In its second-largest acquisition, Amazon buys the company for $970 million.
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While many consumer products companies are investing more heavily in the web, however, their strategies and goals for engaging consumers online are not all alike.
While P&G; created a stir when the PGeStore launched in January, for instance, the big manufacturer has no long-term plans to actually sell directly to consumers, Williams says. “We’re not a retailer and have no intent to become a retailer,” he says. That’s no doubt a relief to the online retailers that, according to Williams, sell $500 million of P&G; products each year via the web.
Web crucial to growth
In fact, Procter & Gamble won’t directly operate PGeStore.com, which is due to go live this spring. The e-commerce site is owned and operated by PFSWeb Inc. under a licensing agreement with P&G; that grants the manufacturer direct access to the site’s information on sales and customer shopping behavior, Williams says. PFSWeb, which will operate PGeStore on a software-as-a-service e-commerce platform from Demandware Inc., will own the P&G; inventory sold on the site and handle all fulfillment and customer service, he adds.
Nonetheless, P&G; sees the ability to engage consumers online-and have direct access to data about how they shop-as crucial to its growth, Williams says.
He says the e-commerce site will provide P&G; with direct information about online shopper behavior that it can’t get from its existing online social media campaigns-including exposure on Facebook and Twitter for many of its major brands including Gillette and Pampers. While those efforts build brand awareness, Williams says, to really take advantage of the e-commerce channel P&G; needs a better understanding of the way consumers shop online, he says.
P&G; already is good at understanding how consumers shop in stores, he says, and now it needs to do the same online. “We have a saying at P&G;, that when a customer is standing in front of our products on a store shelf, that’s the moment of truth-when she makes the choice between product A or B or C. We have an understanding of that moment of truth in physical stores, but we need to learn how shoppers handle their moment of truth when in front of a computer screen.”
“As the web continues to play an ever-increasing role in helping shoppers make those decisions, we want to have a leadership role in the online channel the same as we do in the brick-and-mortar channel,” he says. “In stores, we design product packs that we know sell on store shelves, but do those same packs work online? We’ll have to see.”
PGeStore.com, Williams says, will serve as the company’s online laboratory for testing how all of its brands and nearly all of its products sell on the web. It can then use that information, he says, to help retailers better sell P&G; products directly online, or to present them on the web in a way that will lead to more sales in stores.
A company with $80 billion in annual sales, however, P&G; is not interested in developing its own direct-to-consumer e-commerce channel, Williams says. “We’re interested in enabling our online retailers to be better sellers of our products.”
Branding and sales
But other manufacturers are turning more attention to selling directly via the web, even if it leads to more competition with stores that sell their goods.
At James Perse, which sells through high-end retailers like Nordstrom and Bloomingdale’s in addition to hundreds of independent fashion boutiques as well as its own chain of 14 stores, the goal of its e-commerce strategy is to both build its brand and to sell, says Graham, the director of e-commerce.
“We see our web site first as a branding channel, and secondly for direct sales,” he says.
High-end apparel stores typically sell merchandise from several brands as well as their own private labels, and usually carry only a limited number of products from James Perse, Graham says. That means they cater to the more casual shopper of Perse apparel.
“Retailers do a good job of kitting our products together, but our core customer might be disappointed to see our merchandise in only three tops in two colors when visiting a retailer,” he says. “But on our retail web site, they can view dozens of tops in a whole color palette. For us, it’s all about communicating to that core customer and satisfying their expectations of having something to engage with.”
By engaging directly with consumers through its own e-commerce site, which it launched in 2008 on a licensed technology platform from Art Technology Group Inc., James Perse has learned how to better market to its best customers while also controlling the presentation and pricing of its brand, he adds.
The company has used the customer relationship management and personalization technology built into its e-commerce platform, for example, to increase sales among its best online customers. After identifying its most high-value customers-for example, those who spent $1,000 on its web site in the prior quarter or new shoppers who have extensively researched its brand-James Perse has realized high conversion rates when reaching out to them with a personalized e-mail message or even a handwritten note suggesting products they might like along with a complementary offer like free shipping. “We have seen conversion rates of 30% in these scenarios,” he says.
Although James Perse has a policy of avoiding price discounts in order to protect its image as a high-end brand, it has also used the e-commerce channel to offer special promotions, such as sharp discounts on end-of-season merchandise, only to a select group of customers who have spent a minimum amount in the prior month or quarter. “This doesn’t create a channel conflict with retailers, and it allows our core customers to see the benefit of creating a relationship with us,” Graham says.
He adds that James Perse chose the ATG platform for the flexibility and control it provided the brand in addressing changes in its market. As online retailers like Gilt Groupe Inc. and RetailConvergence.com LP’s Rue La La launched trendy e-commerce sites in recent years offering invitation-only sales to its members, James Perse was up and running with its on invitation-only sales feature on its site in early 2008, Graham says.