learning lab."
The
eStore, which is owned and operated by the e-commerce provider PFSweb, launched
with a test of 5,000 consumers and offers P&G brands at market competitive
rates with a flat $5 shipping fee on all orders.
P&G has consistently maintained
it is not looking to get into the retailing business but is looking to better
understand the consumers who buy its brands. Only about $500 million of the
company’s roughly $79 billion in annual revenues comes from online channels
and most of those come from e-tailers operating independently of P&G.
Kirk
Perry, vice-president of P&G’s North America operations, told the Financial
Times the eStore "will help deliver new tools, services and features
that can ultimately be shared with retailers."
Bob McDonald, CEO of P&G,
told the Financial Times in an interview
last year, "We want to maximize our sales through retailers but we also
want to be where the consumer wants to shop."Â
More consumer packaged
goods companies seem to be adopting the same view as Mr. McDonald. According
to Mark McGuire,the president of Alice.com, about 50 brand manufacturers are
currently having online storefronts being developed by his company. That is
in addition to the 30 that are currently selling products directly to consumers
through Alice.com.
"We are seeing a huge wave of these in the last few months, of consumer
companies saying they want to go direct to consumers, and a lot of that is
about what P&G is doing," Mr. McGuire told the Financial Times.
Discussion Question: What, if anything, does P&G’s eStores and other
manufacturer online ventures such as Alice.com mean for the future of consumer
packaged goods sales to consumers?
Think back to the learning lab concept. E-stores give manufacturers real-time feedback and open the door to genuine rapid prototyping. The result ought to be more successful products, most of which will be sold at retail.
P&G sets the stage for a flood of CPG makers to turn to those like Alice.com. This space is enormous in dollar opportunity.
Internet shopping will not replace retailer shopping (especially if the retailers use the shopper marketing approach), but Internet shopping will be one avenue for consumer shopping. In addition, Internet shopping provides the opportunity for more interactivity between sellers and consumers. That is an important aspect for P&G as it works to learn more about its consumers. If that information is utilized, this is an important avenue for P&G to gain more insight about its consumers.
Manufacturers like P&G have largely indirect models: they sell to intermediaries who then sell to the end consumer. Beyond CPG, there are countless other industries, from healthcare (including pharma) to golf club manufacturers, who really do not know who these end customers are.
P&G’s online venture, like Alice.com and others, represent a better way to not only directly connect with customers, but more importantly also enable them to collect consumer data that can be leveraged for insights.
There is an ongoing tension between retailers and suppliers in terms of where the value and brand relationships resides. Other than price, what’s the difference between Tide from Kroger and Tide from Publix? Further, what do those grocers know about their customers that is of value and that they are willing to share with their suppliers like P&G?
P&G is smart to create this consumer lab. After all, the best data is behavioral, especially when that behavior is a purchase.
Agree with Phil Rubin here, P&G is trying to reach out to consumers at the time of purchase, and learn. Only by developing the right consumer insights around their products can P&G continue to lead in their many categories. This is one more way to connect with target shoppers.
Channel contention is becoming a way of life. Brand managers want to learn more about their end customers, and frankly, selling some product at full margin isn’t such a bad thing for them. As long as they price high (which is the typical way brand managers typically deal with the direct-to-consumer model), retailers will have nothing to complain about.
The apparel business is a different story, of course. Endless pressures for markdown money and “exclusive brands” is driving those brand managers to open their own stores. I don’t think it makes a lot of sense for CP manufacturers to do the same on any large scale. But it sure doesn’t hurt to keep the retailers honest.
P&G may be the leader but I expect many CPG companies to follow quickly. By 2014 (not too distant) the prediction is that over 50% of our purchases will either be made online and/or influenced by the Internet.
If the center of the store, where P&G plays, is not dead yet, it certainly is on life support. If you are a center of store product you will need new venues to engage and to sell to the customers who venture less frequently into these canyons of the “bricks & mortar” outlets.
Social media has allowed firms to listen to and to dialog with customers. However, to date, little has been done to complete the transaction at the time of customer interaction. P&G is the first wave of what I expect to be an opening floodgate.
P&G has been preaching “The First Moment of Truth.” It’s the moment when the consumer gets their first experience with a P&G product. I suspect that P&G will use the estore as yet another method of understanding the consumer. Anything they lose in the $5 shipping will be made up in savings from other research options.
P&G has worked for almost a decade to get this e-learning lab to the point it can be used directly with the public consumer.
Other CPG companies will try to sell directly but they’ll be a long time before they realize the saving research benefits as P&G.
For the types of products P&G sells this is a great venue for so many reasons. As opposed to apparel for instance, there may always be an inherent hesitation for shoppers to buy without first trying on in the store. Household products like P&G’s are a very natural segment of retailing that lends itself to eCommerce. The consumer insights that have already been gained by P&G are among the most valuable anywhere. Will this take a big chunk out of physical store retailing, probably not anytime soon, however the benefits for both P&G and consumers are hard to ignore.
Richard George is right on the money. See my post on the “Shopper Marketing” discussion.
Certainly this effort will provide P&G with consumer insight. But, it is equally, if not more geared to learn and reap rewards from the online business.
The coming core demographic for P&G products are today the Millennium generation. Online is part of their DNA. P&G isn’t going to miss this trend.
Consider, if the future means direct to consumer online sales, then the future likely means making twice as much corporate profit per sale as going to traditional retailers.
So, why don’t they fess up? Because you can’t suggest to the retailers that you are going to compete with them. By the way, any retailer that doesn’t recognize this as their most critical competitive challenge is operating with blinders on.
I believe it’s a very smart way to find out the consumer demand of a product without the constraints of required minimum turns at the retailer. The caveat is that the product has to be from a known source. In other words, brand extensions as opposed to new brands.
I can think of several brand extensions I thought where brilliant but did not have a chance in the retailer aisles. I would buy these product if I knew the parent company had online distribution.