Does P&G need retailers anymore?
NOVEMBER 3, 2014
Through a special arrangement, what follows is an excerpt of an articlefrom WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.
Procter & Gamble's $89 million distribution center near Dayton brings jobs to the region, but as part of a supply-chain overhaul, it also represents the inevitable — and potentially dramatic — transformation of the retail landscape.
The distribution center would "dramatically innovate the way we supply our customers," global products aupply officer Yannis Skoufalos said when the news was announced, allowing P&G to "respond to customers and our consumers in a way we have never done before."
Coming after plans revealed earlier this year to put distribution centers within one day of 80 percent of U.S. consumers and other moves, the language might sound vague at first blush, but it couldn't be clearer: P&G is scaling up its direct-to-consumer capabilities.
On Amazon, a 77 pack of Tide Pods goes for a $19.22 one-time price, or just $18.26 with a subscription. Target offers a similar five percent subscription discount. This price war between Target and Amazon increases savings for consumers, but eats away at margins for manufacturers like P&G.
It's time for P&G to stop conceding these losses and launch a similar program. At the P&G eStore, that same 77 pack of Tide Pods costs $19.99, or 77 cents more than Amazon's one-time purchase price. What happens if the P&G eStore adds a subscription service and co-opts what its retailer partners have found so successful within its own direct-to-consumer push?
One thing is true: The moment of truth is moving from shelf-side to screen-side. Shoppers preferred method of fulfillment is changing as well. Even customers who make their purchases inside stores are increasingly deciding what to buy beforehand using online reviews. Winning over the few customers who are "in play" for everyday necessities like diapers, paper towels, and shaving cream means reaching consumers where they spend their time: online.
Win wherever people shop, that's what Alex Tosolini, P&G's senior VP of global eBusiness, told eMarketer recently. "Our job is not to change consumer behavior," Mr. Tosoloni also said. "Our job is to follow consumers' behavior and be present with our brands."
Have the stars finally aligned for a successful direct-to-consumer push by P&G? Consumers who are increasingly pressed for time and dissatisfied with stores have embraced online shopping. Amazon wants a distribution arms race and won't stop short of air-dominance with a fleet of drones buzzing around its fulfillment centers, but P&G's redesigned supply chain has put it closer to consumers than ever before. Consumers want it. The technology is there.
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