The gift concierge service that uses artificial intelligence is part of 1-800-Flowers’ technology and service strategy.
Branded manufacturers are making big strides selling online. How will it affect stores?
By anyone’s measure, Crocs Inc. is a consumer products industry phenomenon. Launched in 2002 with an unusual clog that quickly won the hearts of children and adults, it didn’t take long for Crocs to emerge as a global brand. It already sells in 120 countries and is approaching $1 billion in annual sales.
But as popular as the Crocs brand has become, few consumers are aware of the full scope of Crocs’ product line, says Chris Ladd, vice president of global Internet and retail. “We certainly don’t have a brand awareness issue, but the average consumer thinks we make fewer than 10 products,” he says. “Yet we make over 200 styles of footwear.” That includes kids’ flip-flops and sandals adorned with cartoon characters and sports logos, canvas-topped loafers for men, and boots and heels for women-and, of course, the popular clog in all of its many bright colors.
Consumers aren’t aware of all those items because most of them don’t make it onto retail store shelves, Ladd says. “Department stores and sporting goods stores are selective in what they carry, and we usually never see more than ten types of Crocs merchandise together in an in-store selection.”
It was largely to address this issue that Crocs two years ago hired Ladd, a marketing executive with e-commerce experience at major brands like Titleist, Footjoy and Reebok, and charged him with building out Crocs’ direct-to-consumer e-commerce channel in the U.S. as well as in dozens of foreign markets.
“Our e-commerce channel allows us to fully merchandise our product line and control our brand presentation,” Ladd says. “It’s the most overpowering thing for reaching consumers, our largest flagship store.”
Crocs is hardly alone among manufacturers investing more heavily in the web. They’re responding to several trends in retailing, beyond the fact that more consumers are shopping online. The recession forced retail chains to close thousands of stores, and to focus more on smaller-format locations, leaving less shelf space to display the full range of manufacturers’ products.
“The number of stores and the amount of shelf space are shrinking, so manufacturers are frustrated they can’t get all their products in front of consumers,” says Scot Wingo, CEO of ChannelAdvisor Corp., which helps retailers as well as manufacturers sell through online marketplaces.
Retailers also are promoting their own private-label brands that afford them higher margins, and giant discounters like Wal-Mart Stores Inc. are demanding ever-lower prices, squeezing the profits of consumer goods manufacturers.
It’s not that many manufacturers are ready to abandon selling through retail stores-not when that channel still accounts for more than 90% of consumer purchases. “We still find that 9 out of 10 of our customers say that, if time and distance is not an issue, they would prefer to go into a store to try on our products before buying them,” says Elton Graham, director of e-commerce for James Perse Enterprises Inc., a fashion apparel brand that sells through its own e-commerce site as well as through stores.
But makers of consumer goods are realizing they can garner additional sales online and gain useful information about consumer behavior they can pass on to retailers that sell their goods, stimulating sales online and off. And some manufacturers, such as Crocs and James Perse, are coming up with new web strategies that could lead to more and more of their sales coming online.
P&G; stirs things up
The growing role of the web was underscored by the announcement in January that Procter & Gamble Co., one of the largest manufacturers of consumer packaged goods, would begin selling directly to consumers at PGeStore.com. “We need to be where consumers are, and they are on the Internet,” says Glenn Williams, manager of U.S. marketing strategy and scale for Procter & Gamble, the maker of many household staples like Tide laundry detergent and Gillette razors. “More and more, consumers are turning to the Internet for routine shopping and to get what they can’t find in a retail store.”
While P&G; made clear it mainly aimed to collect intelligence on online shopper behavior via the e-commerce site-not compete with retailers that sell its goods-it was significant because the consumer packaged goods, or CPG, industry has largely ignored direct web sales, even as manufacturers of technology products like Dell Inc. and Apple Inc. and apparel makers like Levi’s have sold successfully online, notes Wingo.
Now with P&G;’s web store and Alice.com, a new retail e-marketplace exclusively for CPG manufacturers’ products, the most conservative of consumer products industries in terms of e-commerce is making a major move online, giving even more credibility to e-commerce as a vital channel for all consumer manufacturers, Wingo says.
Other CPG manufacturers are already following suit.
“P&G; announced their retail web site, and now everyone in the CPG industry wants a web store,” says Brian Wiegand, co-founder and CEO of Alice.com. Alice, which launched in January, already channels sales for more than 150 consumer goods makers, with several new manufacturers added each week, Wiegand says. Alice also develops separate retail web sites for CPG manufacturers, with about 30 built so far, he adds.
Long tail of CPG
“Retailers’ shelves have a limited amount of space for products, but Amazon.com has shown us that a web site can have thousands of products-and thousands of retailers-in a single e-commerce site,” Wiegand says. “We think we can have the same for manufacturers, with a long online future for the long tail of CPG products.”
Many CPG companies with hot products to sell, he adds, are finding an alternative home online. “There are thousands of CPG manufacturers not on Wal-Mart’s shelves because they don’t have the clout to be on a large retailer’s shelves, but these include some really cool companies,” he says. For example, Vaska Inc., a manufacturer of organic body lotions and shampoos, and Citra Solv LLC, a manufacturer of cleaning products made with citric fruit extracts, are selling on Alice.com but list few retail chains as retailer partners, he adds.