Procter & Gamble, maker of Tide and Pampers, launching Web site mainly to study its customers

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P&G jumping into retail online, testing new site

CINCINNATI — The maker of Tide detergent, Pampers diapers and Gillette shavers is taking hundreds of its popular consumer products directly to shoppers through a new Web site.

The “eStore” Procter & Gamble Co. is testing, an unusual venture for a consumer products manufacturer, could put it in direct competition with some of its biggest customers, major traditional and online retailers.

But the site’s leaders say it is a consumer research “lab” and retailers will benefit because they will get to share its findings on how shoppers respond online and in stores to digital ads, coupons, store promotions and other factors.

“We’re creating this giant sandbox for the brands to play in,” said Mark Layton, chief executive of PFSweb, which will run the new site.

To get the consumers who actually buy those brands to play along, P&G will advertise the site — and hope the convenience of shopping online and the special offers at the site draw customers. Procter & Gamble is the world’s largest consumer product maker.

P&G wouldn’t say whether the eStore’s prices will beat those in stores or on Web sites that also sell competitors’ products, like Amazon.com. But shipping initially will be at a flat rate of $5.

Many major retailers — including many that sell P&G products — are beefing up their Web businesses to grab some of the continuing growth online and keep their sites competitive. They’re adding millions of grocery and other products, new kinds of services and even alliances with rival retailers. Forrester Research expects retailers to report their total U.S. online sales rose 11 percent to $156.1 billion in 2009.

But Web sales remain a small fraction of the nation’s commerce. At P&G, where CEO Bob McDonald is looking online for growth, only $500 million of $79 billion in annual revenue, or 0.6 percent, comes online — mainly through Amazon.com, Walmart.com and other retailers.

P&G officials don’t expect the eStore to boost the manufacturer’s revenue or profit very much very soon. They’re more interested in the data it will produce about their shoppers and what works for them: product pairings, social media links, environmentally friendly pitches, packaging options, even the Web standby of banner ads.

David Garfield, a consumer products industry analyst for AlixPartners, said P&G will need “some care and some balance” to avoid stepping on retailers’ toes with eStore sales, an unusual move for a big consumer products manufacturer.

“P&G’s retailers are more than just a channel, they are really critical business partners,” Garfield said. “P&G will have to work very closely with them.”

Garfield’s firm expects Americans to further tighten their recession-driven frugality when buying household items this year, a key reason for P&G to step up shopper research.

“The value of understanding consumers’ price sensitivity, brand loyalty, purchase criteria and their sentiments has gone up,” Garfield said. “Any tool that a vendor employs to get smarter, faster, about those things make sense.”

Analyst Ali Dibadj of Sanford C. Bernstein & Co. said the site could help P&G decide the best ways to attract value-minded shoppers whose trading down has hit sales of well-known brands.

“I think the consumer will be attracted to that Web site,” he said. “The consumer broadly speaking likes the Internet experience. P&G has a lot of products. If they can provide that bargain … it just depends on how it’s positioned.”

Doug Herrington, Amazon’s vice president of consumables, said he didn’t know the details of P&G’s plans, but said the company has been helpful in sharing consumer insights.

“P&G is actually a great partner for us,” Herrington said. “I can definitely see the energy and interest in consumer understanding.”

P&G has increasingly dabbled online, buying a small stake last year in British online grocer Ocado, mainly to study its business, and doing job swaps with Google to learn about the online world. The Gillette Co., which P&G acquired in 2005, partnered in a third-party site called The Essentials, which started out selling replacement parts for Gillette, Braun and Oral-B brand electrical products and now offers other P&G products.

After testing among P&G employees that begins this week, the company plans to try out the eStore with a pool of 5,000 consumers and then launch it in the spring for U.S. consumers, in English. It could add other languages and countries later.

Herrington said Amazon sales of P&G products like diapers and shavers — as well as competing products from other manufacturers whose wares are offered in Amazon’s 4-year-old Health & Personal Care section — have been growing, though he wouldn’t provide figures.

PFSweb Inc. of Plano, Texas, which manages e-commerce for a variety of businesses, also works for Tractor Supply Co. and cosmetics retailer Sephora.

Neither P&G nor PFSWeb would disclose the financial terms of the arrangement, but Kirk Perry, P&G vice president for North America, said P&G wanted an experienced company to run the site.

“We’re not in the business of being a retailer and we don’t want to be,” Perry said.

On the Net:

www.pg.com

www.pfsweb.com