News

Actions

Procter & Gamble gets $3 billion from e-commerce, but is it enough?

Expert: Direct link to consumer should be the goal
Is P&G 'missing the boat' with online retail?
Posted
and last updated

CINCINNATI - Procter & Gamble Co. revealed last week that its e-commerce revenue has now reached $3 billion annually. But it still may be missing an opportunity to engage with consumers directly in its online strategies.

“I don’t think the winners and losers are defined yet, when it comes to direct-to-consumer,” said Dave Knox, chief marketing officer at Rockfish Interactive. “Anybody not talking about having a direct relationship with the consumer is missing the boat.”

Dave Knox

Knox is a former P&G brand manager who co-founded the Brandery startup accelerator in 2010. He’s written a book exploring how big companies can learn from startups by acquiring them or imitating them. “Predicting the Turn” will be available on paperback Feb. 14 for $28 on Amazon.com and Joseph Beth Booksellers in Rookwood, where Knox will speak Feb. 23.

P&G shed new light on its e-commerce strategies in its second-quarter earnings call Jan. 20, telling analysts that online sales will reach 20 percent of sales and exceed $1 billion in China this year. It’s already 40 percent of sales in Korea.

“We're building a full toolkit of capabilities we can put to work where relevant,” Chief Financial Jon Moeller told analysts. “For diapers, subscription can provide convenience and increased loyalty. For SK-II super premium skin care, direct-to-consumer counseling, either in-store or online, can help inform the benefits of regimen usage.”

Moeller said P&G still sees plenty of growth opportunities in traditional retail channels but it’s equipping its factories and distribution facilities with new technology that can send products with equal ease to retail loading docks or the front porches of loyal consumers.

Dash Button

As WCPO has previously reported, P&G was an early adopter of Amazon Dash, which lets users quickly re-order Tide detergent and Bounty paper towels with the push of a button. Research by Slice Intelligence showed P&G boosted sales and customer loyalty among Dash button users.

“When you look at wallet share for the top five brands, 98 percent of category sales went to Tide after they bought the button,” Slice Vice President Ken Cassar told WCPO. “It’s 99 percent for Bounty. So, there really is a strong case to be made for brand loyalty.”

But even though the P&G brand logo is prominently displayed on the Dash button, it’s Amazon that has a direct relationship with the consumer, Knox notes.

“Is it Amazon that wins in that?” he said. “How long before Amazon turns on the people supporting them now?”

Subscription commerce is a better approach, Knox argues in his book. Dollar Shave Club, Bark & Co. and Birchbox proved they could sell razor blades, snacks and beauty products in a way that disrupted much larger sellers of consumer packaged goods.

“As they grew, the more progressive startups realized they had an opportunity to combine the margins of the retailer and the manufacturer by developing their own products and evolving into significant brands in their own right,” Knox wrote. “Unlike other CPG companies however, they would own the relationship with their consumers directly because of their subscription roots.”

Dollar Shave Club grew to $200 million in revenue before it was acquired by Uniliver for $1 billion last July. For P&G, Knox said it may be too late to find the next big thing in subscription commerce.

But it could test more strategies for establishing direct relationships with consumers. He thinks P&G is already doing that with experiments like Tide Spin, a laundry-delivery service it’s now testing in Chicago and Art of Shaving, a high-end retail store P&G purchased in 2009.

“I’m bullish on brands thinking about services like Tide Dry Cleaners and Art of Shaving,” he said. “It’s taking a brand and making it more than something you buy. It’s something you experience.”

Beyond that, Knox said all big companies should be seeking out next-generation business ideas that have the potential to shake up their industries because disruption is now inevitable.

“Ninety of 100 largest brands lost market share in 2015, which is kind of crazy when you think about it,” he said, citing research from the marketing firm, Catalina.

When P&G bought Richardson Vicks in 1985, Knox said Oil of Olay was tossed into the deal as a throwaway brand. But it repositioned the skin-care line as a prestige product that could be sold by mass merchandisers, competing against more expensive department store products. By 2009, it was a $2.8 billion product line.

The same approach can be used by big companies when evaluating startup companies that can be acquired or imitated. Knox said the E.W. Scripps Co. is deploying this strategy well with its acquisition of media brands like Newsy, a video-news platform geared to millennials, and Midroll, a podcasting company. He also likes the Kroger Co.'s acquisition of the health-food retailer, Vitacost.com, and ModernHealth, a specialty pharmacy business.

“I don’t think anybody can predict which of those brands is going to break through. So, the idea is to get a portfolio of brands," he said. "That one breakaway success pays for all the failures.”