Cutting Out the Middle Man and What it Means for Marketing

Industry watchers in the early years of online commerce often predicted the death of the middle-​men, retailers and distributors, in the supply chain of consumer goods.  So far, e‑commerce retail sales garner a little over 3% of total retail sales. The steady rise in e‑commerce has already begun to change the nature of retailing but not in the ways that were expected.

For example, some consumer products goods (CPG) manufacturers have begun selling online to consumers via a new service called Alice​.com. Writing for the Wall Street Journal, Ellen Byron highlighted how Procter & Gamble and General Mills are exploring this model.  Think of Alice as an Amazon​.com for CPG companies. The concept allows consumers to explore and purchase products, online, from many different manufacturers and to obtain free shipping on everything from granola bars to laundry detergent. The manufacturers and Alice​.com split the cost of shipping the products. Manufacturers also pay Alice​.com for marketing services like product sampling.

What’s in it for the manufacturers? They may be able to grab back market share from retailers who are competing with them by selling store brand products on their shelves. As Robert Tomei, president of consumer and shopper insights for research firm Information Resources Inc. points out, "They're  [the manufacturers] losing the ability to maintain their brand equity; this is a way to re-​establish their communication with consumers."

P&G appears to be among the many different companies who intend to increase online sales because, as CEO McDonald notes, "[w]e must be available to consumers when and where they seek to research or purchase P&G products. Increasingly, that's online." We can also imagine that traditional retailers will be upping the marketing ante to sell store brands as well.

[Source: Quarterly Retail E‑Commerce Sales, U.S. Census Bureau, 2009; Byron, Ellen. New Web Sales Option for Household Goods, Wall Street Journal, 1.12.10 ]
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.