Sounding Board: Changing channels

P&G doesn’t think every sale has to go through a retailer. Likewise, retailers shouldn’t feel obligated to carry every product in every size.

By Len Lewis

The great American inventor and businessman Thomas Edison once said: “Opportunity is missed by most people because it’s dressed in overalls and looks like work.”

This observation, although a bit curmudgeon-ish, came to mind when I asked people about Procter & Gamble’s move to sell its products online and to continue aggressive brand building on social networks. Clearly, this is an opportunity for P&G and other CPG companies. But it is also a chance for the supermarket industry to reinvent itself—for true visionaries to scrap the Model-T chassis on which the industry has been built for the past 80 years.

I think Edison would approve. The man whose inventions were the framework for modern civilization would have been the first on line to buy an iPhone or iPad. But he probably would have taken it apart to see if he could make it better. Given his proclivity for privacy, he probably wouldn’t have been an avid social networker, but likely would have turned these sites into something more than trivial pursuits.

If he were in the food business today he might be CEO of P&G and if he were a retailer the Wizard of Menlo Park might be reinventing the supermarket rather than putting the business on autopilot and turning stores into purveyors of commodities.

When this happens you’re just inviting people to buy the same products online or go somewhere else to shop and in that context P&G’s eStore is simply a natural evolution. Like anyone with products to sell it is developing a new venue, no different than a retailer experimenting with new formats. But as P&G’s CEO Bob McDonald told the Financial Times a while back, “I don’t feel the need to have every sale go through a retailer.”

By the same token, retailers shouldn’t feel obligated to carry every size of every item out there. This is an opportunity to experiment with new items and concepts—things that engage consumers and get them to purchase new things.

Of course, I can hear the hands wringing among those who feel that P&G’s move threatens to topple delicate relationships between retailers and manufacturers. But those relationships changed when Costco opened its first membership club, when Wal-Mart launched its first supercenter and when Al Gore invented the Internet.

One of those seeing the opportunity here is Alice.com, a site that is giving manufacturers an innovative new platform for direct-to-consumer sales of everything from garbage bags to diapers. It is named after the energetic housekeeper of that iconic 1970s television series The Brady Bunch and, as the site’s tagline declares: “Everyone needs an Alice.” Apparently more than 300,000 users agree.

I recently spoke with Alice’s founder Mark McGuire, who described it as a kind of Netflix for commodities. “You set up purchases in a queue that is managed as you go along. Basically, you set up your own customized shelf of what you want to buy over time. The system tracks your purchase history and gets smart at knowing when you’re going to run out of something,” he says.

On first blush this might sound like the pie-in-the-sky promises by companies in the heady days before the dot.com bust. But the model has distinct advantages for manufacturers who can set their own prices, take the retail margin and share delivery costs with multiple manufacturers. McGuire told me there is some concern from manufacturers about channel conflicts. As he put it: “Retailers are still their priority. But Alice is a way for them to get a little closer to consumers.”

I’m not suggesting you start your own e-stores, unless you have a financial death wish. But recognize what this represents among consumers—if not dissatisfaction, then impatience with the current shopping experience and a distinct desire to get what they want, when they want it and to eliminate the drudgery of shopping.

Notice I said the drudgery of shopping—not shopping itself. Some online efforts have been arrogant enough to think they can replace brick and mortar. I don’t believe this will ever happen. It simply goes against our entire hunter/gatherer instinct. That has been honed over the past 25,000 years.

The new model of direct-to-consumer selling is giving everyone—retailers and manufacturers—the chance to rethink the box and what goes in it. But it does, as Edison might have said, look like work.

Len Lewis, a regular Grocery Headquarters columnist, is a veteran industry journalist, commentator and editorial director of Lewis Com­munications, Inc. He is the author of The Trader Joe’s Ad­venture—Turning a Unique Approach to Business into a Retail and Cultural Phenomenon. He can be reached at lenlewis@optonline.net or at www.lenlewiscommunications.com.

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