CPG Goes D2C

Tired of shopping for those boring basics like toilet paper and toothpaste? Just ask Alice — or, as the tagline of the recently launched website states, “Everyone needs an Alice.”

An homage to the bubbly housekeeper for TV’s “Brady Bunch,” Alice.com is the brainchild of Mark McGuire and Brian Wiegand — serial online entrepreneurs who, after several successful start-ups in other areas, have entered the CPG (consumer packaged goods) arena with a service-oriented site that gives manufacturers an innovative new platform for direct-to-consumer selling.

Alice.com has had more than a million unique visitors each month since its June debut. And with features like free shipping and automatic coupons, Alice.com’s concept of linking manufacturers and consumers seems to be taking off. STORES spoke with McGuire, Alice’s president, about the company’s strategy.

This is your third start-up. Why did you choose the CPG business this time?
It’s very big, slow moving and methodical. But it’s intrigued Brian and myself for several years, primarily for those reasons and also because it’s been so unsuccessful online.

Define unsuccessful.
Knowing the convenience of the Internet, you’d think this would be one of the first categories to be purchased online. No one enjoys shopping for things like toilet paper, and it’s not a high-involvement sale where you need to talk to someone or inspect the product. People generally know what they want and typically get the same thing over and over again. But less than 1 percent of these goods are sold online. There’s huge potential.

Why have so many companies failed in this space?
Starting with Webvan, which was the poster child for the dot-com bust, there have been a lot of carcasses on the side of the road. It was just a crazy time of overspending on advertising without focusing on the bottom line and customer growth.

How are you going to avoid that scenario?
We focused on the core elements of this business and where a start-up could change the rules of the game for the better. When we looked at this market, we distilled the business down to three things. The first is the need for free shipping; it’s such a threshold barrier in this market. People won’t overpay for convenience — especially in this economy.

The second was competitive pricing. Again, people don’t want to overpay. The third piece was enabling shoppers to plan for purchases. If you have a two-year-old at home and run out of diapers, it’s too late to order online. We made it very easy to plan purchases.

We needed consumers to approach Alice as a service similar to Netflix: You set up purchases in a queue that is managed as you go along. Basically, you set up your own customized shelf of what you want to buy over time. The system tracks your purchase history and gets smart at knowing when you’re going to run out of something.

What does the direct-to-consumer market look like for CPG?
The packaged goods space is a difficult one for manufacturers going direct-to-consumer. Mainstream shoppers will go to Sony’s site to buy a television, Dell for a laptop or Callaway for golf clubs, but they are not going to go to Tylenol’s site to buy that product and someplace else to buy bathroom tissue.

They view the CPG category on a trip basis and expect to buy a basket of goods from a number of different manufacturers at the same time. This makes selling direct to consumers problematic.

How is Alice approaching the business?
By creating a neutral, open platform in which manufacturers and consumers can participate. Our average “Alice box” has about 10 items in it, and that may represent six or seven different manufacturers who share the cost. We’re not making money as a retailer. The manufacturer is setting the price, paying us a fixed fee for the sale and they take all the retail margin.

Are you selling consumer information as well as advertising?
We don’t sell identifiable information. Manufacturers never know consumers’ names, addresses or phone numbers. But they learn, in aggregate, what products people buy, what ZIP code they live in, their family size and other insights that help them learn about customers and target their advertising.

How many subscribers do you have at the moment?
Over 325,000 customer accounts have been set up and about one manufacturer per day is onboarded into the system. But we don’t discuss specific manufacturers; they are worried about channel conflict. Retailers are still their priority. But Alice is a way for them to get a little closer to consumers.

Are you going to stay strictly with grocery?
Yes. We stayed away from perishables because we are leveraging existing fulfillment resources, like UPS, to ship products. Consequently, we don’t incur costs like Webvan and other companies did to set up territories with their own drivers and vehicles. We deal in repeatable household essentials that enable them to avoid that extra trip.

How many items are you offering on Alice.com?
Right now we have a little over 7,000 SKUs. There are some overlapping ones, but we do get into all non-perishable products.

Do online companies still have to focus on changing consumer behavior?
Absolutely. It’s getting more mainstream every year and that’s great. But we are trying to displace the way people shopped for a long time. That’s a challenge. But the benefit is that we’re offering things people don’t enjoy shopping for. Give them a way to avoid it, and I believe they’ll flock to the model.