For all you CPG veterans out there, did you ever think you’d see the day when major retailers would open up their stores to competitors? A day, for example, where a small retailer could waltz into WalMart and put an identical product up on the shelf?
It’s happening online. Today Sears joined WalMart and Amazon as the third big boy to launch a “marketplace” that opens up its online store to third party sellers (see news here, here and here). eCommerce is certainly changing what it means to be a retailer.
For these big retailers, I can see how the marketplace concept makes sense, namely, by allowing them to leverage the power of their brand to expand their product selection for customers and gain incremental revenue without disrupting their own customer fulfillment costs (Sears, for example, charges each seller a listing fee and the seller drop ships products directly to buyers). In many ways, it seems like a win for everyone involved.
Can this work for CPG manufacturers that are interested in selling direct to consumer?
In my humble opinion the answer is no for a very simple reason: Shipping fees.
The mainstream CPG shopper expects to fill her basket with dozens of items from multiple manufacturers and take one bundled basket of goods home in a single trip. That same shopper is not going to be excited about shopping online for these goods in a marketplace in which she has to pay shipping fees for 10 different manufacturers to drop ship a standalone box to her door. 10 boxes with 10 shipping fees doesn’t seem to work.
Is there a way to drop the shipping fees? One method Amazon uses with their Subscribe and Save program is bulk CPG buying. So instead of buying a four pack of bathroom tissue, I have to buy 48 rolls in order to get free shipping. But is this really mainstream? And even without the bulk, do I want a stand alone box on my door for bathroom tissue, toothpaste, trash bags, pain reliever and the dozens of other products I stock in my home on a regular basis? That’s a lot of cardboard.
We’re taking a different approach at Alice.com, which like the marketplaces mentioned above, is open for manufacturers to sell direct to consumer. But instead of consumers getting multiple boxes, they receive one Alice box of bundled goods from multiple manufacturers shipped free to their door. By sharing the box and shipping costs (rather than drop shipping), the manufacturers can offer consumers the convenience and free shipping they demand.
Bottom line for CPG manufacturers? The lines of what it means to be a manufacturer and a retailer are blurring online, and opportunities abound to innovate in how you get your goods into the hands of the consumer.