Can P&G Be the Amazon.com of Consumer Staples?

Books and electronics have long been the staples of online retail. But if consumer-goods behemoth Procter & Gamble (NYSE: PG  ) gets its way, face cream and diapers may eventually rank right up there with DVDs and New York Times bestsellers.

In an effort to both boost sales and track consumer behavior, P&G will soon launch an online store in partnership with e-commerce provider PFSweb. Initially, the e-store will operate as a pilot, with limited consumer access, although plans for a public launch are slated for the spring.

Thinking that P&G management would do best to take a Mr. Clean Magic Eraser to such cockamamie plans? Careful -- you'll have to argue that the entire packaged-goods industry needs a good shrink-wrapping, too. Companies ranging from cereal-and-yogurt maker General Mills (NYSE: GIS  ) to Johnson & Johnson (NYSE: JNJ  ) and Novartis (NYSE: NVS  ) are all making similar forays.

With retailers such as Costco (NYSE: COST  ) and Wal-Mart Stores (NYSE: WMT  ) selectively cutting the range of some of the products they stock in order to juice cash flow, and amid the rising appeal of private-label wares, it makes sense for brand-name blue chips to reach out to consumers via the Internet. Making that consumer connection may be the most important -- and most successful -- outcome of such online presences. Through blogs and videos, companies would have the opportunity to plug new products in greater detail than a TV or print spot allows. P&G, for instance, could highlight various brand extensions, potentially reducing consumer confusion over multiple but similar product lines.

However, trying to stir up excitement about anti-aging gels among consumers who are just one click away from their Facebook pages comes with certain dangers. As reported by Advertising Age, P&G's new Pampers' Dry Max diaper -- a huge innovation, according to the company -- has been, um, preemptively soiled by a small but vocal group of Internet critics. Meanwhile, P&G's chance to counter the backlash via national marketing is still months off.

Potential pitfalls notwithstanding, P&G management aims to raise its online sales from a current $500 million to $4 billion-$5 billion. It's unlikely that P&G will establish itself as a direct retailer, which means that much of those future sales will be derived through its existing partner network, which includes Amazon.com (Nasdaq: AMZN  ) and CVS Caremark.

Even if new online sales are not substantial on a companywide basis, the online environment should enable P&G to monitor shifting consumer trends in real time. After the company's tough slog through the recession, that development certainly merits a tweet or two. 

Costco and Wal-Mart are Motley Fool Inside Value recommendations. Amazon.com and Costco are Stock Advisor picks. Novartis is a Global Gains selection. Johnson & Johnson and Procter & Gamble are Income Investor recommendations. The Fool owns shares of Costco and Procter & Gamble. Try any of our Foolish newsletters, free for 30 days.

Fool contributor Mike Pienciak holds no financial interest in any company mentioned in this article. The Fool has a disclosure policy.


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