P&G Tries an Online Learning Lab

Dissatisfied with its volume of Internet sales, Procter & Gamble is taking matters into its own hands -- launching its own e-commerce site, which it will use to test online sales tactics and pass along successful strategies to big retail sites like Walmart.com and Amazon.com. U.S. consumer spending on online retail sites exceeded $155 billion last year, according to Forrester Research, and that figure is projected to jump by nearly two-thirds to almost $250 billion in 2014. But less than 1 percent, or $500 million, of P&G's $79 billion in global revenue last year stemmed from online sales via sites such as walmart.com and amazon.com. The new site, called eStore, aims to bridge this gap. The company also hopes eStore will deliver lessons in online retail tactics that it can pass on to other outlets in order to drive online P&G sales growth across the board. The goal, as P&G North American vp Kirk Perry explained when announcing the venture last month, is to "test concepts and programs that can be reapplied with our online retail partners." He described the new site as a "learning lab."EStore will enable users to rate products, ask questions and share ideas about the brands. It will also let P&G test new sales models, such as a subscription service that lets users buy certain products at predetermined times of the month."Anytime a large consumer-products vendor makes a meaningful addition or change to its channel structure, it's a big deal because their channels are the pathways to their ultimate consumers," said David Garfield, managing director and consumer products practice leader at consulting firm AlixPartners. "And their channel partners are companies like Walmart, other mass merchants, and large grocers and pharmacies. You're talking about very big companies dealing with very big companies."The test run, which involves 5,000 consumers, is designed to iron out any bugs before eStore launches broadly in the U.S., most likely in late March or early April. Down the road, the initiative will expand to other markets, though P&G declined to say when and where it will roll out next.P&G has outsourced the eStore initiative to Dallas-based PSFweb, which has built the site and will own and operate it. PSFweb will buy the products from P&G and then sell and distribute them via its own warehouses, said PSFweb CEO Mark Layton. In return, P&G will gain full access to data about consumer buying habits that it will share with other online retailers in hopes of boosting sales.EStore will allow P&G to monitor sales volume and how tactics such as e-coupons and cross-selling impact results. Just as Amazon suggests other books based on what a consumer just purchased, eStore could ask someone buying Tide if he or she needs a fabric softener, explained Tressie Long, an external relations manager at P&G in Cincinnati. And P&G will be able to see immediately how strategies like this affect sales. P&G will also work with PSFweb on how to best drive traffic to the site, be it through keyword searches or tie-ins to sites like Facebook and Twitter, Long said.In addition, P&G hopes to find out what shipping options consumers like most and why. The cost and logistics of delivering goods to consumers in their homes have been the biggest barriers to packaged-goods companies succeeding online, said George Lawrie, a principal analyst at Forrester Research in London. "There's no [consumer] behavioral barrier. The only barrier is around this supply chain, cost-effective thing," Lawrie said. "If they can fix that [by using PSFweb], they're in good shape."Because eStore allows the company to modify its approach in real time and compare results, P&G executives will be able to tweak marketing and distribution tactics quickly and efficiently. "[They'll] have some control over the marketing, the display of products and packaging, the look and feel and experience of the consumer and have [those things] change frequently, be in control of the changes and be able to drive [these changes] themselves," PSFweb's Layton said. P&G "can learn ... what works, what doesn't, and carry that information back to their traditional channels and traditional relationships and say, 'Use this. It works.'"Given the convenience of shopping online, Lawrie expects more consumers to embrace the notion of buying packaged goods there, particularly if the prices are reasonable. "Because [CPG companies] have brands, it means whatever [the brand], it's completely repeatable. And, by the way, [the products are] almost the same all over the world. So, in a sense they're in good shape there. You know what you're going to see. You don't need to touch or feel it," he said.A move toward online sales and less dependency on bricks-and-mortar commerce could slash P&G's retail expenses. P&G executives might "have a tendency to underestimate the size of this because of course they can't afford at the moment to offend their main [sales] channel, which is through the big retailers," Lawrie said. "But [what] they really want is to get away from paying those listing fees. They want to get away from paying for end caps and the lobby displays."See also:"CPG's Online Spending Lags""The Cleaning Lady: A Day With Tide's No.1 Marketer""Consumers Defect From Iconic Brands"

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P&G Tries an Online Learning Lab

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