May 19, 2010 6:47 pm

P&G goes online to compete for sales

Procter & Gamble has started to sell brands direct to US consumers online for the first time, in a sign of how digital commerce is shaking up relations between retailers and their suppliers.

The launch of P&G’s “eStore” site is part of the company’s drive to increase its total online sales. Such sales through retailers accounted last year for less than 1 per cent of its revenues of $79bn. The site will sell Pantene shampoo, Pampers baby products, Gillette razors and other brands.

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The eStore, which will also offer CoverGirl cosmetics, Tide detergent and Crest toothpaste, brings P&G into direct competition with e-commerce sites run by its retailer customers, including Walmart, Target, CVS and Walgreens.

It will compete as well with a growing number of online-only retailers that show consumers are happy to buy items such as nappies and washing up liquid online, including Amazon, Drugstore.com and Diapers.com.

P&G, the world’s largest consumer goods company, argues that the initiative represents a direct challenge for retailers, describing it as a “living learning lab” that will “help us listen, learn and collaborate with online shoppers”.

Kirk Perry, vice-president of its North America operations, said the site “will help deliver new tools, services and features that can ultimately be shared with retailers” to the benefit of shoppers.

However, Bob McDonald, P&G’s chief executive, has been more explicit than his predecessor, AG Lafley, in focusing on online sales, telling the Financial Times in an interview late last year: “I don’t feel the need to have every sale go through a retailer.

“We want to maximise our sales through retailers but we also want to be where the consumer wants to shop,” he said.

P&G said the site would also support online brand building through social networks, such as Facebook. The Facebook page of Pantene is currently using the eStore site to offer its more than 300,000 fans the opportunity to buy promotional bundles of its products.

A number of other leading US consumer brands have also begun setting up e-commerce operations with Alice.com, which allows customers to amalgamate shopping for household and personal-care brands.

Mark McGuire, president of Alice, said the company had more than 30 brand “store front” sites already running, with another 50 or so under development. “ 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.”

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