The new online toilet paper business: Alice.com
New online store Alice isn't like other retailers, takes no markup. CPG companies set their own prices.
As start-up pitches go, "Never run out of toilet paper" isn't the most compelling I've heard. But the new online packaged goods store Alice, which is behind that scintilatting come-on, isn't quite the loser Pets.com clone I thought it was at first.
While Alice appears to the end use to be a reseller much like Drugstore.com or Diapers.com (I'm a Diapers.com customer, it's great), it's actually built on a fundamentally different business model. Alice is not a traditional middleman reseller. It takes no markup, CEO Brian Wiegand told me. Instead, it collects a "fee" from the consumer packaged good (CPG) manufacturers--the people who mix your toothpaste and put it into tubes--for shipping products out, and it passes all the customer data it collects from people buying the products back to the companies that make them. The manufacturers set their own prices.
The aim is to give CPG companies a direct pipeline to data about consumer buying behavior, and to consumers themselves. This is a move that puts them clearly in competition with their traditional retailers, but as Wiegand says, big retailers are already fighting the CPG industry by launching their own store brands. These house brands have already grabbed 20 percent of the CPG market.
Furthermore, the CPG companies are "losing their megaphone," and need better ways to connect with their consumers. Wiegand says the efficacy of the 30-second TV spot is in steep decline. It was until recently the best way to make the world aware of things like a new scent of Palmolive. Likewise, the drop in the distribution of newspapers and their circulars is cutting off CPG companies from consumers.
But to connect to consumers, the manufacturers can't launch their own stores, online or physically. They're not set up for it, and furthermore customers don't want to have to go to three different sites to buy toothpaste, dog food, and paper towels. What CPG companies are set up to do, though, is collect data on consumer buying behavior, and act on it.
"There's a tremendous opportunity between the consumer and manufacturer," Wiegand claims, and Alice is how he's playing it.
The company is doing deals with the CPG companies--it's got 5 of the top 10 signed so far--to sell their products and shunt the data back to the companies. Alice, as a company, is not so much about moving a lot of boxed goods but about moving information back to the manufacturers so they can continue to refine their offerings. Alice will also help the manufacturers run coupon programs.
From the consumer's perspective, Alice looks like a good online retailer. It's got a very nice interface and a strong selection. (During the launch period, even manufacturers not yet doing business with Alice are represented on the site; for those products, Alice buys and resells products just like a typical retailer. After the site is established, only CPG companies with Alice contracts will be represented on the site.)
The site watches what you buy and will try to come up with a regular box delivery schedule if it gets enough data on your habits. It'll remind you that you might be running low on shaving cream, for example, and offer to ship some out to you before you run out. Shipping from Alice is always free.
There's also some social network feature on the site, but I couldn't get past the "Me, My Shelf, and I" pitch and furthermore have no desire to form social connections over trash bags, so I skipped it.
Wiegand says he expects the CPG companies will start directing customers and potential customers over to Alice.com to buy their products.
I found Alice a very good online store. But what's really interesting to me is the business model, for two reasons. First, because it points to a growing channel conflict in packaged goods that I wasn't aware of. And second, because while Alice looks a lot like a typical retailer, under the covers it's quite a different beast.
The site is launching Monday night.