A mere six days after new economy powerhouse Google announced it was stopping online sales of its Nexus One smartphone, old-line stalwart Procter & Gamble announced the launch of eStore - its first foray into selling its brands direct to the consumer via the Internet. What's going on? Why is e-commerce a seemingly good idea for P&G and a demonstrated bad idea for Google's Nexus One?
The answer lies squarely with the fact that P&G understands consumers and their purchasing preferences. P&G was not a first-mover in selling consumer packaged goods directly to the consumer via the Internet. Rather, they patiently waited, watched and learned. What they observed was that consumers were willing to buy such products online, particularly for replenishment. They also realized that the "brick and mortar" retail channels were low-touch/low-support environments that did not do much more than rent shelf space. Although the retail channel serves an important purpose in providing convenience -- immediate availability, multi-category selection -- P&G realized that the retail channel didn't need to take a bite out of every apple sold and that the consumer would support them in the move online.
Unfortunately, Tide, Pantene and the like are still physical products. P&G still needs to manufacture, package, store and ship these products. P&G deals with the delivery issue by offering $5 flat-rate shipping. Competitor Alice.com offers 100% free shipping. However, the fact that P&G still needs to get the goods into the hands of the consumer means that the "brick and mortar" retail channel will not be completely disintermediated. Somebody will always need some Pampers and a pack of Lucky Strikes (legal disclaimer: not a P&G branded product).
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