Procter & Gamble (PG) stepped into e-commerce Thursday, working with PFSweb (PFSW) to launch the eStore to sell its bounty of products ranging from diapers to razor blades.

The consumer conglomerate is gambling that these efforts won't alienate its extensive customer base of retail stores, including its largest customer, Wal-Mart Stores (WMT). Ten years ago, that wasn't so.

"P&G knew they could not emulate a Dell or an Amazon.com and sell directly to the consumer, because they sold to retailers," said Chandrasekar Subramaniam, a University of North Carolina information systems associate professor and co-author of a book that looked into P&G's e-commerce initiatives in 1999. "They wanted to use the Internet to raise their brand awareness and make the consumer feel more connected to their products."

Fast forward to 2010. It now appears that P&G and Wal-Mart, which also runs a vast e-commerce site, have found a way to avoid bumping into each other when a customer comes a calling with a click of a mouse. The page featuring P&G's Pampers diaper wipes, for example, offers a different selection than the Pampers wipes page on Walmart.com, and ditto for the razor page for eStore and Walmart.com.

PFSweb will own and operate the eStore site, which could help ease any tensions between P&G and its business customers. P&G had this to say regarding any concerns about alienating the retailers that are its customers:
While PFSweb will compete as a retailer in owning/operating the eStore, the eStore for P&G is first and foremost a learning lab for e-commerce. The strategic role behind P&G's partnership in the eStore is to help develop and qualify e-commerce innovations that will enable all retailers to win with consumers and accelerate their businesses. This will be done through collaborative test and learn partnerships and rapid deployment of concepts that win with the consumer. Successful eStore learnings will enable P&G to become a world-class supplier for retailers.

A Growing Part of the Pie


E-commerce is big business. U.S. online retail sales are expected to reach $335 billion by 2012, up from $175 billion in 2007, according to a Forrester report.

And while e-commerce through online retailers has accounted for less than 1% of P&G's e-commerce sales, or $500 million, the company is looking to grow it to a respectable level. In an interview with Advertising Age last year, P&G executive Lucas Watson said the company believed it could raise its e-commerce slice of the pie to somewhere between 1% to 10% of its total revenues.

P&G's main goal for the site is to have it act as its e-commerce innovation living learning lab, the company says. The site will feature pages that are based on P&G's brands, customized product selection capabilities, LiveChat with product consultants, social media for fan pages of various P&G products and a community forum.

"Through our partnership with PFSweb and on-going testing with consumers, we envision the eStore will help deliver new tools, services and features that can ultimately be shared with retailers to provide a real convenience and value for shoppers, while also delivering innovation for the industry and specifically for our product categories," says Kirk Perry, P&G's North America vice president, in a statement.

A Long Time Coming


P&G has been tinkering around with the Internet since the late 1990s. In 1999, the company launched Reflect.com, as a means offer personalization to consumers' purchases.

"The thinking behind Reflect was that P&G had a lot of top chemists in their labs that consumers never saw. The thinking was to provide customers with the ability to describe a situation like the condition of their skin and receive a customized solution," Subramaniam recalled.

Eventually, P&G grew comfortable with the concept of selling its health and beauty products online via Reflect.com, but the site was later shut down in 2005 after merging with The Gillette Co.

The company, however, engaged in other Internet initiatives from working with a consortium to develop a supply chain procurement Web site for retailers to order in bulk to being an investor in Yet2.com, an electronic marketplace for folks to purchase, sell and license intellectual property.

"I would characterize P&G as on the cutting edge [in 1999]. They were in front of most companies in seeing what they could do with consumers and the Internet," Subramaniam said. "And while they saw an excellent opportunity to sell to the consumer, at the same time, manufacturer and retailer relationships were in flux over the Internet."

And although some P&G critics may point to missed opportunity in terms of embracing e-commerce sooner, given some manufacturers have found ways to work with their retail channels while also offering direct sales from their Web site, Subramaniam is not in that camp.

"P&G's expertise is not in retailing. It's in product manufacturing and product development," he says. "Their decision to open eStore may be like testing the water to see if it will not create a negative impact on the channel."

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