While scanning Smartbrief, BrandWeek, WSJ and every other daily RSS feed that litters your inbox, you’ll come across plenty of articles that spotlight good ideas. You’ll read about a few line extensions, some company’s new green initiative, and then you throw in some cause marketing press, and that’s your week in CPG. Rarely will you come across game changing ideas coming from CPG’s.

I must say, however, that the P&G “theessential.com” platform that was profiled in a recent Financial Times article is definitely one of those game changing ideas (whether it’s ultimately successful or not).

P&G web move is challenge to retailers

By Jonathan Birchall in New York

Published: October 19 2008 22:34

http://www.ft.com/cms/s/0/04c83c2c-9e16-11dd-bdde-000077b07658.html?nclick_check=1

Procter & Gamble is testing its ability to use the internet to sell its toothpaste, household cleaners and nappies directly to US households, in a potential long-term strategic challenge to its retail partners.

The company is supporting a website, theEssentials.com, that is exclusively selling its brands, with items such as single tubes of Crest toothpaste and bottles of Mr Clean cleaning fluid, to boxes of its Pampers and Luvs brand nappies and Gillette razors.

The move brings P&G into direct brand competition with its retailers, underlining the extent to which e-commerce is contributing to changes in the way the two sides have traditionally worked with each other.

In an indication of the sensitivities involved, the site is being operated by a third party, which owns the inventory. “We treat them like any other retailer as they buy product directly from us,” said Paul Fox, a company spokesman, of the site, which is still covered by P&G’s legal terms and conditions.

However, as e-commerce expands, manufacturers of electronics, clothing and other goods have shown themselves increasingly ready to overcome traditional concerns over potential conflicts with their retailers.

For consumer packaged goods companies, industry analysts argue that direct online sales are also a way to respond to lower prices from retailers’ private label brands.

In beauty products, P&G’s rivals L’Oréal and Estée Lauder have been selling on the web for some time. Other leading consumer brands, including Kellogg’s, have formed close partnerships with Amazon to drive bulk sales.

In another indication of the flux, Wal-Mart, P&G’s largest customer, is hiring a strategy executive whose tasks include assessing the potential effect of direct-to-consumer sales by its own suppliers.

Copyright The Financial Times Limited 2008

Outside of what’s detailed in the article, I’d like to point out a few other things that may work to P&G’s advantage by leveraging TheEssentials.com:
• They get direct consumer profile information on an engaged consumer.
• They can avoid slotting fees on smaller new product launches, or line extensions on “sustain” product lines.
• With customization becoming an ever-growing area of consumer interest (Check Nike ID, or Xbox Skins), P&G can offer a larger portfolio (colors, features) of Braun, Oral-B, and PUR products than would be available at retail.
• They’ll also have a platform to sell incremental product replacement and enhancement parts for their equipment focused brands. And these tend to be very high margin.

www.theessentials.com